The Living Wage: Making ‘poverty pay’ history
By Tim Thorlby
10 min read
It is UK Living Wage Week. In this blog, we look at what the Living Wage is, where it came from and the business and moral case for paying it. In difficult economic times, we have a powerful tool for justice that every business can use.
This week, across the UK, some 11,500 accredited Living Wage Employers are celebrating paying the real Living Wage to their employees. The Living Wage movement began 20 years ago in a church hall as a crazy idea, and now it is a mainstream practice, delivering fair pay for hundreds of thousands of people.
But today in-work poverty is the highest it has been for a generation. Nearly 5 million workers earn less than a Living Wage. At a time of rising living costs, the issue of poverty pay has never been more urgent.
So what is the Living Wage? Why does it matter? And what is the biblical perspective on it?
1 - What is a Living Wage?
Put simply, a Living Wage is a wage that is high enough for a worker to live on. It is high enough to support a decent standard of living – not luxurious, but enough to take a worker out of poverty.
When I was Managing Director of Clean for Good, one of the UK’s few Living Wage cleaning companies, I saw first hand what a difference the Living Wage could make to people’s lives – and we also proved that it was possible to pay it every day even in a highly competitive commercial sector.
Over the last few years, the idea of a Living Wage has become a reality in a growing number of countries as a practical response to low wages[1]. Civil society organisations have worked out how to calculate a Living Wage for their country, and review it each year to keep it up to date. It is usually higher than the Government’s Minimum Wage, if such a wage exists in that country.
A formal definition has been provided by the Global Living Wage Coalition:
“Remuneration received for a standard work week by a worker in a particular place sufficient to afford a decent standard of living for the worker and her or his family. Elements of a decent standard of living include food, water, housing, education, health care, transport, clothing, and other essential needs, including provision for unexpected events.”[2]
In the UK, the Living Wage Foundation define the Living Wage more simply as “a fair day’s pay for a fair day’s work”.
The Living Wage Foundation[3] is the independent national charity which calculates the Living Wage each year for the UK and promotes it to all employers with an accreditation scheme. Some 11,000 employers have accredited so far, including half of the FTSE 100 and many small businesses, making it a high-profile initiative; collectively they employ nearly 400,000 people. Well known payers include Aviva Ltd, KPMG, Everton Football Club, Burberry and IKEA. These employers commit to paying all of their staff the Living Wage or more, as well as any direct contractors (like cleaners or associates).
Today, the Living Wage is £10.90 per hour, or £11.95 per hour in London.
This is significantly higher than the Government’s Minimum Wage of £9.50 per hour for workers aged 23 or over. (Note that the Minimum Wage is called the ‘national living wage’ which can be a little confusing, but it is not, despite its label, a real living wage nor is it calculated to be one.)
The origins
The idea of a Living Wage has its modern origins in catholic social teaching, featuring in the 1891 papal encyclical Rerum Novarum and others since. It also lives within the UN Universal Declaration of Human Rights (Article 23.3)[4].
In this country, it was adopted and developed by Citizens UK community organisers in east London twenty years ago as the basis for a campaign to tackle low pay. From a church hall in east London it has become a national movement. Local churches were at the heart of this campaign, and remain so today.
2 – Why pay a Living Wage?
Good question. There are four different kinds of answer to this.
i - A business answer
The hard-nosed business answer is that there is plenty of evidence that it makes good business sense to pay your workers a Living Wage or more. The kinds of business benefits include the following[5]:
Staff retention – a higher wage tends to increase staff retention and therefore reduce turnover and recruitment costs
Employee satisfaction – paying a Living Wage can often improve worker-manager relationships and increase both satisfaction and loyalty to an employer
Higher wellbeing and health – higher income can enable families to afford better and healthier homes, diets and lifestyles, increasing wellbeing as well as health (and by definition, lower sickness/absence from work)
Higher productivity – there is emerging evidence that paying higher wages increases motivation and productivity
Business reputation – in a marketplace increasingly attuned to ethical issues, an employer who openly embraces a Living Wage can differentiate themselves positively from many competitors
If we understand that the people in a business are usually its greatest asset and that a decent wage is therefore an investment, not just a cost, then we can see how paying a higher wage to the lowest paid may actually deliver positive business returns.
ii - A short economic answer
At a national level, there is evidence that increasing pay levels at the bottom of the economic ladder may help to increase national productivity[6]. The UK has long had a low wage/low productivity problem, and so a Living Wage may be part of the answer for tackling this – a sort of ‘trickle-up’ theory of wealth (which I have discussed in another blog).
iii - A moral answer
We live in a very unequal world. The richest 10% of the world’s population earns 52% of the income.[7] Billions live in poverty. Within this, a remarkable number of people work hard all day and still live in poverty – for many, work is not a route out of poverty.
The International Labour Organisation (ILO) estimate that 630 million people across the world live in ‘moderate or extreme poverty’, despite working, earning less than $3.20 per day[8].
It is not difficult to see the injustice and inequality of how uneven these rewards are. There is no shortage of material wealth in the world, it is just extremely unevenly distributed.
Even allowing for the market to reward different people to different levels of compensation, the most ardent free marketeer would find it difficult to justify a life of poverty for someone willing to work hard all day; it is a significant market failure. The argument for ensuring that ‘work pays’ therefore has a clear moral case. Given that the Living Wage defines the boundary below which we find poverty wages, there is therefore a strong moral case for paying the Living Wage or more.
A growing number of business accreditations now include a commitment to paying the Living Wage within them – e.g. B Corp status, the Ethical Trading Initiative, the Good Business Charter, amongst others.
iv - A biblical answer
For those with a Christian faith, there is also a biblical answer to why we should pay a Living Wage, which we will come to next.
3 – A biblical perspective on the Living Wage
A longer and fuller biblical reflection on the case for a Living Wage and other minimum employment safeguards (like sick pay) can be found in a recent Jubilee Centre Insight Paper[9]. This is a brief summary.
The Bible does not provide ready-made business models, but it does provide a helpful and hopeful vision of how we should relate to each other which still holds good today.
Of most relevance to this discussion is a foundational feature of biblical thought – that markets have limits. Markets are present, and embraced, throughout the Bible, but in the Old Testament Law it is clear that there was never an intention that there would be a free market for land, labour or capital. Strict limits were placed on how people were able to trade these, recognising that each one had significance well beyond its economic value. In this context, people are recognised as being made in the image of God and are therefore much more than ‘economic units’.
Building on this foundational idea, we can identify five key biblical principles at play here, which will help bring out the importance of what is at stake in the employer-worker relationship:
Human dignity: people are more than units - A worker is a person. Whatever the differences in role and responsibility between various actors in a business, the starting point for all is a basic equality of dignity. All are created in the image of God. They cannot be objectified as a unit whose only function is to provide the means for others to flourish.
Agency: flourishing within work and outside of it - Not every job involves the same level of responsibility, but every job should allow the exercise of some degree of agency by the worker. Agency is also not only about what happens within a job. It is also about building physical, social, economic and political capacity for life outside of work. If a worker’s job makes him or her less able to participate in life and society, then the employer is failing in part of its social purpose. Work should enable us to flourish in some way, not crush us. A wage that is so low that it does not enable any kind of life outside of work runs counter to the idea of our agency.
You reap what you sow - Right from the beginning, the logic of cause and effect is written into the natural processes of creation. In line with the agricultural origins of all work, the Bible always assumes that work is appropriately rewarded. Thus talk about reaping and sowing is not just an abstract ideal. The relationship should be appropriate, so that hard work yields a decent living. This connection between someone’s labour and what they receive in return is generally affirmed in the New Testament.
Beyond contract to covenant – Contracts are good and helpful devices, but if business interactions remain at the level of ‘contract’, it implies that there is no deeper relationship between two parties. From a biblical perspective, human identity is irreducibly relational; we relate to family, local community, nation and universal humanity. To be ‘human’ means to belong to a collective. Economic relationships are embedded in these overlapping networks; they cannot happen outside them and the ‘market’ is not a sealed off system of its own. This means that we have mutual social obligations which are much wider than the narrow exchange of a contract. It means that we are responsible for the impacts that we have upon each other, whether intentional or not.
Power comes with responsibility – Wealth and position confers power, including for employers. Power is easy to abuse or use for selfish purposes. However, biblical power does not work like this. The great leaders of God’s people stand out for the level of responsibility they take over those whom they lead. Specifically in relation to business dealings, figures like Job, Boaz and Nehemiah use their economic power for the benefit of the weak, whilst the ideal woman of Proverbs uses business to provide for others.
Jesus sums up the worker’s due in a simple saying:
For the worker is worthy of his wages (Luke 10:7)
Some of the Bible’s strongest statements are made in relation to how business is done and how workers are paid. For example:
14 Do not take advantage of a hired worker who is poor and needy, whether that worker is a fellow Israelite or a foreigner residing in one of your towns. 15 Pay them their wages each day before sunset, because they are poor and are counting on it. Otherwise they may cry to the Lord against you, and you will be guilty of sin. (Deuteronomy 24:14–15)
The Prophets had much to say about abuses of material power and what this implied about the priorities in those people’s hearts and minds.
The biblical perspective can be summed up by ‘love your neighbour as yourself’ (Leviticus 19:18). This includes the mandates to leave the gleanings of the harvest (19:9), deal with financial integrity (19:13) and act justly with the poor (19:15). There are numerous passages in the Old and New Testament that echo these thoughts too.
The biblical vision is a positive one of employers and employees engaging in a mutually beneficial relationship - between people who are of equal value, even if they should perform different roles in the marketplace. They help each other.
Any business which says ‘I cannot afford to pay a Living Wage’ implies that their business model only works if some of their workers live in poverty. Surely that business model is broken? As long ago as the 1930s, at another time of global economic crisis, President Franklin D. Roosevelt acknowledged as much when he said to American businesses:
“No business which depends for existence on paying less than living wages to its workers has any right to continue in this country” (FDR, 1933)
Paying the Minimum Wage – the lowest wage that the law allows – may be legal, but that does not mean it is good. The biblical vision of enterprise is more demanding than this.
4 – Next steps?
There is great satisfaction in launching and building a new business. There is even greater joy in knowing that a business is making the world a better place and bringing hope. I would encourage every business owner to think hard about their lowest paid workers and what ‘good news’ looks like to them.
Churches have been at the heart of the UK’s living wage movement since it began – the very idea is deeply rooted in Christian beliefs. Surely it is right that Christians in the marketplace make the practice of paying a Living Wage a core part of their approach to business.
Further information on becoming an accredited Living Wage Employer can be secured from the Living Wage Foundation.
Let’s banish poverty pay to the history books.
This blog was written by Tim Thorlby. If you’d like to receive email alerts to new blogs, subscribe for free.
Notes
[1] For a brief summary of different national initiatives, from the USA to South Africa see: Living Wage Foundation (2021) Lessons from our Global Living Wage Network | Access here: https://www.livingwage.org.uk/sites/default/files/Lessons%20from%20Global%20Living%20Wage%20Network%20Report.pdf
[2] Global Living Wage Coalition (2021) The Anker Methodology for Estimating a Living Wage
[3] See: www.livingwage.org.uk
[4] Universal Declaration of Human Rights Article 23.3: “Everyone who works has the right to just and favourable remuneration ensuring for himself and his family an existence worthy of human dignity, and supplemented, if necessary, by other means of social protection”
[5] See Edmund Heery, David Nash, Deborah Hann (2017) The Living Wage Employer Experience, Cardiff Business School | Access here: https://www.livingwage.org.uk/sites/default/files/Cardiff%20Business%20School%202017%20Report_2.pdf Also check out: Barford, A. (2022) The Case for Living Wages, University of Cambridge| Access here: https://www.cisl.cam.ac.uk/files/the_case_for_living_wages_report_2022.pdf
[6] Rizov, M. (2015) The UK National Minimum Wage's Impact on Productivity, British Journal of Management Vol 26 Issue 4 | Access here: https://onlinelibrary.wiley.com/doi/full/10.1111/1467-8551.12171
[7] Oxfam (2022) World Inequality Report | Access here: https://wir2022.wid.world/
[8] ILO (2020) World Employment and Social Outlook: Trends 2020 | Access here: https://www.ilo.org/global/research/global-reports/weso/2020/WCMS_734455/lang--en/index.htm
[9] Williams, M (2022) Insight Paper: A Biblical Response to Working Poverty, Jubilee Centre | Access here: https://www.beautifulenterprise.co.uk/jubilee-centre-reports