Living Wage

Debate between William Bain and Richard Fuller

Thursday 6th November 2014 Commons Chamber

[Mr William Bain (Glasgow North East) (Lab)]

May I congratulate the hon. Member for Warwick and Leamington (Chris White) and the Backbench Business Committee on bringing this vital issue before the House in living wage week? It is right that this week we welcome the forward-looking approach of many employers across the United Kingdom who now pay the living wage and have more productive and happier work forces as a result. We should also pay tribute to the tireless work of living wage campaigners in the trade unions, the Churches, the growing number of food banks and in broader civic society in Scotland, in common with civic society right across the United Kingdom. They have never settled for second best and envisage a country where a decent day’s work is rewarded with a wage that can give people dignity and the chance of a better life.

It is not just in this country that the living wage movement is thriving. Although, sadly, the Democratic party suffered badly in the US mid-term elections this week, propositions for a big rise in the minimum wage were carried by voters in four traditionally Republican-voting states, meaning that a total of 14 states have this year adopted large rises in the minimum wage.

The low pay crisis, which this debate will shed new light on, means that the gap between the wealthiest and the working poor in our society is getting larger. That gap becomes a chasm when we consider what it means for child poverty. In my constituency, some 38% of children grow up in households that fall below the minimum acceptable income standards. I think of the mums who have to budget harder than any Chief Secretary to the Treasury ever will to buy new shoes for their children to wear to school. I think of the workers on completely unregulated zero-hours contracts, worrying about when they will be able to pay that heating bill which is still outstanding. I think of the mothers not able to get the child care that would mean taking a job that would leave them genuinely better off.

That picture of what poverty means for 5.3 million people in this country who are paid less than a living wage—the figure has risen by 150,000 in the past year alone—should spur all of us in this House to act. British workers are twice as likely as those in Switzerland and Belgium to earn below the low pay threshold. Wealth inequality in Britain has risen four times faster in the seven years after the financial crash compared with the seven years before it.

Low pay is not just crippling for social mobility or living standards; it is also terrible for our public finances. Some £21 billion was spent on tax credits to help 3 million working families with children in 2012-13, and the cost of in-work housing benefit claims doubled in real terms in the four years to this April. A low-pay economy is a symptom of a low-productivity, low-skilled economy. It is the young, female workers, those in lower skilled jobs, and part-time and hospitality workers who suffer most with that kind of economy, and that must change.

Across the country there are record levels of anxiety over poverty pay. According to the Joseph Rowntree Foundation, one in three people this year has said that low pay is the biggest issue affecting the country. Fewer than one in five voters expect to benefit from any increase in economic growth this year. As we know, the link between productivity and wage growth was broken some time ago and needs to be restored if we are to have a sustained rise in living standards over the next decade.

Sadly, it is no longer the case that the main route out of poverty is a job. Many people across the country juggle several part-time jobs but are still poor. Two-thirds of children in poverty are in households where someone is in work. Hourly pay is now a bigger predictor of the chance of being poor than hours worked. The Government must focus on taking a stronger approach to improving social mobility through our education and skills systems across these islands, taking action on the quality and security of the jobs created in the economy, but also being far more proactive in boosting pay rates through forward guidance on the minimum wage—as adopted by the Low Pay Commission—and expanding the coverage of the living wage to as many people as we can. We also need a combination of action through policies to boost pay, but with the support of the tax and social security system. Although rising pay cuts reliance on state top-ups of income and brings in more tax revenue, the right approach for working families on low incomes is rising pay supported by a strong tax credit system.

[Richard Fuller (Bedford) (Con)]

I am listening intently to the hon. Gentleman. Does he agree that no one on either Front Bench has been confident or assertive enough in spelling out what policies they can adopt to improve wages for low earners? Would he like more clarity from those on the Front Benches about what they will do with tax credits if people’s incomes rise?

[Mr Bain]

The hon. Gentleman raises an interesting and important point. Before his intervention I was saying that we should consider the impact of such measures on a lone parent in work. If she were to take a low-paid job—perhaps just above the minimum wage—the tax credit system effectively gives her an average hourly rate of £13 to £14. If wages paid not just by public sector employers but by the private sector increase, the tax credit system will still have an important role in topping up people’s income, but reliance on the state will be somewhat less. That will relieve pressure on the taxpayer and lead to a more affordable social security system in the decades to come.