The Living Wage in the UK: testing the limits of soft regulation?

Abstract

This article critically evaluates the mixed fortunes of the Living Wage in the UK since its introduction in London nearly 20 years ago. The evidence shows that the gains in hourly pay have been significant, and have been achieved at little or no cost to jobs or working hours. An adequate living wage is therefore a necessary factor in reducing labour market inequality and eradicating in-work poverty. However, the UK case demonstrates that a living wage is not a sufficient factor in the absence of both a coordinated approach for universal implementation and linkages with effective collective bargaining. Poor coordination explains the very low proportion of low-wage workers covered by a voluntary Living Wage. Weak links with collective bargaining mean that even where a Living Wage is introduced by a low-wage employer, further positive wage ripple effects (e.g. by sustaining wage differentials) are rare. The argument advanced here is that while employers increasingly perceive voluntary accreditation with the Living Wage Foundation as an important symbol of ‘business ethics’, the Living Wage remains a relatively isolated wage-setting instrument in the UK. This is the result not only of the voluntarist nature of the campaign but also of the limited scope for direct interaction with other wage-setting mechanisms in the UK, despite evidence of positive complementarity between a living wage and collectively bargained pay structures. The article concludes by exploring different mechanisms through which the Living Wage could be extended and embedded across low-wage labour markets.

A case of employers never letting a good crisis go to waste? An investigation of how work becomes even more precarious for hourly paid workers under Covid

“…Without effective union organisation, voluntary organisations such as the Living Wage Foundation have emerged to establish parameters for what being a good employer might entail and to encourage employers to improve conditions based on ‘sound business decisions’ including ‘ethical’ and ‘reputational benefits’ and their own market positioning (Werner & Lim, 2017; Williams et al, 2017). One weakness of this approach is that these standards are not embedded in collective bargaining agreements (Heery et al, 2018) and may do little to improve conditions even for workers just above the lowest grade due to a lack of ripple effects to maintain wage differentials (Johnson et al, 2019). A key question is thus whether reliance on employers' voluntary action is sufficient to bring about better long run quality of work at the bottom of the labour market, without more active state involvement in setting minimum standards (Lambert, 2014; Sisson, 2019; Warhurst & Knox, 2020), in combination with a strong presence of ‘collectively‐negotiated solutions’ (Deakin et al, 2012, p. 135).…”

“…Employment arrangements that rely on voluntary employer policies and are not protected by organised worker power (Johnson et al, 2019) may not be enduring. Events such as the Covid pandemic could act as a catalyst for change, encouraging employer action either to address specific pandemic effects or to change their long‐term employment practices.…”

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“…These include social and labour market policy conditions (e.g., McBride & Muirhead, 2016), as well as stakeholder input (Luce, 2005a). The importance of clear administration of policies and collective bargaining processes has also been highlighted (Johnson et al, 2019), while study of non-compliant organizations sheds light on the need for intervention beyond regulation, and for implementation of macro policies (Ram et al, 2019).…”

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“…Through their procurement activities, public bodies play an important role in promoting the living wage by encouraging contractors also to pay the living wage. Despite the remarkable success of the Living Wage Foundation in accrediting employers, due to the voluntary nature of the living wage the overall spread of living wage employers in the United Kingdom is still rather limited (see Johnson et al, 2019).…”