‘Still waiting for a Living Wage’: UK progress but more needed internationally

Blog posts

8 Dec 2021

Duncan BrownDr Duncan Brown, Principal Associate

‘The low paid have borne the brunt of this crisis… significantly more likely to have had their hours reduced, been furloughed or lost their jobs’. IES ‘Laid Low’ report, January 2021.

I joined in a number of the Living Wage Foundation’s (LWF) events last month at their annual Living Wage Week. The atmosphere was, rightly, celebratory, recognising LWF achieving the landmark of 9000 members, up by over a third since the start of the pandemic. More than £1.6 billion in extra wages has gone to low-paid workers since the start of the Living Wage movement 20 years ago and £613 million to more than 300,000 workers since Covid struck.

But as Katherine Chapman, LWF’s Director, recognised: ‘There are still millions trapped in working poverty struggling to keep their heads above water, working in jobs that kept society going during the pandemic.’ Rapidly rising inflation will only worsen this situation in the months ahead.

Research published last month by the Resolution Foundation showed that in the UK there are 4.8 million employees  (1 in 6 workers) paid below the real Living Wage (LW), with women and those from ethnic minority groups over-represented (19.4% compared to 16.3% for white male workers). 

Many of our largest multinational companies are still not signed up to the UK national standard, nor applying a LW policy internationally and into their supply chains, where problems of low pay and conditions are often at their worst. The Financial Conduct Authority last month criticised large companies for failing to implement the new provisions in their corporate governance code on Modern Slavery. The Corporate Human Rights Benchmark data suggests only 10% of the world’s largest companies have living wage commitments. Unilever’s announcement earlier this year that it will extend its living wage policy beyond its own workforce (achieved in 2020) to include the ‘first tier’ of its supplier chain by 2030 is a significant and welcome outlier.

So, what are the challenges with applying living wages in multinational companies and how might these be overcome? I ran an expert roundtable on the issue recently on behalf of a FTSE 100 company. The 14 participants included HR leaders, academics, consultancies, policy makers and advisory bodies, such as the United Nations Global Compact and LWF.

A strong business/moral case

‘Making sure that workers earn a living wage helps support economies, fosters growth, and it’s simply the right thing to do for a business founded on respect for human rights.’ Unilever, 2020.

Participants at the roundtable did not regard the moral and the economic cases for LW as alternatives, but rather mutually reinforcing drivers. All felt that the business case is very strong. The Living Wage Foundation’s  Living Wage Toolkit includes their Cardiff University study which found 93% of accredited employers had experienced benefits. Many reported a greater ability to recruit and retain workers, lower absenteeism and higher productivity. So why aren’t multinational companies implementing a global LW policy?

‘The question of calculating and paying a living wage within global supply chains is complex.’ Adidas

The calculation and implementation difficulties are also, unfortunately, pretty consistent from all of the research and reinforced at our roundtable. Living Wage is not a universal or clearly defined concept, there is no consistently accepted international definition, nor standards to judge it. The UN Social Development Goals for example, don’t actually mention it. One global meta-analysis of the area characterised it as ‘often fragmented and confusing’.

We heard from the companies at our roundtable that this fragmentation and complexity is a major barrier to take up of global LW policies. While the LWF explained that they are increasingly co-ordinating their approach as part of a loose network of 15 similar standard-setting bodies, they don’t even use the same calculation method domestically as, for example, Living Wage US.

The implementation challenge

‘Ultimately the challenge is implementation, not calculation'. Living Wages in Global Supply Chains. Joint Ethical Trade Initiatives (JETI)

In terms of the implementation process, our roundtable made very similar points to JETI. First, was the need to treat LW as a process of progressive improvement and learning, rather than selecting the single ‘ideal’ methodology.

Second, it’s a long-term process, not a ‘quick win’ or ‘tick box’. Unilever took six years to implement LW for their own 150,000 employees and have a ten-year ambition to implement for their supply chain.

Thirdly, everyone advocated a phased approach, namely, to start with direct employees before broadening  into supply chains. Here their advice was to start cautiously with communications and advocacy, avoiding threats and ‘red-lines’.

Finally, was the need to broaden the LW project out from being HR-driven to be a more widely-engaging movement, with extensive employee involvement receiving particular emphasis. ‘Don’t let the perfect be the enemy of the good,’ as one participant put it. ‘You need sharpness of objective, and practicality of methodology to make progress,’ another commented.

Getting going on the journey

‘Don’t be immobilised by the challenges, there’s real potential to move things forward now.' Roundtable participant

Late on Saturday November 13th, when the COP26 climate talks were well into extra time, European Commission vice-president, Frans Timmermans, pleaded with delegates ’to think about one person in your life...that will still be around in 2030, think about how that person will live if we do not stick to the 1.5°C.’ His plea unblocked the long-drawn-out proceedings, leading to the Glasgow Climate Pact. Not perfect, but better.

Governments, employers and HR leaders need to think of the same person not earning enough to live on. The Living Wage, in a world still blighted by the pandemic and its human and economic cost, is not straightforward to define or deliver. Perhaps we need the UN to co-ordinate a similar conference to COP26 for the Living Wage and decent work throughout the world.

But as my roundtable highlighted, in the meantime, individual employers can and should be making progress. Although far from being an idealistic living wage ‘love-in’, participants agreed that the ‘shock’ of the pandemic has created significant opportunities for employers. Opportunities to inspire employees and stakeholders to contribute to a wider corporate purpose of addressing some of the most significant and acute social, economic and health challenges evident in the world today. Who wouldn’t want to get on board with that?

Subscribe to blog posts

Any views expressed are those of the author and not necessarily those of the Institute as a whole.