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Paying the living wage will bring a range of economic benefits

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The nature of poverty in the UK is changing. We are seeing in-work poverty rise as wages fail to increase in line with prices.

The concept of a living wage to address the challenge of low pay is not new. Since its inception by pressure group London Citizens in the early 2000s we have seen a number of councils sign up to the principles of the living wage, and a growing number of businesses have recognised its potential benefits.

Recently local government has been challenged to embed the living wage more adroitly into its own pay policies and into those of its contractors and suppliers through procurement.

While fundamentally most local authorities agree with the living wage, there are a number of challenges. The first is affordability. The second is risk and challenge in relation to European procurement law. The final obstacle is shifting the practice of the supply chain.

In my research, Living Wage and the Role of Local Government, I argue that these challenges can be overcome.

In terms of affordability, local authorities should seize the devolution debate by negotiating, as part of city deals or other devolution activities, for the reinvestment at a local level of any taxes raised from their payment of a living wage to direct employees or from their suppliers. These resources can then be used for their own regeneration projects or to support other businesses to pay the living wage.

In terms of risk and challenge, paying the living wage should form one of the factors of economic and social value that local authorities consider as part of the commissioning and procurement process. They must embed addressing low pay as a corporate priority and encourage other partners to adopt it.

The practice of flagship living wage authorities such as Islington LBC demonstrates that it’s possible to overcome legal challenges and ensure that more than 90% of suppliers pay the living wage.

In terms of influencing, local authorities can set out their stall of what added value they expect their partners, contractors and suppliers to bring through the provision of services and in the purchasing of goods.

One way of doing this could be to develop ‘charters for social responsibility’ and use them to shape whether the living wage is required or to be encouraged as part of contracts on a case-by-case basis and to influence the behaviour of other institutions.

Addressing low pay is part of the place leadership role of local government. In essence, local authorities need to be prepared to take risks and the payment of the living wage is one that will bring a range of economic and social benefits to their localities.  

Matthew Jackson, deputy chief executive, Centre for Local Economic Strategies    


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