Local government needs to address low pay

The UK is in the midst of a low pay crisis. Over 5 million people do not earn a wage which is sufficient to afford them a ‘decent’ quality of life. Wages across a raft of sectors are not rising in line with the cost of living and particularly costs associated with housing, fuel and food.

Coupled with the reform of the welfare system around income support and tax credits, it is clear that people in work and on low pay are the demographic facing the biggest growing challenges in terms of poverty.

In recent years, there has been an exponential growth in the recognition of the importance of organisations across all sectors paying their staff a Living Wage in order to address the problem of low pay. The Living Wage Foundation is an important lobbying voice on the low pay agenda and a number of local authorities and businesses have become accredited Living Wage employers.

I would argue that the role of local government is imperative in addressing the challenges associated with low pay. Local government has a democratic remit to enhance the wellbeing of residents living within its boundaries. It has a strategic role in setting key priorities for a locality. It is a significant purchaser of goods and services; and perhaps most importantly it has the ability in its role as a ‘place-shaper’ to influence the behaviour of partners and other organisations.

As part of Living Wage Week I am launching a new report with the Greater Manchester Living Wage Campaign which explores in more detail the principles of Living Wage and the role of local government. This is a real opportune time in the debate around low pay as places are seeking to negotiate with central government for enhanced powers and resources; they are looking to use commissioning and procurement processes to derive wider economic and social benefits; and to influence the behaviour of organisations based in their locality to be more socially responsible.

These themes of devolution, service design, procurement and influence are integral to the recommendations of our report, which seeks to up the ante on the role of local government in the low pay agenda.

In terms of devolution, we argue that local authorities should be lobbying central government for the reinvestment of tax revenues they raise through paying their direct workers a Living Wage or encouraging businesses based in their boundaries to do so. The justification for this is that the biggest beneficiary for localities paying the Living Wage is HM Treasury, in the form of income taxation and reduced income related benefit. This negotiation or lobbying for reinvestment could take place through existing City Deals, or through new devolution activities, or through creating Living Wage-focused City Deals.

In terms of the themes of commissioning and procurement and influencing (which are interlinked), we argue that authorities should embed the need to address low pay as a corporate priority; they should explore how other authorities have embedded Living Wage principles into procurement; and they should develop ‘charters for social responsibility’ as a means of influencing procurement processes and the behaviour of suppliers and wider businesses.

The justification for each of these recommendations is that authorities have been historically risk averse when it comes to Living Wage and contracts as a result of the threat of legal challenge. Local authorities should consider whether to require or encourage the payment of the Living Wage in procurement exercises on a case by case basis; with the charter for social responsibility effectively being the framework for how this decision is made.

It could be that certain types of services are relevant for a requirement for Living Wage; and for others there may be other forms of economic and social benefit accrued. The charter and the embedding of low pay as a corporate priority are also key ways in influencing the behaviour of the supply chain and other businesses.

Addressing low pay is part of the place leadership role of local government, and the payment of the Living Wage will bring a range of economic and social benefits to their localities. Local authorities need to be prepared to take risks.