Michael Taft: Make The Living Wage A Living Fact

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From top: The Living Wage Technical Group’s logo; Michael Taft

The Living Wage Technical Group has today produced the hourly Living Wage for 2018: €11.90 – a 20 cents rise over last year. Since the Living Wage was first launched in 2014, it has increased from €11.45 – a 4 percent increase.

What has been driving this increase?

One word: housing.

The Living Wage is constructed on the work of the Vincentians’ Minimum Essential Standard of Living with some variations introduced by the Technical Group. This is a comprehensive and detailed breakdown of the cost of all goods and services that go into a minimum living standard.

When we separate out housing costs from the rest of the expenditure (food, transport, health, utilities, etc.) we can see the issue.

In the four years, housing costs increased by 37 percent. All other costs fell by -4 percent.
This leads us to a particular insight: if general pay increases in the economy are merely going to pay higher rents or higher house prices, then employers are essentially subsidising economic rents, whether to a landlord or developers /financial institution.

This is a drain on the productive economy and leaves many people’s living standards no better off except that they may have kept pace with housing costs.

For many people the solution is to increase the minimum wage to the level of the Living Wage. This would require an hourly increase of €2.35 or 25 percent.

Leave aside the issue of whether this would be feasible without employment or working time loss (just to note: the ESRI found that the 50 cents increase in the minimum wage in 2016 had no negative impact on employment).

The Living Wage, while expressed in an hourly payment, is actually based on a full-time worker (39 hours per week). Therefore, the Living Wage is:

Weekly: €469

Annual: €24,444

Anything less than those benchmarks and workers fall below the Living Wage. So someone may be paid, on an hourly basis, above the Living Wage. But if they only work 35 hours, they may be below the weekly and annual Living Wage.

This is important because there is evidence from the US that businesses facing substantial increases in the minimum wage are cutting back hours and forcing more work on to employees. In this way, firms can ease the increase in overall payroll.

When the minimum wage in Ireland jumped by 50 cents in 2016 there was anecdotal evidence that in the hospitality sector some workers faced higher targets (mattress changing, room cleaning). All this to say that without strong labour protection some employers may attempt to claw back minimum wage increases by sweating labour.

This suggests that we need a broader, multi-pronged strategy in order make the Living Wage a living fact. I would suggest three areas:

First, reduce high living costs which would reduce the Living Wage. For instance, if rents increased by just half the pace they did over the last four years the Living Wage would be lower. There are other living costs that could be reduced:

Public transport fares: we have one of the least subsidised public transport systems in Europe, resulting in high fares and a poorer service. Increased subventions would mean lower fares.

Healthcare: reduce insurance, GP and prescription medicine costs – through a free, universal health service.

Communications: yes, Ireland is a high-cost country. Consumer prices are 17 percent higher than EU-15 levels. But why is communication 24 percent higher? It would be helpful if the Government commissioned a study into all prices to get a real handle on the reason for our high living costs – rather than assume that current market pricing is somehow ‘natural’.

Second, provide for collective bargaining at company and sectoral level. The Irish private sector is generally low-paid compared to our EU peer-group. It also has much lower collective bargaining coverage.

This is especially so in the low-paid sectors – retail and hospitality – where Irish pay and collective bargaining levels are even further down the EU table. By providing workers with the tools to bargain together, they can drive up wages consistent with the company’s ability to pay and, so, bring workers closer to the Living Wage.

Further, workers can better protect themselves collectively if employers try to claw back wage increases by degrading working conditions.

Third, the minimum wage does have a role but what is needed is a more robust approach. For example, minimum wage increases could be linked to overall wage increases in the private sector but instead of expressing them in percentage terms, they could be expressed in terms of a flat-rate pay increase or a combination of the two.

This would use general wage increases as parameters but express the increase in terms of an egalitarian calculation. In this way, the minimum wage would rise as a proportion of the average or median wage.

This three-pronged approach would help bring workers above the Living Wage while reducing living costs, which would be a benefit to all workers and the productive economy.

In short, the drive to achieve the Living Wage for all workers must take place at a social level (living costs), in the workplace (stronger workers’ rights) – both combined with a solidarity minimum wage strategy.

This broad-based strategy can help make the Living Wage a living fact.

Michael Taft is a researcher for SIPTU and author of the political economy blog, Notes on the Front.

12 thoughts on “Michael Taft: Make The Living Wage A Living Fact

  1. Spud

    Glad this topic is posted.
    Many (or perhaps all given my cynicism these days) of those companies that have signed up to support the Living Wage have done so purely for false corporate social responsibility reasons.

    I know for a fact one such company in Ireland who promotes that they are a living wage supporter, yet contracts out all lower paid jobs – like their canteen and cleaning staff. A job I saw online for this was paying 9.55 – the minimum wage. I’m sure their staff were proud to think they work in a workplace where all staff, regardless of skills, are being paid a fair wage. Unfortunately, they need to think again.

    If their CEOs / HR folk etc… are so passionate about seeing those who work for them to be paid a decent wage to support basic living, why not get their contractors to adhere to it also?

  2. SOQ

    What does housing actually mean? Anyone who has a mortgage has not had substantial increases surely? The people who are getting screwed are renters and the solution to that is targeted tax breaks.

    I am not against the living wage at all, just pointing out that some people’s housing costs have risen far more than others and that 50% of those rent increases are actually tax.

  3. wearnicehats

    I’ve said before that this living wage thing is utter nonsense. It’s a totally false economy. If the minimum wage was to be put up to match this then every industry that relies on minimum wage workers will have to put up the prices of what they reap, make or sell. In turn this will raise the cost of living and, in turn, increase this Living Wage nonsense. It’s self-perpetuating.

    1. Col

      I think I got this all wrong, but I thought businesses should have used this to highlight to government how unsustainable things like housing cost increases are.
      The self-perpetuating bit should be an argument for reducing costs, rather than increasing wages.
      But as I said, that doesn’t seem to be anyone else’s take on it.

  4. john f

    “some employers may attempt to claw back minimum wage increases by sweating labour”.
    Primarily this happens in unskilled manual labour jobs where employees have little choice than to put up with the work increases or leave the job.
    Labour costs are by and large the largest cost of doing business. Unskilled manual labourers make up the vast majority of the working class here. This article suggests greater collective bargaining powers to allow employees to gain higher wages, that is not going to happen in an environment where more workers are continually added to the market. Employers are less likely to entertain pay increased demands were they can easily change out the groups of staff making them.
    For this reason, it is a bad idea to allow those in direct provision centres to work. I find it funny that political parties and organisations that claim to be all about protecting the working class are hellbent on undermining them by leading the calls for increased mass immigration and open borders. Broadly the influx of people inwards will need somewhere to live and this will further drive up the cost of housing.
    I fully agree with Mr Taft’s calls for a universal healthcare model, the current HSE is just not working and is proving to be an expensive failure for everyone. Also his calls for increased state subsidisation of public transport make sense. As regards communication costs there seems to be reasonably competitive options if people are prepared to shop around for them.

    1. anne

      More workers = less rights.. Is that some innate law or something I didn’t know about?

        1. anne

          Yeah in the wild west or something..employment laws and rights are created where there’s a will to do so.

  5. stephen

    The living wage is great until a carton of milk costs 4 quid and a mcdonalds hamburger doubles in price, the people elevated to this new ‘living wage’ will feel the burn first and be worse off in spending as consumers.

    1. Rob_G

      +1

      If you decided to increase wages across the board, in the end most if not all of the increase would be eaten up by rising rents & rising prices

  6. Kevin Doyle

    I’m a public sector worker, 33, my income is just above this living wage.
    Yikes. I’ve been working and in and out of 3rd level education my adult life.
    Can’t imagine how other people manage it.

    1. Kevin Doyle

      You know, in other counties things like universal basic income are being discussed.
      Living wage is also a big deal. Incidentally my neice is 20 just got her first job while in college. She is not being paid minimum wage €9.55, instead she’s on the sub minimum wage of €7.64.
      Gas country

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