Minimum wage and living wage “can co-exist”, says top economist

The national minimum wage and living wage complement each other and both have an important role, according to Rhys Moore, director of the Living Wage Foundation, speaking at the CIPD Reward Conference last week.

Moore said: “While the national minimum wage is a very well-informed negotiation to come up with a rate across all sectors, there is no brief around the standard of living or cost of living, and this is where the living wage has an important job to do.

“The living wage is a more ambitious benchmark and it is there for employers who want to do better.”

Moore’s comments were part of the living wage debate that took place at the conference on 15 April.

When asked if both the national minimum wage and living wage rates could continue to exist after the general election, he said: “There is space for both the living wage and the national minimum wage and we have no immediate plans to give up any reins.

“While the brief for the Low Pay Commission [which recommends the rate of the national minimum wage] may change following the election, nothing will be solved by merging the two rates. There is a need to have clarity on the two rates and to keep the two distinct.”

While there has been a surge in take-up over the last couple of years, with 1,400 living-wage-accredited organisations, Claire Townson, deputy director for people at the Joseph Rowntree Foundation, cautioned that paying the living wage can be a costly exercise and organisations need to work out how to accommodate it.

Living wage rates are £7.85 per hour outside London and £9.15 in London. Townson confirmed the living wage has meant “happy workers and a happy service [for customers]” at her organisation. She did however, describe the living wage as an “aspirational rate” and outlined other measures that can be adopted in the interim if an organisation cannot yet pay the living wage.

“Listen to what people in low-paid occupations are saying and some achievements can be cost-neutral,” said Townson. “It is easy to do and it has less impact on the bottom line. Look at zero hours contracts – can you guarantee minimum hours? Do you need exclusivity clauses in contracts? Offer progression in certain roles. Low-paid workers also value flexibility. All these things benefit employees, with some at no particular cost.”

Another concern raised during the debate was the need for accredited living wage employers to ensure that contractors are also covered by the living wage rate, in addition to employees. Moore confirmed that this does not apply to all of an organisation’s supply chain, just those in the sphere of an organisation’s direct influence. The importance of this goes back to the roots of the campaign, when the aim was to secure better pay for cleaners working in Barclays buildings, without being Barclays employees.

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Nestlé explained its success in securing the living wage for employees and contract partners in areas including facilities, cleaning and maintenance.

Jenny Lightfoot, head of reward at Nestlé UK & Ireland, said: “We wait for contracts to come up then have this conversation with providers – and it is a positive conversation to have. [As an accredited organisation] you can’t say ‘it’s nothing to do with us and we’re not interested in what they are paid’. The living wage fits with our values and providers also have this commitment to our business.”