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Living Wage commitment: more than a wage rate

By Andrea Coulson - Posted on 27 October 2016

Dr Andrea Coulson has carried out research for the Living Wage Foundation and here explains more about it and the implications of the Living Wage.

On Monday (October 31) the Living Wage Foundation’s real living wage rate for 2016 will be announced.

Strathclyde University is hosting the Living Wage Expo Conference 2016 to provide existing and potential Living Wage accredited employers opportunities to share thoughts and experience on how to make the most out of Living Wage accreditation as well as be amongst the first employers to hear about the new Living Wage rate.

The annual rate for the UK and a rate for London are independently calculated by Donald Hirsch, at the Centre for Research in Social Policy, Loughborough University to represent a wage rate which means employees and their families can afford things like a decent meal, a warm home and a treat for your children. It is important that these voluntary rates should be applied to all workers over 18, recognising young people face the same living costs as everyone else.

Becoming a Living Wage Employer accredited by the Living Wage Foundation through the Scottish Living Wage Accreditation Initiative in Scotland requires a commitment to pay all direct employees and all third-party on site contract employees the Living Wage.

“By paying the real Living Wage employers are voluntarily taking a stand to ensure their employees can earn a wage which is enough to live on. That basic fairness is at the heart of what our campaign is trying to achieve and why great businesses and organisations choose to go further than the government minimum.” Living Wage Foundation

Evidence on the business case for a living wage illustrates that implementing the Living Wage is about far more than introducing a new wage rate and cannot be measured in monetary values alone. The philosophy of Living Wage adoption reflects a social contract inherent in core business values and often requires a new business model to be developed.

Covering the costs of implementation is fundamental to a business case for adopting a Living Wage and a cost mitigation strategy is needed. Implementing a Living Wage should not be done at a direct cost to the broader workforce, for example loss of employment, or indirect cost, by a reduction in training and development opportunities. A business model is needed where cost mitigation is considered alongside investment commitments designed to achieve value creation through Living Wage adoption.

There are a number of potential benefits that specific businesses can realise from implementing the Living Wage which include financial savings such as: reducing staff turnover; increasing worker morale and loyalty; reducing absenteeism; productivity improvements; strengthening recruitment opportunities; and providing reputational benefits. Employee engagement is central to adopting the Living Wage. Asking employees how their lives can be, and are, improved by action taken by their employers is critical to improving social welfare. Social capital and financial capital need to be considered together.

Evidence of the impact of Living Wage adoption needs to be drawn from financial and non-financial information and representations of ‘value’ which can be created for and are recognised by a business and its stakeholders. Employers’ evidence of living wage implementation may include ‘packages’ of employment benefits that reflect fair compensation for workers and extends beyond the Living Wage to improved terms of employment and working conditions, and hopefully social welfare gains. Alternatively, capturing and reporting on employee views on how their lives have changed is critical to understanding and evaluating social value creation.

Practice based research and knowledge exchange that I’ve carried out at Strathclyde Business School with the Living Wage Foundation includes evidence from five major accredited Living Wage employers. It covers more than 327,000 staff and gives evidence of the business benefits of paying the Living Wage. It demonstrates how paying the Living Wage is good for employees and their employer.

Paying a living wage and treating employees fairly helps to ensure a healthy and productive workforce and helps to raise people out of in-work poverty.

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