London Living Wage Pleases Workers, Employers and Government

580,000 workers, one in five in London, get less than the poverty wage (£8.30) of the “London Living Wage” (LLW). Though the national minimum wage is £6.19 per hour, in London it is too little to live on. The LLW is defined as the basic living wage in the capital.

The government could save almost £1bn per year if all workers in London were paid at least the LL Wage, because of the higher tax revenue, and a reduction in welfare spending. Professor Jana Wills who steered the work observed:

Poverty levels among people who are in work have grown, making the campaign for a living wage more important than ever. It's clear that the LL Wage can benefit everybody concerned—employees and employers as well as the tax-paying public. Businesses that have introduced the wage have seen a 25 per cent fall in the number of staff who leave, better workplace relationships develop as a result and better psychological health amongst those employed in living wage workplaces.

Companies interviewed for the study suggest that the reputational benefits of paying the LL Wage have helped them attract new business. Employers also reported that demonstrating corporate social responsibility by paying the LL Wage has proven hugely beneficial in attracting high calibre graduate recruits. While wage costs increase for businesses, the impact can be minimised through adjusting working practices to increase efficiency.

A workplace survey found that half of employees (54 per cent) felt more positive about their workplace once the LL Wage was introduced, with 52 per cent feeling more loyal to their employers. Almost one third (32 per cent) of the London workers surveyed felt the higher wage benefitted their family. One in four began to be able to save a little or buy occasional special items. A two person household could earn up to an extra £5,000 per year.

Middle Class Support for Welfare Goes Up When They Feel at Risk Themselves!

Three researchers from Yale and Ohio State University, Philipp Rehm (Ohio State), Jacob S Hacker and Mark Schlesinger (Yale) examined attitudes to welfare policies within the US and across 13 other countries. The researchers surveyed people’s support for unemployment insurance across 13 nations (Portugal, Switzerland, Netherlands, Norway, Denmark, Sweden, Spain, Finland, Ireland, Germany, Australia, United Kingdom, United States). They then surveyed US residents alone on their support for specific social policies within the United States and asked people to assess major economic risks—both their level of worry about them and their level of expectation that they themselves would experience them. Rehm said:

We also probed their attitudes about spending on existing programs, the role of government relative to the private sector in providing economic security, and hypothetical social programs that could be created to deal with major economic risks. Our research all produced highly consistent results across nations and within the US.

They found that support for welfare policies goes up when economic difficulties strike higher up the social scale. Popular support gets broader and opinion less polarized. Where the risk of unemployment or other misfortune threatens mainly people already on low incomes and at the bottom of the social scale, opposition to the welfare state among the generally better off is strongest. When, in times of widespread recession, that threat begins to climb the social ladder, support for welfare policies tends also to migrate up the ladder and to widen out among a larger proportion of the population.

Economic events that make better off people feel insecure are likely to reduce their traditional opposition to welfare. This has the effect of raising a nation’s average support for welfare intervention as those who normally perceive themselves as self sufficient feel at greater risk of losing jobs, homes and other major fundamentals of life.

Conversely, when economic hardships strike only those who are generally on low incomes most of the time, opposition to the welfare state remains strong higher up the social scale. It takes a more widespread misfortune, such as national or global recession, to shift attitudes. The paper says:

To create cross class coalitions—that is, a wider proportion of the population supporting the welfare state—risks have to broaden in reach, not just deepen in impact on the already disadvantaged.

The conclusion is that a broad coalition of support across the social divide is necessary for welfare states to survive:

There seems little question that welfare states cannot long swim in a sea of public hostility, that widespread support is a necessary condition for their sustenance.

It seems a patently obvious conclusion, but says nothing about why people should be so opposed to welfare when the research shows they turn to supporting it when they themselves feel insecure. Welfare is a security net! Remove the net and it is missing when you need it. In other words, it is common sense to want to have a security net, and there is no time better than the present to prove it.

The middle classes, for the first time in several generations, are beginning to realize that they too can feel the need for security when the ruling class starts to pull the snug rug of middle class complacency from beneath them, for the smug rug includes the safety net. For that reason the agents of the ruling class, supposedly democratically elected governments of get rich quick opportunists, will squeeze the blood from the underclasses before they will squeeze anything from the middle class.

The point of Rawls's “Veil of Ignorance” is to put everyone in the situation of not knowing where in society you will end up. If you know you are wealthy and are complacent about your position in society, then you will not care a hoot what happens to your neighbours. If you consider that you might end up poor or disabled, whether by misfortune or bad judgment, then you will insist upon society providing the welfare safety net that you will need to keep you alive and perhaps sane. Quit apart from that, though, which is still an argument from self interest, people in putatively Christian societies ought to have sufficient compassion for the poor and disadvantaged to want to have them protected.

There is a final reason for welfare, another selfish reason for the middle classes, and that is the need for everyone to have some money to spend. In a hierarchical society like western societies, money has to be injected at the base. It is then inevitably spent by the poor on their necessities, and someone has to supply those needs—small shopkeepers and services, or people employed at the lowest level of supermarkets and service industries. That money therefore moves up. The “trickle down” idea is manifestly nonsense, because the rich spend their money wherever in the world they like, and mostly not in western supermarkets!

It is therefore in the best interests of everyone to support the welfare state. Any of us not at the top of the heap might need it, and all of us do need it for society to work properly. It also ensures that we are doing the most honorable thing, and that is caring for the welfare of the least in our society. That alone ought to be sufficient when people like to claim to be Christian.

Media Manipulation of the Poor Prevents Wealth Redistribution

Nate Kelly, a professor of political science at the University of Tennessee, Knoxville, and Peter Enns of Cornell University studied of economic inequality and public views of government redistribution programs by analyzing hundreds of thousands of responses to survey questions from 1952 to 2006.

The results are very revealing about the mentality and conditioning of poor Americans, and poor Americans certainly now includes a large chunk of people who like to consider themselves as middle class! One would imaging that people struggling in hard economic circumstances would appreciate government assistance, but they do not in the US. Kelly found:

When inequality in America rises, both the rich and the poor become more conservative in their ideologies. It is counterintuitive, but rather than generating opinion shifts that would make redistributive policies more likely, increased economic inequality produces a conservative response in public sentiment.

As the rich get richer and the poor get poorer, both oppose government welfare programs. At present, in the US, governments cannot act to change inequality. As Obama is finding out, the poor even oppose measures that help them! Poorly off subjects, asked if they thought the government spent too much money on welfare, inevitably replied “yes”, and still do even though inequality over the last few decades has zoomed in the US.

This isn't because are unaware. They know about the huge wealth differences in the US. The reason is, the authors conclude, because the elites, political leaders and media moguls, distract and shape public opinion. In good economic times the media focus on individual achievement, and so the poor resist government programs. But in bad economic times, the media emphasize government welfare programs as handouts, and no one likes a self image of being a beggar or a hobo down on their luck. Kelly observes that:

What is clear from our work is that the self reinforcing nature of economic inequality is real, and that we must look beyond simple defects in the policy responsiveness of American democracy to understand why this is the case.

He means, of course, that leaders like Obama who would like to redistribute the huge inequalities in US wealth have not been utterly lacking in the US, but the US propaganda machine is so successful that too many people just cannot bring themselves to admit they would welcome it. They are conscious enough about their own poor circumstances, but simply do not realize how the US media manipulate them. Obama and anyone equally public minded are bound to lose until poor Yankees realize the rich and their media are pissing on them from a great height!

Now Legislate a Maximum Wage!

The ongoing economic turmoil and the meltdown in the financial world have revealed the negative effect of the excessive “compensation” packages for bosses, Fred Goodwin CEO of RBS being the most infamous of them. All the main political parties talk about having better regulation of a corporate sector that paid itself vast bonuses for destroying the financial system. A few thousand—not enough!—protestors angrily descended on the bank of England, but British Trades Unionists lobbied Parliament for a higher minimum wage. In Britain, on All Fools Day, 1 April, we celebrated ten years of a legal minimum wage, set up by the New Labour government in one of its few sensible and useful policies. Yet, the minimum wage always remains too low to live on adequately. Set a minimum wage and the spread of wages above it simply extends, they rise to match. One way to counter it is to set the minimum as a proportion of the wage bill, instead of a fixed amount. Thus the Council of Europe set its decency threshold at 60% of net earnings. So increasing the range automatically raises the minimum. There is a danger then of a self sustaining wage inflation setting in. But this suited Blair. It kept the labouring classes silent while Blair occupied himself with bigger schemes in partnership with his neocon chum, Bush. What is needed now is a maximum wage! This is professor Gregor Gall’s proposal. He explains the notion of maximum wages is based on the idea that no matter what job a person does and no matter how many hours they work, no one’s skill, expertise, intelligence or experience can justify the payment of 100, 200, 300 or even 400 times the wages of the lowest paid worker in any organization. The only way executives’ astronomical salaries can be explained is that those who receive them steal from those that end up being the low paid of the organization. In February, President Obama floated the idea of a national cap on US executive salaries at $500,000 where state bailout money has been taken. In Britain, it would plainly mean the banks, but it should mean all organizations that receive public money—bosses of train operating companies, defense contract companies, local authorities, national health trusts, universities and so on. Such reformed executive salaries could also be tied to genuine performance measures under which an executive is only entitled to the full salary by performing above a certain line. Maximum wages would be based on a ratio of around 1:4 to 1:10, where the multiplier would be based on the lowest paid in the organization. These could be determined by law. By fixing a wage range, senior managers who want to increase their own pay, have to increase that of lower paid employees automatically to fit the rules. Ordinary people who can see the injustice of the unlimited managers’ salaries can see how this reform would deal with it. But if it was only maximum wages, bonuses would not be included, and if it was just salary, then other items like expenses would be exempt. We’d soon find greedy executives awarding themselves perks and benefits on top of their wages. Such creativity as they had would be devoted to devising endless avoidance schemes, just as these people find “legitimate” tax avoidance schemes. So the notion of maximum wages needs to cover all forms of remuneration. But there’d also be a need for transparency to make sure that the rules set by law were being adhered to. It would mean everything in the books must be open, so that employees as well as shareholders could understand fully the company's finances. So, trades unions ought to press for policies along the lines of a maximum wage, knowing that most people would see it as fair. It does not stop genuine talent, merit or success being rewarded, but transparently and not excessively though regulation. It also gives people at all levels a real incentive to achieve and do better, because they cannot just steamroller self indulgent packages to the detriment of others in the company and the nation simply to feed their own greed. No one therefore need feel hard done by. The rules apply to everyone equally. A salary range from a minimum to a maximum linked in some fixed ratio means financial reward comes from the position people achieve in the range, and that has to be worked for.