Living wage Q&A: what is Ed Miliband proposing?
Labour's pledge to offer tax breaks to companies paying the living wage divides both parties
A PROPOSAL by Ed Miliband to encourage employers to pay workers the living wage has drawn mixed reactions from the Labour and Tory camps. Members of the Labour party have called for more extreme action to tackle poverty, while Boris Johnson has reasserted his support for the living wage, dampening the Conservatives' attack on the plan.
What is being proposed?
If Labour wins the next election, Miliband has pledged to give companies a 12-month tax break worth up to £1,000 for each worker if they agree to pay staff the living wage. In a speech tomorrow, he is expected to call for "strong increases in wages that will genuinely make people all across Britain better off".
How will the tax-break be funded?
Miliband has told the Independent on Sunday that for every extra pound employers pay up to the living wage, the Government saves almost 50p on lower tax credits and benefits, and higher tax. The cost of his policy would therefore be funded by the money saved on lower benefit payments, as well as higher tax and National Insurance revenues.
What is the living wage?
The living wage was introduced in the last decade after a campaign to help families who were struggling to make ends meet despite working two or more minimum wage jobs. The UK living wage, set annually by the Centre for Research in Social Policy at Loughborough University since 2008, increased today by 20p to £7.65 an hour. The London living wage, set annually by the Greater London Authority since 2005, increased today by 25p to £8.80 per hour. The rate takes into account the average costs of housing, council tax, transport and food. Unlike the minimum wage, which is currently is £6.31 for those aged 21 and over, the living wage has no legal force. It is paid by employers on a voluntary basis and is a recognised sign of good employment practice.
How many people are paid less than the living wage?
According to The Guardian, more than 5.2 million people in the UK are paid less than the living wage. Women and young people are said to be disproportionately affected.
Who is against Miliband's proposal?
Bob Crow, the left-wing leader of the RMT railway union, dismissed the pledge as a "cop out" and has called for a raise in the statutory minimum wage – a proposal backed by several members of Miliband's own party. Fiona Twycross, a Labour London Assembly member, warned that, at the current rate of progress, it will take "450 years for all workers to be paid a living wage in London". CBI leaders praised the Labour leader for making the living wage a voluntary scheme rather than mandatory but warned that not all employers could afford to pay it. The Conservative party condemned the plans as unaffordable and unworkable, and pointed out that even Ed Balls, Labour's shadow chancellor, was previously against the idea when it was first raised by Miliband in the 2010 Labour leadership contest. Balls said at the time that the policy would require "a substantial extra cost either to the Exchequer or to business".
Who is in favour?
Boris Johnson, the Conservative mayor of London, dampened his own party's criticism of the proposal by today reasserting his support for the living wage. He is expected to say that it is "not only morally right, but makes good business sense too". Charities such as Save the Children have also echoed calls for more families to be paid the living wage, while Matthew Bolton of Citizens UK – the organisation that first began campaigning for the living wage – called on employers to "stop and think" about workers being pushed into poverty. ·