As election looms, Labour promises tax breaks for firms that offer living wage
Labour would offer tax breaks to persuade the private sector to pay a living wage as a way to boost productivity and cut welfare bills, Ed Miliband will propose on Saturday.
The Labour leader suggests that firms could be offered either tax reliefs on training or capital investment, or lower business rates, in return for paying the living wage.
Speaking to the Guardian on a campaign tour in advance of Thursday’s local elections, the Labour leader said: “Living wage zones would work for everyone – the people who get decent pay, the employers who get a more committed workforce and the government that saves money on credits.” He said the proposal was a labour market reform that tackled in-work poverty and lifted productivity without boosting the welfare bill.
Dismissing the language of “scroungers and skivers” used by some on the right, he said he wanted “responsibility for everyone to look for work and … compassion for those that cannot find work”.
He added: “I am not going to try to divide the country on welfare.”
The independent thinktank the Institute for Fiscal Studies has calculated that for every pound spent paying the living wage, the Treasury saves 50p through not needing to pay tax credits and benefits.
The shadow Treasury team is now looking at the level of incentives needed to get employers to take up the scheme, and whether living wage zones could be established in industry sectors or geographical areas where a critical mass of employers are prepared to pay the living wage.
The measures are being considered as part of the Labour policy review, which is looking at a range of welfare reforms ranging from a compulsory jobs guarantee for the long-term unemployed, to restoring the contributory principle in some areas and switching housing benefit spending to house building.
Miliband said: “We are not going to be able to tackle the problem of in-work poverty through the tax credit system alone. It is a about changing the way the labour market works, using the power of government, making work pay and doing it in a way that gives the private sector real incentives. We have had enterprise zones. We can have living wage zones.”
He said: “Twelve councils are now living wage employers and there are a 17 further in the pipeline. These councils are not only paying their staff the living wage, but also requiring the same of their contractors. We want to extend this progress.”
The living wage is currently set at £7.45 per hour outside London and £8.55 in the capital. There are 200 employers accredited with the living wage campaign. The statutory minimum wage is £6.19.
The Resolution Foundation thinktank has calculated that if all those currently on the minimum wage received the living wage there would be a £2.2bn net saving to the public sector including higher income tax and national insurance receipts.
Miliband said he wanted to see local councils mandated to approach larger private sector employers to help create living wage zones.
He said: “It would be in central government’s interest to get private sector employers over the hump to pay the living wage, so local councils could offer temporary rate subsidies or extra cash for training.
“The money would come from savings to the Treasury through lower tax credit payouts. It’s an incredibly exciting idea since it is a way of persuading private sector there is a real incentive to pay the living wage.
“Employers might say at present this is just a cost to us but if we can show how they will benefit then that attitude changes. There is also increasing evidence that living wage employees are more productive and committed.”
He added: “The whole living wage idea has come up from the grassroots. It has not come from the thinktanks. It is an example of the kind of politics that I want.”
The idea is partly inspired by Arnie Graff the Baltimore-based community activist now working for the Labour party.
His aides said: “Low and stagnating pay is fast becoming a national crisis. In-work poverty has risen by 20% in the last decade and now stands at 6.1 million living in low-income households. Average wages have fallen since 2008, and the number of low wage, low skill jobs is expected to grow.” Miliband, under renewed pressure over lack of policy specifics, has recently been buffeted by the aftermath of Lady Thatcher’s death, unsolicited advice from Tony Blair and warnings from his biggest union backer that he will be consigned to the dustbin of history if he continues to take advice from Blairites such as the shadow defence Jim Murphy.
The Labour leader insisted he is energised by campaigning – making speeches in market squares on a pallet, not he insists a soapbox, the oratorical weapon of John Major. He said: “My biggest enemy is the people that say you politicians are all the same and governments cannot do things.”
On Friday, he was forced in Chesterfield market square by a passing pensioner to make a public vow that if elected he will speak the truth, the whole truth and nothing the truth. Miliband said there is a terrible wall of cynicism out there, adding that Angela Eagle, the shadow leader of the House has just started a public inquiry into political disengagement.
He also insisted he was not on the wrong side of the welfare argument. He said: “I am incredibly confident of our position on welfare. We are in the right place. For the 230,000 young people aged under 25 unemployed for more than a year, or older people unemployed for more than two years, we guarantee you a job at the minimum wage, but you have to take the offer. It’s a clear message that you have got a responsibility to work.
“At the same time I am not going to join George Osborne in saying anyone out of work is a skiver and a scrounger. Personally, I don’t even think it works for them [the Tories]. I don’t think my party is divided over this.
“I want responsibility for everyone to look for work and I want compassion for those that cannot find work. I am not going to try to divide the country on welfare.”
He said he supported benefit caps set regionally since housing benefit, a large part of welfare income, has to reflect regional housing costs. “If the government is so confident about the national cap, why are they not implementing it across the country, instead of some regions?
“The fact is that for all their heavy rhetoric we will be spending more on welfare at the end of this parliament in real terms than at the beginning,” he said.
Asked if he recognised himself as the most leftwing leader of Labour since Michael Foot he said: “I am firmly in the political centre ground, and I am addressing issues that go back decades. For the Brown and Blair generation, it looked like the Thatcher settlement had worked for most people. So Blair for totally understandable reasons was largely not about challenging the social settlement.
“For this generation looking back it becomes blindingly obvious that the Thatcher economic settlement did not work. We have an insecure labour market, wages falling and an economy only working for those at the top.
“We are about creating a different kind of economy for the future. Cameron is almost the business as usual candidate. That is why I think the ball is at our feet and it is our election to win.”
The national minimum wage will rise by 12p an hour to £6.31 for adults and by 5p to £5.03 for 18-to-20-year-olds from October.
Read the rest here: Minimum wage to increase to £6.31
Resolution Foundation report says earnings for low to middle income families will not reach pre-recession levels until 2023
Britain’s low to middle income families are unlikely to see their living standards return to pre-recession levels for at least another 10 years, the Resolution Foundation thinktank warns .
Its report, Squeezed Britain 2013, shows that if low to middle earnings rose by the 1.1% a year above inflation achieved in the past, average annual household incomes in this group would take until 2023 to reach £22,000 – the equivalent of where they stood in 2008.
The Foundation points out that this group’s average earnings might now have reached £27,500 but for the downturn since 2008. To reach that level over the next decade would require annual real earnings growth of 3.3%.
The foundation says such an increase in earnings is unattainable based on current projections and past experience. It points out that the Office for Budget Responsibility, the government’s forecaster, predicts average real earnings will continue to fall into 2014 at the same time as support from tax credits and benefits is due to decline.
In another extraordinary finding the foundation also says that from 1994-95 to 2009-10 the top 1% of earners accounted for the 15% of the growth in income from employment and investments, while the bottom 50% accounted for another 15%. It says the last year has shown a decline in inequality.
The report includes new polling conducted by Ipsos MORI showing voters divided about whether growth will return soon. More than a third (36%) do not believe the economy will be growing again by 2015, while 47% think it will be.
Four in 10 people do not expect to be better off in 2015 than today, compared with a similar number (42%) who think they will be. Nearly seven out of 10 people (68%) say they are cutting back on spending.
The researchers focused on the so-called squeezed middle – the country’s 10 million adults living on low to middle incomes. Their gross household incomes range from £12,000 to £41,000 depending on how many children the household includes.
They do not include the poorest 10% of households and those who receive more than one fifth of their gross household income from means-tested benefits.
The Resolution Foundation has long argued that the squeeze on the low to middle income group is not just a result of recent fiscal austerity but is a much longer-term and deeper-seated trend.
It says: “The struggle with stagnant wages, high levels of debt and a heavy reliance on rising tax credits reaches back before the financial crisis and as such it represents a major challenge for all parties. The wages of ordinary full-time workers barely grew in the five years prior to the 2008 crash and were negative for the lowest earners, despite relatively healthy economic growth.”
Even workers in the top half saw their wages grow only slowly. It was only the very richest – those in the top 5% – who experienced growth of more than 1% a year.
Households in the top 10% of the working-age income distribution accounted for 37% of the overall growth in gross income from employment and investments between 1994-95 and 2010-11, with the top 1% alone taking 13%. In contrast, those in the bottom half accounted for just 17% of overall income growth.
The report points to major long-term changes in the housing market. For the first time in recent history the majority of those on low to middle incomes under the age of 35 live in private rented property.
The report says under current circumstances it would take 22 years for a household on a low to middle income to save for an average deposit on a first-time home – in a climate of stagnant incomes and restricted mortgages.
The extent to which indebtedness is holding back households, and possibly a return to consumer demand is also underlined.
Among all households with debts in the bottom half of the income distribution, 30 per cent are “debt-loaded”, that is, they spend more than a quarter of their total income on repayments – even at a time of ultra-low interest rates.
Gavin Kelly, chief executive of the Resolution Foundation, said: “The next election will be about living standards yet little is known about what will be on offer.
South Africa increases the basic daily wage of farm workers by 52% following a violent strike in the wine-producing Western Cape region.
Read the original: SA farm workers get 52% pay rise
The big food companies should be taxed for the damage they cause to our bodies and the planet
The world is throwing away a shocking amount of food. A report last week claimed that at least a third of the 4 billion tonnes of food the world produces each year never gets as far as our mouths. Between 30% and 50% of food purchased in Europe and the US is thrown away. The research is questioned, not least by the supermarkets, but it does echo the results of an exercise in Britain six years ago, when researchers for the government-funded Waste and Resources Action Programme (Wrap) went through the nation’s rubbish bins. It concluded that we were throwing away 30% of the food we’d bought while it was still edible.
Britain – and much of the rich world – has got used to filling the fridge with what looks nice, not what it actually needs. The cost of that indulgence is, says the Institute of Mechanical Engineers, £10bn annually. Globally, the cost, in money, energy and ever-scarcer water, is unquantifiable.
Our future food security has been climbing the top 10 of current global worries. The prospect of feeding a mid-century planet of around 9 billion people looks impossible without major and potentially unattractive changes to farming and our diet. If you accept the United Nations Food and Agricultural Organisation’s call for production to be increased by 70% to feed the population of 2050, most of the work will be achieved just by being a bit more thrifty. All we have to do is to use better what is already there.
However, throwing food out is easy. Using it sensibly, especially the less attractive bits, is not. The urge to bin and buy again, encouraged by multimillion pound advertising campaigns, is all the less resistible now because, despite recent price rises, for most of us, food is cheap. At Christmas, the average family spent just over £100 on the big meal, a quarter of what it spent on presents. Stopping the waste will take more than a few celebrity chefs telling us how to use the roast chicken leftovers or asking the supermarkets to relax a bit with buy one, get one free offers.
Education of consumers and voluntary agreements with the retail industry have all been tried: Wrap is 13 years old this year and has not impressed. Its critics say that its expensive information campaigns under slogans such as “Love Food Hate Waste” lack targets and convincingly audited results. Like so many toothless quangos, it can only cajole business rather than bring it firmly to heel. More households may be portion-planning and recycling now, because of Wrap’s adverts, but the slight reduction in the tonnage of food estimated to have been thrown away in British households (from 8.3m in 2006/07 to 7.2m in 2010) is probably accounted for by the price rises and stall in incomes that followed the global economic crash of 2008.
Here we come to the uncomfortable core of the problem. Price is the key factor in our behaviour with food and food may, simply, be too cheap. Certainly, in Britain it is cheaper than at any time in history: we spend less than 10% of household income on food and drink. In 1950, we spent around 25%. In the developing world, 50% or more of income is spent on food. Tellingly, Britain spends less than any other country in Europe. Worldwide, it seems that the lower a country’s food/income ratio, the higher its incidence of obesity. Presumably, the higher also the proportion of food it chucks
Widespread use of a so-called living wage could save the government £2bn a year, according to two think tanks.
Follow this link: Living wage ‘would save billions’
Raising housing benefit is an expensive fix that fails to tackle the problem of high house prices and rents, says Institute of Economic Affairs
Anti-poverty campaigners should ditch their support for housing benefit in favour of proposals to bring down the cost of housing for low income families, according to a free market thinktank.
The £21bn cost of subsidising mortgages and rents to low incomes families could be almost halved when the government passes legislation to ease planning rules and allow more house building, the Institute of Economic Affairs (IEA) said.
The number of people claiming housing benefit has increased by 780,000 since the beginning of 2009 to 5 million.
The IEA said that only when property developers and local communities have the freedom to build more homes will the cost of housing begin to fall.
The thinktank warned that lobbyists campaigning for increased government spending on housing benefit and tax credits wanted an expensive, taxpayer-funded fix that failed to tackle the long term problem of unaffordable house prices and escalating rents.
The report by the IEA will provide some momentum to the government’s attempts to reform the planning rules, which have already been watered down to appease protestors. Legislation is expected to return to the House of Commons in the new year where it
may meet with renewed protests from groups seeking to prevent building on green belt and other desirable plots of land around major cities.
The IEA argues that a mass building programme will not only benefit the economy by providing much needed jobs, but will also bring down housing costs by as much as 40%. Philip Booth, editorial director at the IEA, said: “The poverty lobby continually campaigns for increased housing benefit. However, this will only raise house prices further and exacerbate poverty traps. House prices have gone up 40 times since 1971 whereas prices in general have ‘only’ increased tenfold. Housing without subsidy is now out of reach of much of the workforce. If the UK is compared with other similarly densely populated countries, it is clear that the reason for this is quite simply, our planning system. This needs radical reform,” he said.
“It’s probably also worth nothing the impact of planning regulation on food prices due to its impact on the cost of retail spaces is also discussed in the chapter, I don’t think that’s something people have looked at much before,” he added.
The thinktank argues that “eliminating government interventions” in areas such as planning, energy markets and childcare means “living costs can be reduced dramatically, taxes could be cut, and the welfare state could be reformed to meaningfully address poverty in Britain”.
The chancellor George Osborne has made looser planning regulation a central plank of his growth strategy. In the autumn statement earlier this month he said Britain needed to build more homes to boost growth.
Charities have argued that route out of poverty for low income families is a rise in wages beyond the average 1.8% a year employers have paid over the last two years. The consumer prices measure of inflation topped 5% in 2011 and was 2.7% last month, still well above average wage rises.
The Joseph Rowntree Foundation has campaigned for employers to pay a “living wage” of £7.45 to boost incomes and make low income families less reliant on benefits.
Chief executive Julia Unwin said the £6.19 minimum wage was too low to sustain families without extensive state support.
“There is no doubt that working people will be hit by recent [austerity] measures. For the first time, more people in poverty are in working households than workless households, excluding pensioners. This is a scandal of our time. But it’s also true to say that this is not a static group. There is a vicious circle, which means people move in and out of work, remaining poor, remaining benefit dependent as they struggle to improve their lives. That is the reality of people’s experience,” she said.
“The fact that one in six people, almost five million, have claimed jobseeker’s allowance in the past two years is evidence of this reality. The insecurity and weakness of the labour market at the murky end means it doesn’t take much for a ‘striver’ to become a so-called ‘shirker’.”
McDonald’s and Burger King staff join hundreds demanding union recognition
Hundreds of fast food workers at New York City branches of McDonald’s, Burger King and other big-name chains have staged a walk out in protest of low wages.
The strike, organised by pressure group New York Communities for Change (NYCC), was part of an attempt to gain union recognition for staff at fast food outlets in the city.
“So many people in our neighbourhoods work at fast food restaurants and make poverty wages so low people can’t put food on the table, put clothes on their kids’ back or even afford the train ride to work,” said Jonathan Westin, the organising director of NYCC.
The group staged a number of demonstrations across the city, culminating at the McDonald’s in Times Square. Organisers said the campaign would gather pace.
NYCC organizers have been holding discussions with employees about forming a new union, the Fast Food Workers Committee, for several months. Attempts have been made to sign them up to a petition demanding that workers be granted the freedom to join a union, and a raise the minimum wage from $7.25 to $15 an hour.
Salon.com reported that a 79-year-old McDonald’s employee, who had worked for the chain since 1996 earning $7.40 an hour, was fired after his bosses discovered he was petitioning co-workers. Only three of the 40 employees at his store signed the petition out of fear of losing their jobs.
McDonald’s said in a statement: “McDonald’s values our employees and has consistently remained committed to them, so in turn they can provide quality service to our customers.” It added that most of its franchisees offered competitive benefits.
Some 50,000 workers are involved in the fast food industry across the city, with many paid the median hourly wage of $8.90 (nationally, it is $8.76). Low-pay campaigners estimated in 2010 that an adult with one child living in the least expensive area of the city needs to make $21.85 an hour to be self-sufficient. The average fast food worker in New York earns about $11,000 a year.
Joan Entmacher, vice president for family economic security at the National Women’s Law Center, said in an interview with the Guardian that corporations need to see the value in raising the minimum wage. “One of the advantages of raising the minimum wage is that it often lifts the wages for other people, and other jobs that used to be paid a little bit above the minimum wage.”
Entmacher said that in raising the minimum wage, corporations would benefit from higher worker productivity.
Westin argued that low pay puts a strain on taxpayers as many workers turn to public assistance to make up the difference. “Taxpayers are footing the bill for what corporations should be paying their workers … It’s a huge issue for communities all over the city and all over the country.”
Since 2000, fast food employment has grown by over 55%; 19 times faster than the private sector overall. Projections show the growth will jump another 15% by 2018. McDonald’s made a profit of $5.5bn last year.
“They’re big chains, they’re highly profitable, and making their profits off of paying poverty-level wages,” said Entmacher. However, many branches are operated on a franchise basis, and owners fear their profitability would be hit if they are forced to pay higher wages than a nearby outlet.