Nestle - The problem with the living wage

Masquerading behind the promise of a solution to our poorest workers' problems is simply yet more tactics for electoral gain and governmental savings.

This week Nestle became the UK’s first large manufacturer to offer a ‘living wage’ to all of their employees. The concept, backed by both government and opposition, seems to offer salvation to those who work tirelessly for a minimum wage they simply cannot afford to live on. However, behind the façade of Parliament’s answer to our poorest workers’ problems is once again just another bid for political gain and a promise which in reality will create more problems than it solves.

It is very rare that the leaders of the UK’s political parties will agree on a common cause, however, over the living wage issue they have done just that, and it’s hardly surprising. Masquerading behind the promises to improve standards of living for the working class is a clear political motive. Increasing the lowest wages would mean that the need for government subsidiaries such as working tax benefits and housing benefits would be extensively reduced. This is not to mention the increased taxes the government would reap from a higher paid workforce. What, in effect, the living wage is doing is shifting the cost of our lowest paid workers from the government onto businesses. Obviously when looking at hugely profiting multi-national corporations such as Nestle and Tesco this may be no bad thing but the repercussions this would have for smaller businesses could be disastrous.

It seems the living wage is yet another exercise to impress the electorate at the next general election without any idea as to how it would work widespread in practice. The living wage is set at the amount needed for an ‘acceptable standard’ of living, however, successfully calculating this figure is simply impossible. At the moment the figure stands at £8.80 per hour for those living in London and £7.65 for those living outside. How can this possibly be correct when it takes no geographical location other than in/out of London nor the amount of children in a household into consideration? It makes no allowance for the fact the lowest paid workers are often students who will be living with parents and gives little indication as to what an ‘acceptable’ standard of living actually means.

Whilst there’s little proof that increasing wages means companies will make fewer jobs it is obvious that they will look to absorb their costs in other ways. This often means raising the prices of their products- the knock on effect of this being an increased cost of living. All this seems to do is create a cycle which serves to rise inflation: a pointless exercise contributing nothing in the way of help to those living on the minimum wage.

Labour endorses the scheme and are likely to include it in their next manifesto, however, both they and the Conservatives have, in the past, promised to ‘name and shame’ those who do not participate by paying a decent living wage. This blame game seems highly unfair to smaller businesses who realistically cannot afford to offer such a high wage increase to their lowest paid workers. When emerging from the hardest economic downturn in recent history it seems unjustifiable that politicians should now blame the businesses that fought to make their way out of the recession themselves for the problems their workforce now face. If left able to ‘choose’ whether to adopt the scheme it will only be firms who can afford it and wish to look slightly more philanthropic and firms that very rarely employ low paid staff such as law firms that will do so, leaving the average business out in the cold.

It is clear that we cannot continue with a system where our lowest paid workers cannot afford to live, however, unfortunately the living wage offers no solution to this. Parliament’s message is very clear, they support a living wage but do not want to be the ones to pay for it. It is about time that they actually offered pragmatic solutions to our problems rather than simply shifting the responsibility and therefore blame from themselves unto others. The living wage is sadly just another political tactic of one-upmanship and when delved into further offers very little help to some of our hardest workers and lowest earners.