Jason Stockwood: Living Wage is one step towards a fairer economy

It comes into force on Friday, and is set at £7.20 per hour for those aged 25 or over. The Government boasts that it will put more money into the pockets of the lowest paid.

On one level, that’s true. But the state-sanctioned Living Wage is not as clearcut a story as it first seems.

There have been calls for a genuine Living Wage for many years, and these have recently gained great momentum.

Despite fierce objections from people like Tesco chief executive Dave Lewis, who said that the scheme was part of a “lethal cocktail” facing supermarkets (or, if we’re being uncharitable, supermarkets’ shareholders), there has been a groundswell of support amongst the public.

The main cheerleaders for the scheme have been a group called the Living Wage Foundation, and they’ve been at the forefront of the movement.

However, despite the Government’s promises, their demands have not really been met.

Crucial amongst these is the level at which the wage has been set. £7.20 might sound like a generous hike, but in fact it’s well below what’s been asked for.

The Living Wage Foundation has calculated that the actual living wage is £8.25 an hour across the country, and £9.40 an hour in London. Clearly, this is significantly higher than what the Government has implemented.

There are also concerns that the statutory Living Wage will be used as a cover to reduce increases for the lowest paid in the future. When the scheme was first announced, the Labour Party pointed out that it still wasn’t high enough.

They pledged £8 an hour – but, as commentators showed, even this wasn’t enough to cover the real cost of living, and that the gap between the Living Wage and the current minimum wage would in fact close gradually up to 2020.

We should also think about the Living Wage in the context of what workers are offered elsewhere in the world.

Even Labour’s proposals, a full 80 pence per hour higher than what has actually been enacted, would have seen the lowest paid workers earning just over half what their counterparts get in, for example, Luxembourg.

Workers in areas like Yorkshire will benefit hugely from the Living Wage, but only if it’s set at a realistic and reasonable level. No one should be forced to work for less than they need in order to survive. It’s not fair, it’s not sustainable, and, in fact, it’s not good for business. Whatever Dave Lewis might say, fair remuneration for staff is the key plank of any strategy to build a stable and lasting economy.

One study has shown more than 80 per cent of London businesses who have implemented a Living Wage saw enhanced quality of work by their staff, and a 25 per cent reduction in absenteeism.

These are clear and significant benefits, and they should be embraced by businesses across the country.

But more than that, businesses have a moral responsibility to their people. Squeezing workers as hard as possible for as little money as possible is not acceptable. We must all recognise that we have a duty to treat employees fairly, aside from any business case in favour.

Denmark is a salutary example here. There, they have free healthcare and free college education. The minimum wage is set at 110 kroner – about £11.50.

Danish employees work 35 hours per week. The result? Denmark consistently tops charts of the happiest countries in the world.

Fair pay is a fundamental part of a fair, happy, productive society.

But of course, salary is only one part of the puzzle. We must also all act to build company cultures that are enjoyable and nurturing, and at Simply Business we have taken significant steps to make this a reality.

Business owners must support their people, and in return they will get better returns. Culture drives performance – salary levels are just the table stakes.

As business owners and managers we have a responsibility to our people, and fair pay is one of the most important of those. It’s not the only one, but it is a crucial first step.

Businesses have an obligation to use their position as a way to build a better society, not just for ourselves and our shareholders, but also for the people we work with every day. We should embrace the new Living Wage not as an ultimate solution, but as one step on the way to a fairer economy.

Jason Stockwood is CEO of Simply Business, one of the UK’s biggest business insurance providers.