Rachel Reeves: Building an economy with fair pay at its heart

David Cameron and George Osborne would like us to think that our troubles are over. But most families know that this complacency is misplaced. They know that things are getting harder, not easier. They can see that prices continue to race ahead of their pay. They worry about the prospects for their children when almost one million young people are out of work.

It’s an economy that no longer seems to offer the promise of a better life for the next generation. And it’s an economy that, for far too many people, seems only to offer work that is insecure, poorly paid, and in the worst cases simply exploitative.

There are now more than one in 10 people who want to work more hours, but can’t get the extra shifts. At the same time there are 700,000 people working more than one job – more often out of desperation than choice. One million people are thought to be on zero hours contracts.

And now we learn, in an incredibly important report from the Resolution Foundation, of a surge in the number of people paid less than a Living Wage – up from 3.4 million in 2009 to 4.8 million today, or 20 per cent of the workforce.

Confronting low pay is part of the very DNA of the Labour movement. Our party was born of the self-organisation of workers in the 19th century who fought for a share of the fruits of the Industrial Revolution.

In 1851, Titus Salt, the highly successful textiles manufacturer in Bradford, was so appalled by the pollution in his home town that he built Salt’s Mill to minimise noise pollution with houses for his employees, schools, hospitals, libraries and a bath house.

Joseph Rowntree appointed a welfare worker in 1891, introduced sick funds in 1902, and a pension scheme in 1906. He also built 400 homes for his employees with educational facilities attached.

These and so many other pioneering industrialists were philanthropic characters but wily businessmen too.

They understood the importance of fairness in the workplace, to encourage workers, build morale and teamwork. And the same insights are well appreciated by the best employers today – including those in sectors such as care, cleaning and retail where rates of pay have traditionally been the lowest.

Across the country, Labour councils have been leading the way in signing up to the living wage – even amid unprecedented cuts to their budgets.

Fifteen Labour local authorities have now been accredited by the Living Wage Foundation, and dozens more have made a commitment to pay the living wage. Labour councils have acted as champions and leaders for the living wage across their local economies and Ed Miliband wants Labour to learn from this experience so we can build on this work in government.

It means learning from what Labour councils have done in the area of procurement to see how central government could further extend the requirement to pay the living wage through public sector supply chains, as well as requiring greater transparency from employers on the numbers of their staff paid less than a living wage.

One of the most exciting ideas is that of “living wage zones”. Local employers coming together to pay the living wage, in exchange for government sharing some of the tax credit and other savings that it makes from the higher wage being paid.

Underpinning and driving all of this work is a determination to reverse the squeeze on living standards we have seen and build a fairer and more inclusive economy. This is the goal upon which government’s sights should be focused.

The cost of living is a real problem for too many families and the economy is not working for the majority of working people. Fixing this problem is in everyone’s interest – essential both to relieving immediate financial pressures and securing a better future. None of this is on the current Government’s agenda. It is central to Labour’s.

We have begun to set out policies to tackle the squeeze on living standards, the spread of insecurity and low pay. It’s an approach based upon bottom-up solutions, but where government does not shy away from playing its part.

It’s an approach in which the mutual benefits of solving these problems are recognised and shared, but where we are ready to challenge those who are not upholding their own responsibilities.

It’s an approach where we join together to build an economy that allows us to grow and prosper together as One Nation. We have already begun the journey – and I am very excited about where it could take us. The next election will be a living standards election.

*Rachel Reeves is Labour MP for Leeds West and Shadow Chief Secretary to the Treasury. This is an edited version of her speech to the Resolution Foundation.