Cable issues stark warning over economic cost of ‘living wage’ idea

BUSINESS Secretary Vince Cable has warned that forcing businesses to pay the living wage could lead to the loss of thousands of jobs.
Business secretary Vince Cable visiting the future Haribo plant in West YorkshireBusiness secretary Vince Cable visiting the future Haribo plant in West Yorkshire
Business secretary Vince Cable visiting the future Haribo plant in West Yorkshire

The idea of a living wage, a salary that more closely reflects the cost of living than the minimum wage, has grown in popularity in recent years with York Council and York St John University among organisations that now pay it and has London Mayor Boris Johnson among its supporters.

But Dr Cable, speaking at York St John University yesterday, rejected the idea of compelling companies to pay more.

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“I think at one level, in moral leadership, it’s important. I can see the advantages of having a measure which individual employers can strive for if they are profitable employers, put it forward as an example of good practice,” he said.

Business secretary Vince Cable visiting the future Haribo plant in West YorkshireBusiness secretary Vince Cable visiting the future Haribo plant in West Yorkshire
Business secretary Vince Cable visiting the future Haribo plant in West Yorkshire

“I do, however, worry about the living wage becoming a policy tool which governments are expected to apply in part or in whole.

“If you have general application of the living wage at the kind of level that is being discussed it would have very considerable impacts on employment.”

Dr Cable said research suggested applying the living wage to all companies would lead to a loss of 160,000 jobs.

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He also suggested it would be difficult to design a system that allowed for different costs of living across the country and for different families.

“I can see in many ways it is providing moral leadership, there 
are companies that clearly 
could afford to pay more than they do.

“But once you start making this in any way normative, let alone mandatory, then there are very serious economic consequences which we have to consider.

Speaking at a Joseph Rowntree Foundation event to discuss low pay, Dr Cable said the minimum wage had been particularly effective in helping women and part-time workers.

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He defended the Government’s record on enforcing the minimum wage but said further action would be taken against employers who shortchange their staff.

Dr Cable said the relatively small number of prosecutions was explained by the tax authorities persuading employers to change their ways before court action was needed.

“We have wanted to strengthen that and the way we are now doing it is through naming and shaming of companies which have a poor record on the minimum wage and we are going to start using that in a more aggressive way.”

Last month, Dr Cable asked the Low Pay Commission, which advises the Government on the level of the minimum wage, to look at how it could rise faster in the coming years as the economy improves.

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The Business Secretary has also launched a consultation on the use of so-called zero-hour contracts where workers are contracted to work but are not guaranteed a particular number of hours.