Scottish Living Wage Q&A

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September 2010

Scottish Living Wage Q and A

What is the Scottish Living Wage?

A living wage can be defined as the level of income needed to provide an acceptablestandard of living in Britain to ensure good health, adequate child development and

social inclusion. It is different from the minimum wage, which is the legal minimum anemployer can pay its workers.

The Scottish Living Wage Campaign has set a figure of 7.15 per hour as the livingwage for Scotland for 2010/11. Labour believes this should be the guaranteed minimumfor all public sector employees in devolved areas. It would increase the net earnings ofthe lowest paid workers by almost 2,000 per year.

A Labour Government in Scotland would ensure that workers in the private sector alsobenefitted by building it into contracts with its suppliers and seek to encourage wideruptake in the private and voluntary sector developing a Scottish Living Wage Employer

Award.

How many people in Scotland currently earn less than 7.15 per hour?

The Annual Survey of Hours and Earnings suggests that around 456,000 people inScotland currently earn less than the Scottish Living Wage of 7.15 per hour. Thisincludes approximately 20,000 public sector workers in devolved areas, such as theNHS and local government.

For example, according to the Scottish Government approximately 4,500 employees inNHS Scotland are expected to earn less than 7.15 per hour in 2010-11. These are

predominantly catering staff, cleaners and porters on the lowest point of the Agenda forChange pay scale, which is currently 6.98 per hour.

What would be the benefits to employees of a Scottish Living Wage?

The Labour Party is rightly proud of the introduction of the National Minimum Wage, inthe face of fierce opposition from the Tories and indifference from the SNP. But recent

A Labour Government in Scotland will have to make tough decisions to cut spending,but supporting a living wage shows the values that will inform our decisions. We are

on the side of working families, determined to tackle poverty and for a fairer society.

There are almost half a million workers in Scotland earning less than 7 an hour. Thispolicy has the potential to improve the lives of tens of thousands of families acrossScotland and provide a much needed boost to the economy.


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figures have shown that the majority of children living in poverty in the UK have at leastone parent in paid employment.

The message from this is clear; low paid, transient, unskilled work is not sufficient to liftpeople out of poverty. Introducing a Scottish Living Wage of 7.15 per hour will help

remove barriers to employment by making work pay and help us to tackle in-workpoverty.

Wont any salary increases be cancelled out by reductions in tax credits?

No. Individual circumstances will vary, but any reduction in tax credits as a result of theLiving Wage will be significantly outweighed by the increase in salary. For example, acouple with one parent working 35 hours per week and two school age children wouldsee a net increase of 737 per year. A single person with no children working 40 hoursa week would enjoy a net increase of 1,938 per year.

The living wage does not necessarily mean that its recipients no longer receive benefitsand credits, it simply ensures that they are not dependent on them to reach certainminimum living standards. In addition, only those employees working more than 16hours per week are entitled to claim Working Tax Credit. A Living Wage would thereforebe of particular benefit to part-time workers who rely solely on wages for their income.

How will the Scottish Living Wage boost the economy?

The introduction of a Scottish Living Wage would boost the economy by increasing thespending power of low paid workers. A study by Staffordshire Business Schoolcalculated the economic impact on Stoke-on-Trent of contracting out their home care

service. The study concluded that for every 1 an hour more paid to a public sector careworker, 1.63 was injected into the local economy. On an annual basis this would haveprovided Stoke-on-Trent with an additional 1.5 million in income. If the same multiplieris applied to Scotland then the introduction of a Scottish Living Wage would inject over32 million into the Scottish economy. This figure would increase substantially if privatesector employers also adopted the living wage.

What are the benefits to business of a Scottish Living Wage?

In addition to the clear social and economic benefits for Scotland, the payment of aLiving Wage can also have a positive impact on value for money and service delivery of

contracts. A study conducted for the University of London found that contractors inLondon who have implemented the London Living Wage identified benefits including;

- easier recruitment and retention- reduced recruitment costs- higher quality staff- better attendance- better productivity, motivation and loyalty


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- better quality of service.

How much would the policy cost?

The Annual Survey of Hours and Earnings suggests that 20,000 public sector workers

in Scotland in devolved areas earn less than 7.15 per hour. Independent research fromSpice suggests that increasing the wages of these employees to the level of theScottish Living Wage would cost approximately 20 million.

However, the Scottish Living Wage would also produce significant savinemployers through better attendance, easier retention of staff and reduced recruitmentcosts. Scottish Labour believes that the policy can therefore be introduced in a costneutral way from existing budgets.

For example, when Glasgow City Council introduced its living wage policy last year itrequired them to increase the wages of 681 staff then earning less than 7 per hour.

Their lowest rate is now 7.33 per hour. This cost up to 1.2 million, which was paid forthrough increased attendance.

It is also worth pointing out that a BBC investigation found the total remuneration for3,415 senior public-sector workers earning more than 100,000 is 445 million. SeniorScottish officials are the best paid in the UK. If they were all to take a 5% pay cut itwould produce a saving of 22 million enough to fund a living wage.

How would a Labour Government in Scotland persuade other employers to paythe Scottish Living Wage?

The Scottish Government spends approximately 8 billion per annum on procurement.There is therefore considerable scope for extending Living Wage uptake beyond publicsector employees by promoting the policy through procurement strategy.

In order to promote awareness of the Living Wage and encourage suppliers to considertheir own employment practices, the Scottish Government should amenprocurement strategy to include specific reference to the Living Wage. This would havethe effect of saying that all levels of Government should take into account whether ornot suppliers will pay the Living Wage when considering tenders. This would beparticularly relevant in awarding contracts where pay rates have historically been low(e.g. catering and cleaning).

Guidance from the European Union suggests that a public sector organisation canadopt a living wage policy stipulating that quality and good value depend on goodemployment practices. Recital 33 of the EU Procurement Directive on Public Servicesand Utilities states that contracts can be awarded on the basis of most economicallyadvantageous tender, not just the lowest price. The European Court of Justice in theHelsinki Concordia Bus case (c-513199) decided that factors which are not purelyeconomic may influence the value of a tender from the point of view of the contracting


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authority. A Living Wage question has been added to all Glasgow City Councilcontracts and those relating to the 2014 Commonwealth Games for which they areresponsible.

A Scottish Living Wage Employer Award should also be developed and awarded to any

employer in the public, private or third sector who can demonstrate that they areproviding employees with a minimum of 7.15 an hour and related benefits such as paidleave, sick pay and free access to a trade union. A constantly updated list of allemployers who receive the award would be publicly displayed on the ScottishGovernment website.

How will the Scottish Living Wage be calculated in future years?

The Scottish Living Wage should be reviewed on an annual basis to ensure that itcntinues to provide an appropriate level of pay. Scottish Labour will establishing an independent body, or commissioning an organisation such as the

Rowntree Trust, to make an annual recommendation to the Scottish Government.

Documents

Scottish Living Wage Q&A