Ikea’s living wage announcement is great – but it shouldn’t be unusual

The living wage shouldn’t exist. The fact that it does exist implies there are some wages that don’t provide enough for a person to eat, put a roof over their head, or have other basic amenities. Shouldn’t all work provide enough money to live on?

Ikea’s recent announcement that it would pay more than the national living wage needs to be seen in this context: a laudable decision, but one that should not be exceptional. 

George Osborne’s budget on 8 July rebranded the national minimum wage, announcing that the “National Living Wage” would start at £7.20 and rise to £9 an hour by 2020.

Are Ikea only doing what they are legally required to? Not quite, as the National Living Wage does not apply to those under 25, whereas Ikea’s decision affects all workers, regardless of age. It is disappointing that a company is going above and beyond what is legally required, when all that it is doing is applying one policy across its workforce. The focus on the lowest paid workers becomes less reassuring when the standard is not applied to all workers. 

IKEA

The announcement of the National Living Wage also conveniently forgets that there has been a living wage since 2001, the only difference being that was voluntary rather than compulsory. The Centre for Research in Social Policy produces annual research that results in two rates, one for London, and one for the rest of the UK. The aim is to examine what households need in order to have a minimum acceptable standard of living.  

Crucially, decisions about what to include in this standard are made by groups comprising members of the public, rather than officials who might have an interest in keeping the standard artificially low. 

However, the figure is still shaped by market forces – the living wage is capped at 2 per cent above average pay rises, reflecting the fact that many employers may find it unacceptable to make pay rises that are in line with dramatic increases in living costs. 

Looking at the voluntary history of the living wage is productive – take up by employers was relatively low without any legal sanction, and the burden of being low paid did not fall equally across society – research by the TUC shows that women were disproportionately likely to earn less than the living wage. 

Previously, adopting the living wage was a way employers could show their commitment to a particular cause – making sure they were not contributing to working poverty, by ensuring employees could meeting their basic minimum living costs. Not only that, but it would also benefit the business, with employers adopting the living wage reporting enhanced quality of work and reduced absenteeism. 

Now that the language of “living wage” has been adopted by the government, it is instructive to examine whether it will meet the same aim of reducing working poverty. The exception for under-25-year-olds means that young workers will continue to have their work undervalued, potentially far beyond any period of apprenticeship or training (which already have specific exceptions in the current national minimum wage regulations). It is alarming to think that you have to be 25 before you can start living (or at least support yourself through your own work)! 

In a debate often framed in terms of “strivers” and “shirkers”, it is useful to remember that there are many people for whom in-work poverty is a reality, and that the division is often not so clear cut. There are many individuals who work hard, often at more than one job, but the level of their wages mean that they still require support from the state – the National Living Wage should remove this possibility, but while it retains age-related exemptions, and no provision for its rates to be altered in line with inflation or the changes in living costs, it remains a hollow gesture towards reducing poverty.

Michael Newman is a solicitor at Leigh Day

See also…