Living wage: what happens when companies put well-being before profits

Posted by Rachel Wilshaw Ethical Trade Manager

4th Nov 2013

UK construction workers

As Oxfam celebrates becoming a living wage employer, Oxfam GB's ethical trade manager Rachel Wilshaw explains what a living wage means for Oxfam - and why it is so desperately needed by workers in developing countries and the UK alike.

For Oxfam, there is nothing more material to our mission to overcome poverty than people being able to earn a decent income from their labour

Lee Jeffs from Glyncoch

Yet this basic right, enshrined in the International Labour Organisation (ILO) Constitution nearly 100 years ago, is currently out of reach for millions of people here in the prosperous UK and in developing countries alike. 

This is due to a poisonous combination of factors including a global trend towards more precarious work, minimum wages not keeping pace with inflation, low levels of organisation and collective bargaining, and shareholder pressure to prioritise profits over the well-being of people in the business or supply chain.

Father of three, Lee from Glyncoch (pictured left), who recently qualified in construction skills with support from our partner Glyncoch Community Regeneration, can only find agency work as a mail sorter: "You can work full-time one week, and have no work the next, so it's insecure."

In the UK we have seen a hollowing out of jobs during the recession, meaning employment has become more insecure. A sign of this is that now at least 1 million people on zero hours contracts (some suggest there might be as many as 5 million on this kind of contract).

"I didn't think I would be struggling at this age,"  says Patricia, from Tower Hamlets, a part-time lunchtime supervisor in a school who takes on extra work where she can. She is in rent arrears, struggles to pay her bills and has been referred to a food bank. "They [the government] need to create jobs, they can't tell people to go out and get jobs if there aren't any."

Tea picker Malawi. Credit: Abbie Trayler-Smith/Oxfam

Oxfam recently heard about the case of a care worker in Oxford who was referred to a food bank because he had gone four days without eating. His zero hours contract was not guaranteeing enough work to meet his most basic needs.

And as I make cups of tea to keep me going in my work, I am equally disturbed by the findings of our recent study Understanding wage issues in the tea industry, co-authored with Ethical Tea Partnership, which showed that tea pickers in Malawi are living below the extreme poverty line of $1.25 a day, despite earning the legal minimum wage. I wrote about this a few months back.

It is time to take a step back from accepting this disturbing reality as the way things have to be. Ensuring care workers and tea pickers can earn a living wage on a secure contract is a compelling solution to such in-work poverty. It would lessen social inequality, bring more cash into local economies and provide employers with a more committed and productive workforce

The good news is this is well within our reach

Bangladesh garment workers wage comparison graph

A recent report by Impactt showed that Bangladesh garment factories saw worker turnover reduce by 50% with an 8% increase in average take-home wage. And in a poverty footprint study of the cut flowers sector of Kenya, Oxfam calculated that just a 5p increase on a £4 bunch of roses would enable wages to be doubled to a living wage. 

The same kind of benefits can be found in the UK: 80% of employers that adopted the living wage believed it enhanced the quality of the work of their staff and helped decrease absenteeism by approximately 25%.

We need a combination of government policy measures and private sector collaboration to tackle this issue in a concerted way. The Dutch and German governments are changing their public procurement policies to require evidence of a living wage being paid by beverage companies, and the issue is firmly on the agenda of the more progressive garment and food companies, such as the members of the Ethical Trading Initiative.

This year we became an accredited Living Wage employer, joining another 431 employers in the UK. But, whilst this is reason to celebrate, it has been calculated that at the current rate of voluntary adoption, it would take 450 years for everyone in London to be earning a living wage. So, whilst some companies are playing their part voluntarily, the rate of change is far too slow for British families who are being forced to choose between heating and eating.

Governments and companies the world over need to take responsibility for ensuring decent work and a living wage. And here in the UK, all political parties should be ready to answer the question of what they will do here, and in their international business and development policy, to tackle low-paid precarious work which perpetuates poverty and represents such a threat to sustainable development.

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Blog post written by Rachel Wilshaw

Ethical Trade Manager

More by Rachel Wilshaw

Rachel Wilshaw