Meeting of the Parliament 01 March 2012
I cannot remember that far back. I defer to the member.
In fact, in the five years following the introduction of the minimum wage, the unemployment level in the UK fell from 6.3 per cent to 4.7 per cent. We all know that correlation is not causation, but the committee received no firm evidence that increasing wages has an adverse impact on jobs. One of the reasons for that is that greater disposable income for workers leads to increased growth, which is something that the committee looked at in considering the impact of the living wage on local economies. People at the lower end of the income scale tend to spend more of their disposable income than those at the higher end. In submissions that were received by the committee, it was generally argued that the benefits of the living wage would feed into local economies and benefit local businesses, as recipients would generally spend the extra income locally.
The committee received some positive comments on the living wage from the business sector. Perhaps tellingly, they came from London, where the living wage has been implemented successfully, with Greater London Authority staff receiving the living wage along with some 3,000 employees from the private sector, including employees at Unilever, JP Morgan and Barclays. People might think that, of course, people who work for Barclays would be paid more than the living wage, as bankers get paid huge amounts of money. However, I am not talking just about the folk at the top of those companies; I am talking about cleaners and catering staff in London receiving a minimum wage that is set at a higher level than in the rest of the UK. That has come about as a direct result of evidence from London that the introduction of the living wage makes business sense. The committee heard evidence from Transport for London that the living wage has had a positive impact on recruitment, retention, absenteeism and staff morale.
After looking at the impacts on businesses and communities, we turned back to the impact on the most important group: the individuals on low wages. Evidence that we gathered showed that a living wage would increase low-paid workers’ disposable income, with a corresponding effect on their standard of living and morale. Questions were raised over the effectiveness of the living wage because of the possible loss of other benefits, including passported benefits such as free school meals. However, we were unable to find any evidence to suggest that the majority of recipients would not experience a positive outcome from receiving the living wage.
In fact, if we look at the correlation with the minimum wage, the same potential is there, but there is always the opportunity for continual assessment of passported benefits and so on to ensure that people benefit from the minimum wage. I think that we could do the same to ensure that people benefit from the living wage.
Another important facet of our inquiry was procurement. The committee heard that guidance on whether local authorities can specify payment of the living wage as a condition of the award of contracts under the European Union procurement directive is insufficiently clear. As a result, no local authorities that implement the living wage have managed to extend it and to impose such conditions in contracts. They have preferred to enter into voluntary arrangements, which are only partially successful.
That is why the committee welcomes the fact that the Cabinet Secretary for Infrastructure and Capital Investment has written to the European Commission seeking clarification of the issue. It would be good to hear from the minister whether there has been any progress on securing a response, although I think that I know what the answer might be.
The report concludes that the living wage is a potential driver of preventative spending, which is at the heart of the Scottish Government’s public service reform. However, the committee accepts that it is not for the Scottish Government to determine wages in the private and voluntary sectors.
As far as local government is concerned, the committee accepts that local authorities are accountable to their electorates and not to the Parliament or the Scottish Government, and it is therefore for individual councils to decide whether to introduce the living wage.