Living Wage – Meeting of the Parliament, 01 March 2012

As a member of the Local Government and Regeneration Committee, I was pleased to take part in the inquiry into the living wage in December and January. I wholly support the committee report, and I would like to address both the wider economics and the morality of the living-wage argument.

In my youth—which was not yesterday—I flirted with the politics of the command economy. “Wouldn’t it be nice,” I reckoned, “if we could all agree on a system of fair prices for everything, and on equitable distribution of property based on need.” Bigger brains than mine have tried to make such idealism work, and have failed; in my opinion, because practical implementation does not take into account human nature—good and bad. At first hand, I experienced the awfulness of Czechoslovakia after the Dubcek spring of 1968, and the former Soviet Union and East Berlin of the 1970s. The command economy just did not work.

Someone once said that democracy is a lousy system but it is the best invented yet, and the same sort of argument has been used in economics:

“A market economy can be pretty bad but it’s better than anything else so far.”

Supply and demand can drive progress, but there needs to be a manageable system—I emphasise “manageable”—of rules and regulations based on human values. We are not animals in the jungle, driven only by our needs for immediate family survival—for which there is an economic theory—but rather we are, I hope, a civilised society seeking a better world.

Only last week, a previous speaker in the debate, John Wilson, hosted a reception here in the building for the Church of Scotland, and the Right Rev David Arnott, the Moderator of the General Assembly of the Church of Scotland, presented the draft report of its special commission on the purposes of economic activity. It was an enlightening evening for me, the highlight of which was the words from the report that were repeated by Mr Arnott in his press release:

“Economics is not, and can never be, a morally neutral or ethics free zone. Humanity does not exist for the market but the market for humanity. Any morally legitimate vision of economics and economic activity, whether domestic or international, must be a vision of social economics, embedded in a vision of society which respects and values the needs and contributions of all its members”.

Those are wise words, and we should use that kind of thinking when we are considering setting and operating a living wage.

We have a market economy operating within a representative democracy. A decent living wage should be an integral part of the regulated limit at the low end of the income scale, below which no one should fall. This is a matter of human compassion, although we also heard arguments in committee for how it can make good sense economically, especially when it comes to employment stability. That great Fifer—I emphasise “Fifer”—and father of modern economic thinking, Adam Smith, regularly drew attention in his theories to the need to treat people properly.

Our committee was united on the idea that a living wage is a good thing. The question was how to get there affordably, especially for some suppliers to local government, such as smaller businesses and the voluntary sector.

I am in some awe of the researchers at Loughborough University. I will repeat what our convener said—they came up with the level of £7.20 per hour, which is described in one briefing document as

“an estimate of the minimum income that households need in order to afford a minimum acceptable standard of living, as defined by members of the public.”

That must have been some research project.

I certainly do not think that the figure is high, given the levels of income that obtain elsewhere in society, especially in the upper decile of high earners. In a society in which the income gap between the rich and the poor is increasing, I am tempted to say that a very modest amount of income redistribution would easily solve the residual problems in implementing a living wage, but that question is for another day.

I maintain that the living wage is a moral issue, in addition to its being an economic one. I urge Parliament to accept our committee’s report.

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