Wider Payment of the Living Wage in Scotland – Issues for Consideration

1 Introduction

Background to the research

1.1 The idea of a Living Wage is to set a voluntary wage floor, benchmarked on estimates of what households need to meet minimum living costs. The calculation of these costs, by the Centre for Research in Social Policy at Loughborough University, is based on detailed research into what types of goods or services members of the public think are needed for a socially acceptable standard of living. The Living Wage is updated annually, in line with changing price levels and living standards.

1.2 The Living Wage encompasses a voluntary approach to a wage floor, unlike the statutory National Minimum Wage, which is set by the UK Government. However, the ambition of many of its advocates is to develop new norms to which employers can adhere. The Living Wage has been implemented by a range of employers across the United Kingdom. As at May 2015, around 1500 employers have been accredited by the Living Wage Foundation, including around 200 based in Scotland^[1]. There were 5.2 million private sector businesses in the UK at the start of 2014, 322,555 of which were based in Scotland (Department for Business, Innovation & Skills, 2014).

1.3 It is Scottish Government policy to ensure that all directly-employed staff are paid the Living Wage. The Scottish Government has also provided funding to the Poverty Alliance for a pilot to promote take up of the Living Wage Accreditation Scheme and increase the number of employers paying the Living Wage in all sectors in Scotland.

1.4 In December 2011, the Scottish Parliament Local Government and Regeneration Committee held an inquiry into a Living Wage. In its subsequent report, published in February 2012, the Committee set out its broad support for the Living Wage but also noted the "complex range of factors, difficulties and unresolved issues" that must be taken into account in decisions on whether or not to introduce the Living Wage. Further, it acknowledged that current economic circumstances bring "additional pressures on the public, private and voluntary sectors alike, which do not lead to conditions that are generally favourable in respect of the likelihood of wider introduction of the Living Wage"^[2].

The Committee noted that any savings resulting from increased tax revenue and decreased benefits spending that might result from wider adoption of the Living Wage in Scotland would accrue to the United Kingdom Government rather than to the funds available to the Scottish Government, because of the way in which the Scottish Budget is funded. It also noted that it is not for the Scottish Government to determine wages in the private and voluntary sectors, but that the public sector can lead the way by example, and called on the Scottish Government to use its experience, expertise and good relationship with COSLA and with local government generally to seek to encourage the further introduction of the Living Wage wherever it might be appropriate, taking account of the prevailing economic conditions.

1.5 It is in this context that the Scottish Government commissioned Ipsos MORI Scotland and the Centre for Research in Social Policy at Loughborough University to conduct research to gather evidence on the potential costs and benefits of, and barriers and enablers to, wider implementation of the Living Wage in Scotland.

Aim and objectives

1.6 The overarching aim of this study was to inform potential action by the Scottish Government to support the Living Wage. The specific objectives were to:

i. Review (and assess the applicability to Scotland of) existing empirical and theoretical research on the impacts and practicalities of:

• introducing the Living Wage universally
• introducing the Living Wage across the public sector only
• introducing the Living Wage in only a subset of organisations in the private sector
• promoting the Living Wage specifically through public sector contracts

ii. Gather information from organisations in the Scottish private sector that have already introduced the Living Wage on:

• what they perceive the costs and benefits to have been
• any objective evidence of the costs and benefits that is available
• any barriers to implementation that were encountered
• how these barriers were overcome.

iii. Gather information from a sample of Scottish Government contractors on the perceived costs and benefits of the Scottish Government encouraging the implementation of the Living Wage through their procurement activities.

iv. Gather opinions from a range of interested stakeholders in relation to the findings in objectives i-iii.