How Osborne’s Fake ‘Living Wage’ Could Trap Many in Poverty

When George Osborne stood up in the House of Commons last year and announced that there would be a ‘national living wage’, many people initially applauded. Yet there was much to be wary of as the Chancellor pulled this rabbit from his budgetary hat.

A pay rise for some of Britain’s poorest workers is always something worthy of praise, but the small print – that many of these workers would lose tax credits and end up worse off – certainly lessened enthusiasm for the measure.

Now that those tax credit cuts have been delayed (at least until Universal Credit is rolled out) thanks to a campaign led by UNISON, it’s time to look once again at what will be introduced in April, and it’s clear that there’s still a great deal to be concerned about.

It’s not a real living wage

The living wage is a term with a very clear meaning and value. It signifies the amount someone has to earn to cover the basic cost of living. Anything below the living wage and people are struggling to get by,trapped on poverty wages that make it more likely that they’ll be unable to pay their bills and more likely to become reliant on high-interest lenders.

The Living Wage Foundation currently calculates the living wage – the amount it costs to live to be £8.25 outside London and £9.40 in the capital. But the Osborne ‘national living wage’ when it comes in this April will be just £7.20 – a pound or two an hour less, depending on where someone lives in the country.

The reason for the difference is that the government’s ‘national living wage’ isn’t a living wage at all, because it’s not based on what it costs to live. Instead it’s a rebranding exercise for the national minimum wage that’s intended to steal the clothes of anti-poverty campaigners without eliminating in-work poverty. But just changing its name won’t change what it really is. I could call a goat a racehorse but that wouldn’t make it win any races – and the Chancellor’s ‘living wage’ won’t pay people what they need to earn to live on.

The sum of £7.20 an hour is a living wage only in the sense that it is possible to earn it whilst living. But it’s not enough to escape from poverty. It’s not enough to pay your bills or clothe your kids. And it’s not enough to cover the bills or to – heaven forbid – afford a holiday.

It’s not for everyone

Something genuinely called the national living wage would apply to everyone, but this one doesn’t. It only applies to those over the age of 25, which means younger workers are more likely to be trapped at an evenlower level of poverty pay than their older colleagues.

Levelling down and levelling up

If the intention of the ‘national living wage’ is to raise wages, then it’s having a decidedly mixed impact. Although those earning less than £7.20 an hour (mostly those on the minimum wage) will receive a rise in April (if they’re old enough), those earning only slightly more than £7.20 an hour are far less fortunate – as bosses are likely to seek to use this opportunity to ‘level down’ wages.

Take Mitie, for example, which has been given a multi-million pound contract to clean NHS hospitals in East Yorkshire. Whilst company directors and others are receiving 2.9% pay rises, the firm won’t give a rise to 570 of its lowest paid staff working at Hull Royal Infirmary, Castle Hill Hospital in Cottingham and local clinics and health centres, because they earn more than the new fake ‘living wage’. A company spokesperson told the Hull Daily Mail that: “It is worth recognising that all our people already earn at least 7% more than the new ‘national living wage’.”

Yet if Mitie really wanted to treat these workers well then it would give them the pay rise they deserve – and that would be a 12% pay rise to pay them a real living wage.

Britain deserves a pay rise

Last summer George Osborne stood up in Parliament and said – echoing an argument we’ve made so many times before – that Britain needs a pay rise. We will hold him to that, because it can’t be acceptable to create a system where so many of the young are locked into poverty, where low-paid workers are told they’re earning a ‘living wage’ when they’re still unable to make ends meet, and where contractors paid for out of our taxes use government spin to justify low pay for our people.

This piece was originally posted on The Huffington Post.