In D. Figart (Ed. Journal of Business Ethics, Retrieved October 10, 2014, from http://www.theguardian.com/society/2013/dec/15/top-football-clubs-attacked-for-low-pay-of-ground-staff. Labor and Wages Flashcards | Quizlet We developed a living wage calculator to estimate the cost of living in your community or region based on typical expenses. Grover (2008) therefore suggests the UK approach should be called living income instead of living wage. Philosophical/ethical perspectives on the LW are to be found primarily in the works of three scholars from the turn of the twentieth century up to the present day who have, in our view, made extensive and important contributions on the subjectJohn Ryan (18691945), Jerold Waltman (b. Perhaps because of this, both the US and the UK have some of the largest proportions of low wage workers in developed economies.Footnote 2. Retrieved October 28, 2014, from http://www.theguardian.com/business/2014/oct/26/lowest-paid-rise-productivity-puzzle-low-wage-growth-uk. The biggest problem that businesses wishing to implement the LW face, however, is related to the externality argument. Webb, S., & Webb B. If it is accepted that employers, as the providers of work, have a responsibility to pay at least a LW to their workers the question arisesas to what internalization mechanisms should be adopted: regulation (mandatory approach), voluntarism or government incentives (Stabile 2008, pp. Allen, K. (2014). These employees talk about how the LW helps them to meet the cost of the essentials of life such as bills, food, rent and transport; to prevent them from being in debt and to enjoy a better social life. What is a 'living wage'? Adams, S., & Neumark, D. (2005a). 2014). 87, 189197. ), Living wage movements: Global perspectives (pp. Which other working conditions should campaigners and employers be focusing on to ensure that workers capabilities are enhanced? Stabile (2008), on the other hand, grounds his arguments for sustainability in a more systemic, social utility view: if, because of low wages, workers were forced to work long hours, this would diminish their strength and longevity, and lead to a depletion of resources (Stabile 2008, p. 4). In market economic thinking, wages are a market estimation of what a worker adds to the production of goods and services that society wants (Stabile 2008, p. 2). Last but not least, Stabile (2008) offers arguments for the LW from a moral economy perspective. Accountancy Live, 12 September 2014. Referring to the notion of productivity, Ryan argues that on account of ignorance, immobility, or failure to assert themselves a number of workers are paid much less than the value of the groups marginal product and that wages also tend to equal that of its least productive members (ibid., pp. Penrose Care: http://www.youtube.com/watch?v=jIM_ptAhFQw. Loughborough: University of Loughborough. volume137,pages 433447 (2016)Cite this article. Grover, C. (2005). In medieval times, the idea of a just wage was built on the notion of a just price. Aquinas (1947 [originally written 12651274], IIII, 66) thought it was morally proper for humans to seek material possessions to provide for their sustenance. Open Access This article is distributed under the terms of the Creative Commons Attribution License which permits any use, distribution, and reproduction in any medium, provided the original author(s) and the source are credited. The living wage refers to the income level required to sustain a decent standard of living based on the family size and the location. That is, its LW rates are the lowest possible, although still higher than the NMW (Clark 2014). Ethical foundations of the contemporary living wage movement. Sen (1999, pp. 74, 3233). For some businesses, this may raise questions of viability, whilst for other business organizations the challenge will lie in explaining to their shareholders why they intend to spend more money than legally required on their staff. Geneva: ILO. The inflation rate in 2019 was 1.76%. Figart, D. (2001). Our paper is structured as follows. What is a Living Wage? - Global Living Wage Coalition Robeyns, I. Retrieved October 20, 2014, from http://www.heraldscotland.com/news/home-news/pay-row-energy-firm-gives-staff-living-wage-deal.22280481. 749754). Basic family budgets for working families. The effects of living wage laws: Evidence from failed and derailed living wage campaigns. Pollin, R. (2005). Despite these similarities, however, there are some differences between the two countries. So far, academic interest in the LW has been mainly pursued by economists (e.g. It thus appears that both in the UK and the US, there is a trade-off between a pragmatic approach for making a difference in the lives of working people (for example, the UK LW rates of are significantly higher than the current NMW rate of 6.50 an hour), and the quest for, or implementation of, an ideal LW. Retrieved October 20, 2014, from http://www.ethicaltrade.org/sites/default/files/resources/ETI%20living%20wage%20guidance_0.pdf. How to use living wage in a sentence. London: Macmillan. Furthermore, a tangle of issues related to who, how and why the LW ought to be paid to workers has to be considered in such debates. He assigned the state (and thereby the more wealthy members of the community) the responsibility to provide the poor with means to earn an income that would enable them to earn a sustainable livelihood (Aristotle1999, Book 6, Part V). Living Wage: round-up of key current resources and initiatives. What form (s) of transportation do Morgan and Alex use to get around? The Minimum Wage is the lowest wage that employers can legally pay workers. Just as a just price was the outcome of a combination of fair bargaining and informed consent, a just wage was the outcome if both employer and employee knowingly and voluntarily agreed to the wage (Waltman 2004, p. 33). 39, 2128. In such contexts, the responsibility of customers and other stakeholders to recognize, and reward, LW employers, and shun those who do not pay a LW, will become more pertinent (see Ryan 1912, p. 264). Furthermore, universal, non-means-tested benefits, are also less likely to occur, and more likely to be reduced, under such conditions.Footnote 13 Waltman (2004, p. 164) posits that work should be the centre of any welfare reform (p. 164), especially in view of the fact that a life without having to depend on the help of others enhances peoples autonomy (p. 18) and in view of the personal and social dimensions of work.Footnote 14. Retrieved July 10, 2014, from http://www.theguardian.com/social-care-network/2013/dec/04/pressure-mounts-better-pay-homecare-workers. According to Penrose Cares website, the founders started the company as a response to the need to fundamentally reform the home care sector in the UK to help improve elderly care and disabilities care in the UK. The companys managing director further states that a LW for care workers means that those special individuals that have a vocation to care can pursue care as a profession - being able to live securely so that they in turn can help the elderly and disabled in our society feel secure. The company became LW accredited in Autumn 2012 and is only one of four out of about 1,000 care agencies in London that pay the Living Wage (Homecare 2013). At the same time, Stabile (2008, p. 6) points out that the notion of capability also entails the idea that one should not just look at wage levels but also at working conditions - including number of total work hours (Waltman 2004, p. 193)and whether they diminish peoples capability, or whether they actively contribute to peoples development of their capabilities (see Garriga 2014). Following this section, we consider the arguments of key modern thinkers on the LW who develop key facets of the construct. BBC News, 3 November 2013. Minimum wage. BBC (2013). The economics of the living wage. Last but not least, the LW rate is calculated with reference to an absolute benchmark, that is, the use of a basket of essential goods and services that a household needs to ensure a basic standard of living (Ciscel 2004), taking into account regional variations regarding the cost of these needs. UK Government (2014). This gives rise to discussion and debate as to what subsistence needs should include. The national minimum wage. We have taken the somewhat unusual step of undertaking both a critical literature review and of presenting two illustrative examples of companies that have implemented the LW. But the externality arguments hold for all employers who do not pay a LW. Pennycook, M. (2013). As we will go on to explain,we believe that the voluntary nature of LW adoption in the UK makes it a richer site for further research than it would be in the US. 4 November 2013. Currently, LW-accredited companies do not have to roll out the LW in their supply chains. The costs and benefits of the London living wage. (2014). Retrieved July 2014, from http://www.bbc.co.uk/news/health-21430956. The living wage: Building a fair economy. Wage rate leaving neither a surplus nor a shortage in the market. By contrast, both in the UK and the US, the LW has been promoted by civil society campaigns (see Pollin and Luce 1998; Figart 2004; Wills et al. Groom, B., & Kuchler, H. (2012). International Journal of Social Economics, The case for the living wage. Pennycook, M. (2012). As Ryan (1912, p. 82) defines it, the LW is the amount of remuneration that is sufficient to maintain decently the labourer. At the same time, the LW is also a relative concept. New York: The New Press. Waltman (2004) provides a review of basic income guarantee and similar approaches in his book. 19, 324. Labor Studies Journal, Crucially, the minimum wage does not derive from a calculation of the subsistence level for a . 48, 381391. Stabile, D. (2008). Aristotle emphasized the need of households to take care of themselves and be self-sustaining. Snarr, C. M. (2011). In his review of moral economic thought, Stabile highlights three themessustainability, capability, externalityaround which he constructs his arguments for the LW. District of Columbia. It should pay for cost of living in any location, and should be adjusted to compensate for inflation. equilibrium wage rate. Working Paper. It raises a number of questions about motivation for, and implementation of, the LW in private-sector organizations, which CSR scholars are well placed to explore. Furthermore, it would be fruitful for researchers to investigate how governments and society at large may provide effective incentives and pressure points for companies to adopt the LW. Politics. He provides convincing arguments and evidence that refute the first three objections (pp. (2009). (2014). 73) distinguishes between functionings, capabilities and commodities. This was shown, for example, in the 2011 England riots, when thousands, mostly young, people from disadvantaged communities in London and other English towns and cities took to the streets and looted, and set fire to, local retail parks and shops. In the UK, on the other hand, the two existing LW rates are calculated as an average of subsistence needs of a selected number of different household types. Paid every twelve months; 1 pay period per year. London: Centre for Economic Performance, London School of Economics. Chicago: Quadrangle Books. The minimum wage is the lowest legal pay rate that a company can offer its employees. An equally fierce albeit less violent protest has been the Occupy Movement, in which people in the US, the UK and several other countries protested in 2011 against growing inequality and wealth disparity between the top 1% and the rest of the population. Grimshaw, D. (2004). A further challenge related to the capability argument is that if the view is taken that working conditions are also important for peoples capabilities, could a campaign for, and the adoption of, an hourly LW rate be too narrow? Its supporters and detractors hold equally trenchant views about its merits and dangers, respectively. With the LW movement, especially in the UK, we can see a shift occurring away from traditional labour-capital relationships to a civil society led movement, which targets employers in their campaign for decent wages in a highly visible and well-organized manner. ETI Base Code clause 5 describes a living wage as "enough to meet basic needs and to provide some discretionary income." Other standards highlight that wages should be enough to support a worker and his or her family. Ryan (1912, p. 73), in what could be regarded an early conceptualization of the concept, argued that in addition to having food, clothing and shelter, humans must have opportunity to develop within reasonable limits all [their] faculties, physical, intellectual, moral and spiritual. According to Ryan, a decent livelihood coming from a proper wage is essential to meet the minimum conditions of right and reasonable living, since without them [humans] cannot attain to that exercise of his faculties and that development of [their] personality that makes [their] life worthy of a human being.. (2006). Living wage campaigns as social movements: Experiences from nine cities. Furthermore, because workers on a higher wage can afford to work fewer hours to make ends meet, they would also have more time available to spend with their families, to attend evening classes or to get involved in their communities. Low Pay Commission (2014). IBE. 127148). In a money-based society, Aquinas argued, prices had to be just to ensure that all members of society had access to necessities (ibid., p. 77). Journal of Economic Issues, Translated by Benjamin Jowett. The key argument Ryan makes, in his seminal work dating from the turn of the nineteenth/twentieth century, is that the claim to a Living Wage is of the nature of a right, to which all labourers are entitled (Ryan 1912, pp. ETIs expectations of members regarding the ETI Base Code clause on living wages. As a result, workers had no incentive to work hard or to bargain for higher pay, as income was the same whatever the level of pay (given that most employers paid less than the scale). How do companies prepare for all these changes? Journal of Public Health, 1944). Seligman, B. London: Institute of Business Ethics. We emphasize that even though the UK is used as a primary example in this article, the arguments put forward will be of interest in the national contexts, where LW movements are beginning to follow a similar trajectory of voluntary adoption and accreditation, such as in New Zealand.Footnote 5 It should also be noted that the LW, although enjoying growing acceptance in public discourse in a number of countries, is still only a limited way of addressing problems of rising economic inequality, an increase of long-term low-wage jobs, and a decline of unions and legal protection for workers. Eskow, R. (2014). Living wage research for KPMG: Structural analysis of hourly wages and current trends in household finances. Pollin, R., & Luce, S. (1998). Google Scholar. Smith and living wages: Arguments in support of a mandated living wage. Thus, wages are not tightly linked to the productivity of the worker, which is also true for the top-end of the income scale, where high executive remuneration does not necessarily mirror high productivity (Perel 2003). Waltman, in particular, criticizes the exaggerated protection of property rights in liberal individualist thought (p. 12), in comparison to other rights that all citizens should enjoy. Lords urge government to oppose quotas for women. Living Wage, Individual: $20.80. 17, 135145. More than 5 million people in the U.K. are paid less than the living wage. 120, 489507. Accessed 10 October 2014. community campaigns) (Freeman 2005), and not (primarily) through the workers own efforts. an automatic indexation of the minimum wage) or a high level of collective bargaining power or a combination of both (Grimshaw 2004, p. 101). Among those paid by the hour, 181,000 workers earned exactly the prevailing federal minimum wage of $7.25 per hour. At a fundamental level, the concept of the LW has direct implications for business organizations, clearly, as it concerns how much they pay their workers at the bottom of the pay scale. Stabile (2008, p. 7) adds that because business organizations do not pay the full cost of the resource they are using, they will produce too much of their product due to their lower costs and thus resources are being used inefficiently. Journal of Business Ethics, And workers paid above the subsidy scale found their pay driven down in competition with subsidized workers. Fairness in the workplace: Pay. This obligation is grounded in the employers private ownership of resources. A change in business ethics: The impact on employeremployee relations. Grover, C. (2008). The first argument is, at a basic level, about workers being paid a wage that enables them to sustain themselves (Stabile 2008, p. 4). This research agenda will include questions exploring practical implications as well as questions from a more critical perspective. Formula . Luce (2004) states that in early campaigns the more traditional model of one adult full-time worker supporting another adult and two children was used, as this model is also used to determine poverty thresholds in the US, whilst in more recent campaigns the model of a single adult supporting two children featured more heavily (Ciscel 2004). For example, which incentive mechanisms provided by the government may be the most effective drivers for employers to adopt the LW? Grover (2005), for example, refers to UK Labours making work pay policies in the 1990/2000s, which provided generous tax credits and supplementary welfare payments for low-wage employees. (2014). Consumer Price Index Frequently Asked Questions How giving the lowest-paid a big rise could just solve our productivity puzzle. Under the Fair Labor Standards Act (FLSA), the federal minimum wage for covered nonexempt employees is $7.25 per hour effective July 24, 2009. The purpose of a living wage is to make sure than anyone who works full-time should have enough money to This argument has been criticized by feminists who have viewed this focus on men as breadwinners as being inherently negative towards women in the workplace (Ciscel 2000). Living Wage, Family of 4: $27.06. Economic Development Quarterly, Caputo, R. (2008). Mutari, E., & Figart, D. (2004). Some observers, however, are critical ofcalls demanding that governments address the problem of low pay and in-work poverty solely through the payment of benefits, rather than through seeking to increase incomes through higher wages, particularly in view of past experiences of negative effects on the economy and society.Footnote 12 Grimshaw (2004, p. 116) argues that todays wage subsidies such as tax credits, housing benefit and others reject the duty of employers to pay for the social costs of maintaining their workforce and thereby intensify pressures towards commodification of work. (2012). London: Resolution Foundation. Sen, A. (2013). The above arguments place the call for a LW on firm theoretical foundations. Ryan, J. Wages and hoursHistorical and contemporary linkages. Politics and Society, Living wages and the making work pay strategy. What role can governments play in brokering productive relationships between LW campaigners and employers? The Herald Scotland, 27 September 2013. The District of Columbia has the highest livable wage for an individual, at $20.80 an hour or $43,258 a year. What is the purpose of minimum wage laws? - Studybuff.com Perel, M. (2003). A number of LW campaigns in the UK focus on public sector institutions such as local councils (these campaigns are somewhat similar to the US campaigns, as they seek to obtain a binding commitment from these public sector organizations, albeit via a different mechanism, i.e. Stabile (2008, p. 96), on the other hand, refers more explicitly to peoples capabilities in regard to the functions they have as members of society and as workers, and to their ability to enhance capabilities in their children. But other campaigns in the UK also explicitly target private-sector businesses without government contracts, which contrasts with the approach pursued in the US.Footnote 4 As mentioned earlier, this nudging of private-sector companies to engage with the LW concept as part of their moral obligations or their corporate social responsibility provides a richer context for CSR, management and business ethics research compared to those contexts in which paying the LW is a matter of compliance or adherence to long-established bargaining processes only. ETI (2014a). US campaigns have used, for example, the Economic Policy Institutes research on family budgets and self-sufficiency standards (Ciscel 2004).Footnote 8 The UK campaign uses the basic living costs calculations by the Greater London Authority for the London LW, and Loughborough Universitys Minimum Income Standard for the LW outside London (Lawton and Pennycook 2013). Hourly rate. Reynolds, D. (2001). Module#7 Flashcards | Quizlet Penrose Care is a small private care company based in London.Footnote 19 Care providers as a whole do not enjoy a good reputation in the UK, including the treatment of their staff (Triggle 2013; Learner 2013). Markit (2013). SSE, see next section). Muilenburg, K., & Singh, G. (2007). Retrieved October 20, 2014, from http://www.homecare.co.uk/news/article.cfm/id/1561473/london-living-wage-increases-effective-immediately-penrose-care. (1897/1965). Grover 2008, Bennett 2012, 2014). These rates are then promoted as the LW hourly rate that employers should adopt (at the time of writing 9.15 in London, and 7.85 in the rest of the UK). Davis, A., Hirsch, D., & Padley, M. (2014). 2, 443461. (Dower and Reidy 2013). Immigrant workers in particular may have to hold down several jobs to make ends meet (Wills 2009), and this would, inevitably, affect their productivity and efficiency.