The answer to the question “should people on low pay be paid more?” is rhetorical, and ranks with questions such as should we pay more attention to the environment? Or should doctors and nurses be paid more than finance professionals and footballers? Questions about low pay are platitudes, which while important, mask complex issues that make for dangerous topics in the hands of vested interests on both the Left and Right of the political spectrum. And this is precisely what has happened to the now lively debate going on about the living wage.

In 1999, the then Labour government established the Low Pay Commission, precisely to depoliticise the issue of low pay and the minimum wage, and take it out of soapbox debate. With income inequality as a political topic du jour, the Labour Party’s 2015 election campaign sought to re-politicise it, picking up on the campaign by the Living Wage Foundation for a “living wage.” But it is George Osborne who has brought the issue back into mainstream politics by promising to introduce a National Living Wage (NLW) from April 2016. The important issue of low pay and poverty has now become a political football, marginalising the more important issues of how wages are determined, and how the benefits system should be designed to help the least well off. While the idea of high or higher living wage is an apple pie and motherhood phenomenon, as Americans would say, it is basically a wage subsidy paid by a de facto tax on companies, in effect shifting the burden of welfare provision from the state to companies. With the best will in the world, our political leaders and think tanks cannot pursue this route and end up with the higher productivity growth we all crave.

For the sake of clarification, the living wage, set by the Living Wage Foundation in conjunction with researchers at Loughborough University is based on estimates of the cost of living, applicable to all workers, and companies may choose whether to take it on board. Some 2,000 companies, covering about…

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