National Living Wage in the Context of Wealth Disparity in the UK

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Status: Finished  |  Genre: Editorial and Opinion  |  House: Booksie Classic
A brief analysis as to why the debate surrounding the National Living Wage in the UK should be shaped around wealth disparity and inequality rather than a question of isolated affordability

Submitted: January 09, 2020

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Submitted: January 09, 2020

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Approaching the climax of 2019, we received the news that from April 2020 the national living wage for over 25s would increase from £8.21 to £8.72 an hour[1], simultaneously pay rates will also rise across all other pay groups. The increase follows a pre-election commitment by Chancellor of the Exchequer, Sajid Javid to increase the national living wage to £10.50 an hour[2] over a period of 5 years.

The announcement made by Prime Minister, Boris Johnson has sparked subsequent debate between those who welcome the increase but simultaneously question whether it’s enough, and those who insist that the increase is not economically plausible.

The TUC (Trade Union Congress) General Secretary, Francis O’Grady, in response to the announcement suggested “Workers are still not getting a fair share of the wealth they create… No more excuses, working families need a £10 minimum wage now, not in four years’ time”.[3]

The claim by O’Grady is largely in line with the implication forwarded by The Living Wage Foundation which set its real living wage at £9.30 an hour and £10.75 an hour in London.[4]

Claims that the national living wage increase proposed by Johnson does not go far enough are counteracted by those that question its economic feasibility. Hannah Essex, co-executive director of the British Chambers of Commerce, suggested that “raising wage floors so far above the rate of inflation will pile further pressure on cash flow and eat into training and investment budgets”.[5]

Perhaps the debate needs to be framed in a different context? Parallel to Johnson’s announcement, The Huffington Post published the startling statistic that the world’s richest 500 people increased their collective wealth by 25% in 2019 (and that) the 500 wealthiest people held a net worth of $5.9 trillion- collectively up $1.2 trillion over 2019 alone.[6] Familiar CEOs and big business names were among the list including Brits James Dyson & Hugh Grosvenor, as well as Amazon founder, Jeff Bezos and Facebook co-founder and CEO, Mark Zuckerberg.

Such a claim is mirrored by statistics put forward by the CIPD and The High Pay Centre which suggested in 2018 that top executives will pass the median UK gross annual salary for full time employees on Thursday 4th January 2018.[7] This statistic has been an annual ever present since 2016 and in simpler terms suggests that top executives surpass the average annual income in the UK in just three days. On top of that, the CIPD suggested the median pay to a FTSE 100 CEO in 2016 was £3.45 million.[8] Little has been done subsequently to remedy the extent of disproportional wealth.

How then can we have a valid debate on the living wage in the UK without considering the ever present, top heavy wage disparity in the UK? Can one truly say that a small increase to the living wage will increase demands on training and investment budgets when extortionate payment is being made to CEOs- prosperous or not, who are very plausibly working for the same companies as those on the national living wage? Surely such astronomical pay more greatly impacts the issues raised by Hannah Essex? I’d argue an examination into fairer wealth distribution coming from the few at the top needs to be at the forefront of discussion when debating wage increase for the many at the bottom.

 

 

[1] https://www.theguardian.com/society/2019/dec/31/boris-johnson-to-raise-minimum-wages-by-four-times-inflation

[2] https://metro.co.uk/2019/09/30/chancellor-sajid-javid-raises-national-living-wage-10-50-10834020/

[3] https://www.theguardian.com/society/2019/dec/31/boris-johnson-to-raise-minimum-wages-by-four-times-inflation

[4] Ibid

[5] https://www.bbc.co.uk/news/business-50947097

[6] www.huffingtonpost.co.uk/entry/world-richest-wealth-income-inequality_n_5e06915de4b0843d360653ad?ri18n=true

[7] http://highpaycentre.org/blog/its-fat-cat-day-thursday-jan-4-2018

[8] Ibid


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