What’s the most effective way of ensuring fair wages for low earners?

The question arises from James Graham’s excellent blog on how raising the personal income tax allowance, a central plank of Liberal Democrat influence in the Coalition, makes it more likely that large companies will pay fairer wages.

James was responding to Zoe Williams in the Guardian (well worth a read), who rightly highlights the negative societal impact of companies paying their employees wildly differing amounts – sky-high executive salaries at one end of the spectrum, and sub-living wages at the other that  have to be topped up by complex and costly welfare spending.

Of late there has been a great deal of coverage of extremely high pay, and bank bonus season will undoubtedly keep said payments firmly under the microscope. Rather less has been made of the payment of wages that aren’t sufficient to attain a decent living standard, and the illogical system of meagre compensatory handouts it necessitates.

So the question again is: if we want to see fair wages at the low end of the spectrum, what’s the best mechanism? Exhorting companies to ‘play fair’ (also known as tilting at windmills in some circles…)? Making the tax system more favourable to low earners? Giving employees a greater say in how companies are run? Legislating for a living wage?

In reality of course it’ll take a mix of the above, and possibly other measures, to secure fair wages for all – how do you, the esteemed LDV reader, think the Liberal Democrats should approach fair pay?

* Prateek Buch is Director of the Social Liberal Forum and serves on the Liberal Democrat Federal Policy Committee

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This entry was posted in Op-eds.


  • Daniel Henry 20th Jan '12 - 5:32pm

    I think giving tax breaks to companies that provide living wages to all staff would help.

  • Andrew Duffield 20th Jan '12 - 7:17pm

    The fairest wages are those free from state enforced theft in the guise of income tax.

    Earnings measure the value we add to society. The value REMOVED from society – rent seeking disguised as earnings – is the only morally legitimate target for tax. The vast profits generated by private banks (of which big bonuses are but froth) are made up almost entirely from rent. Tax rent-seeking properly (or at all, in fact) and we could start lifting the entire productive economy completely out of tax – forever. Now that’s what I call ‘fair’.

  • The best mechanism is to ensure that all prospective employees get a decent eduction and can get a decent job. If there were fewer unskilled people chasing the low paid jobs, they would have to pay more. This is one reason take away food is so expensive in Norway – there aren’t many people who want to work in fast food, so the wages are higher to attract staff.

  • Minimum wages, living wages etc. are at times a good way of raising the living standards of low-paid individuals (though there are some arguments to suggest that this is at the expense of the people whose labour is not valued at or above that wage), but the underlying issue is that one needs to be instituted to provide what we deem to be a livable standard. Tim’s right about education. There’s a good quote from Tim Hartford on the issue:

    “if a young adult cannot produce enough of value to justify being paid a living wage, nothing we do to the minimum wage will help. He, the institutions which trained him and the society in which he lives, have far bigger problems.”


  • The best way for workers to receive fair wages is to organise into strong unions and demand them.

  • Daniel Henry 21st Jan '12 - 1:36am

    How long have they been trying that for JRC?
    How’s that tactic been working for them?

    I think a better way for workers to receive fair wages is to set up mutuals and co-operatives and take control over their working lives, rather than having to negotiate with an employer.

  • Daniel Henry, where they exist the tactic of being involved in strong unions has worked very well for employees. In the UK in the 1960’s and 70’s strong trade unions were largely responsible for the most equal society that this country has ever enjoyed. Trade union members still, even after the establishment managed to legislate strongly against them and the massed ranks of public opinion formers have attacked their every move, enjoy better pay than their non-unionised compatriots. US government information states: “in July 2002, average hourly earnings among all union workers were $20.65, compared with $16.42 for nonunion workers.” I suspect that this will be true in most places. A long debate raged on this site a while ago about how unfair it was for tube drivers to receive a fair wage whilst the non-unionised workers were suffering from poor wages, your co-contributors to these comment threads had no problem recognising that union membership was proffering better outcomes for those workers. The government is engaged in a campaign to ostracise public sector workers by appealing to the dubious notion that their strong trade unions have secured good pensions whilst the private sector worker has been cowed by their employers into accepting little or no security into their old age and that rather than this being unfair because of the poverty of the rewards being offered to the general workforce it is unfair because of the spoilt richness of the public sector worker. The establishment campaign against the workers goes on. Liberals happily join in because they confuse collective action with communitarianism and declare it ‘illiberal’. Funnily though they support collective action in every country other than their own declaring it a fight for freedom but when organised into a domestic trade union declare it the first step on the road to slavery. The evidence is there that strong trade unionism is historically the best motor to equality. That it is not as successful as it was is due to the fact that it has largely been absent through legislation opposing it and a lack of will from the workforce to engage in it. Neither of these factors show that it is not a successful tactic when utilised.

    Whilst setting up mutuals and cooperatives may help people take control of their working lives it also changes their status from being salaried workers and does not address the issue of how those who remain employees actually improve their lot. As most of the comments in this thread it falls into the category of; the way to receive fairness in your existing position is to not be in your position. It is like the yarn about the tourist asking for directions only to be told “well I wouldn’t start from here”.

    If you value equality then it is impossible to deny that the best way to achieve it is to empower the individual. Individuals in the work place are far more powerful when they act together in order to balance out the inherent power of those who hold the purse strings. As it states in the article there are many mechanisms that all must be employed but to deny the most effective tool available to employees on the irrational grounds that freely organising into collectively active groups is somehow illiberal is absurd.

  • Daniel Henry 21st Jan '12 - 1:53pm

    Fair enough JRC, I didn’t mean to suggest that the unions have no effect, just disagreed when you said that them simply demanding a living wage would work.

    I thought your second post was a bit more realistic, pointing out that unification can help workers rights but other measures are needed as well.

    As to your point that mutuals only help the people that are in one, the more successful mutuals there are, the more people this will be. If the unions helped members to set up mutuals and compete with lousy employers then they could potentially put lousy employers out of business.

  • Daniel,
    Thank you for your graciousness but you do still slightly, but significantly, misrepresent my point. My point about mutuals was not that they only help those that are in them, it was that being in one is a categorical change in employment status and therefore does not offer a solution to the status of those who are of a different category i.e. employees. My second point was rather more long winded but nonetheless identical to my first but would be changed if I had said ‘simply’ demand them. It is the right of every individual to demand fair treatment. Not to ask for fair treatment but to demand it. The weakening of the workforce has led to the belief that it is right to treat fairness as being in the gift of the powerful and that we should be grateful for it, maybe by buying a yacht of gratitude for example.

    It might seem churlish to reply to such a small point but small changes of language make big differences. In the above you add ‘simply’ and change the strong point of human right and dignity in being empowered into one of workers simply throwing a strop. This is one of the ways that the unions have been belittled by public debate and workers have been discouraged from acting in a way that would be beneficial to them. Another such use of language allows the detractors of union worth to personalise the debate by characterising union demands as being only for the benefit of union leaders.

  • Richard Swales 22nd Jan '12 - 12:14am

    1) Train them so they have skills that other people want to pay more money for – I find it amazing that this suggestion is missing from the article.
    2) Employ them yourself with your own money* to do productive work – if current wages are really unfair then presumably you’ll make a mint and be able to start paying more.
    3) Support cuts in the legislative burden. In prehistory everyone had skills, traded with everyone and so everyone was self-employed. Isn’t a big reason why so many unemployed people feel that doing what their ancestors had to do and creating their own jobs would be beyond them is that the accounts, legal compliance, risk of getting sued is too scary – leaving lots of people knocking on relatively few doors to get jobs?

    * If you personally don’t have the money lying around to start a business, then band together with other people who feel the same, fellow union members, fellow churchgoers etc, and do it.

  • Simon Rigelsford 22nd Jan '12 - 12:21am

    Make it easier for everyone to start their own business – remove unnecessary government regulations, reduce taxes, even abolish occupational licensing laws…

  • Remember what Paddy used to keep saying..? ‘Tax what we don’t want, don’t tax what we do..’ simply put, we do want jobs, we don’t want excessive bonusses.. so tax should not be levied until a worker earns a living wage.. The problem is getting the tax off the high earner who has numerous ways of avoidance..

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