The living wage inevitably garners wide support among the public, a backing that crosses all demographic and political groupings. Yet, it remains both controversial and somewhat slippery as a concept.
Donald Hirsch and Laura Valadez-Martinez have produced an admirable introduction to the living wage, explaining the differences, but nevertheless the interconnections, between a minimum wage and a living wage, discussing the background of the idea, and examining many of the economic and policy debates without engaging in polemics. The book is designed to be used in undergraduate courses in social policy or the economics of poverty, and it would serve that purpose well. It contains a remarkable amount of material within a brief compass, 113 pages of text.
The empirical focus is on the experience of the United Kingdom and the United States, more so on the former. This is both a strength and a weakness, as students in the target audience will be more familiar with (and undoubtedly more concerned about) these two countries. For myself, though, I wish a nod or two had been given to Australia. It would have fleshed out several of the issues. But that does not detract from the strengths of the book.
A major strength is that the relevant economic concepts are explained clearly but thoroughly. For example, how the textbook model of labour markets supposedly works is developed through a series of clear graphs; then the way the ‘real world’ works is explained by citing studies that both contradict and support the textbook model. Then, matters such as possible substitution effects, where companies might invest in more sophisticated equipment to offset the higher costs associated with wage rises, are ably discussed. Another example is how living wage policies can interact with other income support policies. Is a living wage the best tool for fighting poverty? The issue is anything but straightforward, despite its seeming simplicity on the surface.
Other complexities abound and are handled here in expert fashion. Say we agree that we should have a living wage. How should it be calculated? Should, as its early advocates thought, be based on the needs of the worker? If so, what needs? Subsistence? Surely not. The consensus would seem to be on a decent living as defined by the current society. But how to measure that? Public opinion polls? A percentage of median household income? A percentage of median hourly wages? The aspirations of the workers themselves? Or, alternatively, should at least some attention be paid to what employers can afford to pay or the general state of the economy? Again, if that is to be considered, what are the relevant factors to be brought into the equation? What about updating the wage level? Should inflation be the guideline, or changes in productivity? Readers of this book will not come away convinced one approach is better than any others, but will come away knowing a lot more about the questions.
The authors also tread carefully around another complexity that has serious ideological overtones, namely the family unit that a living wage should cover. They don't discuss it, but several early reformers talked about a ‘family wage.’ What they meant was that a single breadwinner (usually a male) should be able to earn enough to support a wife and perhaps two, three, or four children. It is well to recall, too, that the Beveridge Report (which did not really address living wages) envisaged a traditional family with a single employed worker. But times have obviously changed. Should, that is, in families composed of couples, both people be expected to work outside the home? If so, should their combined income be the measuring rod for the living wage? Would such a policy be tacitly endorsing a traditional family structure? And what about lone parents? New Zealand, to take one example, sets the standard as one parent working full time and the other half time. Moreover, as above, should other state benefits be considered when deciding how much of a family's income should come from wages?
Another oft-discussed matter is differentials. The National Minimum Wage in the UK establishes an important age differential. Despite the TUC's position that it should be abolished, it, according to the authors, plays an important part in current policy. It may allow the adult rate to rise more than it otherwise would. The US has discussed this from time to time, most recently in the administration of George H.W. Bush. American minimum wage advocates stoutly resist the idea, but it is possible that that tack may actually be counterproductive to getting a higher adult rate.
There is also an important discussion of the power (and limitations) of voluntary efforts, chiefly those of the Living Wage Foundation in the UK. Wage increases have indeed been won for many workers through these efforts; but are they sustainable without legal action?
In short, for a highly readable, incisive analysis of the state of the living wage as both idea and policy, this is the book to have.
