Charities must embrace and celebrate the living wage, writes Martin Barrow

If it means they can't sustain the services they provide, they should restructure, merge or close, he argues

Martin Barrow
Martin Barrow

We are living longer, which should be a cause for celebration. Instead, the national debate about ageing is shrouded in pessimism: it will bankrupt the NHS, we can’t afford social care, we shall have to work into our 70s.

Something similar has happened with the living wage. A new, legally binding scheme to pay at least £9 an hour within five years has been announced by George Osborne, the Chancellor. It is what we have all been calling for, isn’t it? I have yet to hear anyone explicitly state their opposition to paying workers a living wage.

And yet the narrative around the living wage is overwhelmingly negative. Businesses warn of job losses and steep rises in consumer prices; local councils say they will struggle to maintain services; care homes say they will be forced to close. Unions describe the living wage as "a con", saying that it does not compensate for cuts in tax credits.

Charities have been strangely ambivalent in their response to the living wage. After campaigning for years for a meaningful increase in pay to tackle in-work poverty, many charities are struggling to accept that the government (and a Conservative government at that) has listened to their demands. Jubilation has quickly turned to grim determination as the third sector calculates the cost of implementing the living wage across its own activities

The reality is that many charities, like businesses, have been getting by through paying the minimum wage (which rises to £6.70 an hour from 1 October) to many employees. This is particularly true of charitable organisations that have large service provision in health and social care. In addition, many of their service users are supported in jobs that also pay the minimum wage, a proportion of which are unlikely to be viable with the implementation of the higher living wage.

The debate about the living wage could not have come at more awkward time for charities, already under fire over fundraising and corporate governance. In the face of a media onslaught on the use of chuggers, call centres and mailing lists, the sector has been unable to coalesce around an effective response that helps to rebuild public trust. With confidence badly damaged, charities have also been unable to articulate, in a persuasive and coherent way, their aspirations and concerns about the living wage.

Businesses have been typically forthright in their views, criticising the Chancellor and warning of catastrophic consequences. Whitbread, the owner of Costa Coffee, Premier Inn and a number of high-street restaurant chains, said it would mitigate the "significant cost increase" by cutting costs and increasing productivity, which means jobs will be cut and retained staff will have to work harder. The announcement was made by chief executive Andy Harrison, who earned £6.4m in 2014.

Charities and voluntary organisations should been equally unambiguous in articulating their support for the new living wage as well as the challenge of implementing it, instead of allowing business to frame the debate virtually unopposed. They should not have become distracted by their own concerns about implementation. Clearly, making the adjustment towards a living-wage economy will be painful for many charities. Unlike businesses, they cannot pass on the additional cost to customers. Much of their income comes from local authorities, which are in no position to make up the inevitable shortfall. Charities should and are campaigning for better funding of social care, but there’s little sign this is going to happen. So bold and innovative thinking is required. Restructuring, mergers, rationalisation and even closures must be on the agenda

If a business can prosper only by paying its employees low wages that are topped up by benefits, then it should close. If a charity is providing a service that is viable only by paying the minimum wage (or less), then it too has an obligation to walk away. And it should not be afraid to say so.

Martin Barrow is head of corporate communications at Forster Communications

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