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The Fallacy of the Living Wage

Quite often one comes across a totemic issue that not only seems ill-suited to the tradition in which it has nested, but also seems to go against everything it is that particular tradition proclaims itself to stand for. And it seems to me that, for the left, the ‘Living Wage’ is just one of these issues.

Now of course, we all know the background behind the idea, the shocking levels of inequality, the people struggling to get by, working huge amounts of hours, living in a heavily taxed world, and trying to do it all on a terribly low wage. And we can all decry the poverty, rail against the injustice, and commit earnestly to seeking a way to resolve the situation. But it seems to me that, if that is really your goal, then the Living Wage is a cop-out. It is a convenient non-sequitur which makes a few people feel a little better about themselves, whilst having little effect on those at the bottom who find their new handout immediately swallowed by the inevitable inflation that follows it.

And so, the question is this: if you wish to empower those at the bottom of the socio-economic ladder, to lift them out of working poverty, then do you really achieve it by merely tinkering with the terms of their servitude? If an individual has nothing to trade but their labour, then do you really make them richer by simply clarifying the contract upon which that labour is bought? Or, alternatively, do you do it by giving them the opportunity to have something else, something tangible, to sell? Chesterton once famously said that the problem with capitalism is that there are too few capitalists – the problem with contemporary society is that we tend to fall over ourselves to subsidise too few capitalists, and do it in the name of protecting the masses.

I suppose that what I am saying is that it would be a fatal lack of ambition if one was to say that the only legitimate scope of the state is to protect the worker, which all too often really means protecting big business from the reality of smaller competition.  If the state is to subsidise at all then it should be to liberate and empower the individual, the family and the community – and not to merely negotiate more favourable terms of surrender.

Now, whenever debates like this come up, it is interesting to observe how many people end up taking positions they don’t really believe in, all in order to better oppose those things which are really quite believable.  For example, when it is pointed out, entirely accurately, that centralised imposition of working terms can be disastrous for smaller business, then the response needn’t be (as it has often become) to therefore prioritise big business as being more capable of implementing the terms of the state, or to pledge state money to subsidise those businesses who can’t afford to implement such policies. Rather, it would be better to point out the rather obvious fact that if more people had more small business, if a greater amount owned a greater portion, then policies such as this might be rather less necessary in the first place.

Further, when it is suggested that the country needs big business to provide jobs and security, it might be worth suggesting that if a significant chunk of the population had genuine economic autonomy then they might be rather more resilient to the fluctuations of the markets and the  bouts of joblessness and hopelessness that ensues. Indeed, those very markets might become more vibrant, nuanced, diverse and accessible, and therefore not subject to the blind whims of the oligarchies who control them.

And finally, when it is suggested (as it always is) that we must do things step by step, without any sudden movements, and so for the short term we should settle for making the servitude more bearable, then I would immediately suggest that you might as well, in that case, redirect those small steps and head toward genuine economic empowerment, since this would help make life a little more bearable too, and at least the final goal is one we can all agree is worth walking towards at all.

All is not gloom and doom of course, and new shoots of thought are being explored, or rediscovered (depending on who you believe) that with the subtlest of changes can help transform the worker into the owner, and genuinely help re-capitalise those who have been stripped of all wealth and assets. And if this is to be one of the future directions of the economic settlement then it is surely to be welcomed. I only hope that in the meantime the project isn’t surrendered once again to those who would endlessly oscillate between one servitude and another,  the State and the market, and all under the fallacious guise of helping the worker.

I am no economist, and would never claim to be, and I have no doubt that a clever individual with long words and detailed graphs could produce a thousand plausible arguments against what I suggest here. And I would be interested to listen, and be educated in the mysterious and fantastical ways of advanced economics. Nonetheless, the second it is suggested that we should, as a society, settle for a deepened continuation of the status-quo, then we should cease to be so charmed, whether by the economist or the politician, and should demand something much more radical.

This article appeared on LabourList on February 12th, 2010.

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