Monday, June 6, 2022
HomeEconomicsJ Sainsbury/wages: business case for higher wages weaker than moral one

J Sainsbury/wages: business case for higher wages weaker than moral one

Capital has labour’s back, apparently. Investors with assets of £3.8tn between them, including Legal & General and Nest, want J Sainsbury to pay workers a “real living wage”. Shareholders will vote on the demand, currently for £11.05 per hour in London and £9.90 outside it, at the UK supermarket chain’s annual meeting.

The moral case for increasing hourly pay during a cost of living crisis is clear. ShareAction, the body leading the campaign, counts Christian Aid and CAFOD among its members.

The business case is less obvious. The UK, like much of the rich world, sets minimum wages (confusingly called, for those aged 23 and over, the “national living wage”). This is currently £9.50 an hour. The UK wants to lift this to the equivalent of two-thirds of the median wage come 2024.

That would push the UK towards the top of the class like Portugal and New Zealand, which both reached that level in 2020. Yet activists say that is not an adequate living wage — the right to which was set down over a century ago in the Treaty of Versailles. The “real living wage” would reflect a varying basket of goods and services closely matching typical living expenses. 

More than 10,600 employers — including Chelsea Football Club, whose star player Romelu Lukaku earns a fortune — are on board. Some 300,000 employees are beneficiaries, to the tune of around £1.8bn since the campaign began in 2001.

Supermarkets are understandable holdouts. They operate on razor-thin margins and spend heavily on staff; 12 per cent of Sainsbury’s revenues goes on payroll. There is no hard evidence to show higher pay improves productivity. That applies to C-suites as well as shop floors, though surveys point to improved morale, staff retention and recruitment.

Wage increases bring a swift and highly transparent day of reckoning. Sainsbury’s last year lifted its payroll by 16 per cent, to £3.75bn, while clipping shareholders’ cut by 6 per cent. If capital backs higher pay for labour anyway, companies will find it very hard to resist.

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