Can income recovery drive economic recovery?

Thursday 14th November 2013If Saints can recover, so can we.

Two strange and very welcome things appeared in the papers this week. The first was a spate of articles in the British press hailing Southampton football club’s youth development policy as the potential saviour of English soccer. Having supported them through thin and thin, it’s happily bewildering to anticipate the Mighty Saints potentially fielding three players in England’s friendly against Chile tomorrow night.

But back in Ireland, the following quotes were even more striking. Not just for what they said, but also for the fact that they appeared in the Irish Independent.

“The social welfare system is subsidising the paltry pay and conditions that an increasing number of employers are offering.”

“It is time we had a debate in this country about the race to the bottom that is being engaged in by some employers, who are using the economic crash as a pretext for attacking workers’ pay and conditions.”

Both appeared in an excellent opinion piece by columnist Colette Browne, which discussed the prospects of a ‘living wage’ policy in Ireland. Browne makes the point that the concept of a living wage – paying people enough to meet the cost of housing, healthcare, food and heating – is well understood and widely accepted in Britain. Some surprising supporters include Tory London mayor Boris Johnson and blue-chip employers like accountants KPMG.

One of the reasons is that low pay puts extra pressure on taxpayer-funded benefits. Sound familiar? A recent IMPACT ebulletin reported that almost 90,000 employees are currently receiving jobseekers benefits because their pay is too low or their working hours are too few. And over 40,000 working families are receiving family income supplement.

These are effectively direct subsidies from hard-pressed taxpayers to profitable but mean employers. It galls that some of these employers also go out of their way to avoid paying taxes themselves. As well as being intrinsically right, more workers on decent pay – and paying tax instead of depending on benefits – would mean less pressure on the public purse.

Also this week, a new report placed Ireland sixth in the EU (up four places in seven years) when it comes to income inequality. The fact that the worst offenders also include other austerity adherents (Greece, Portugal, Spain and Latvia) underlines Browne’s point about employers exploiting the crash to attack those on low and middle incomes.

Now that we’re seeing signs that the economy is finally waking up (in parts of the country at least) it’s time to start thinking about how pay increases could accelerate the process. And if income recovery as part of economic recovery sounds nuts, stranger things have happened: Three seasons ago Southampton were bottom of the third division. Today they’re third in the premiership.

Bernard Harbor is IMPACT’s head of communications.