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Investors and the Living Wage: what role do they play?

By Mara Lilley, Campaign Manager at Shareaction

You wake up, you go to work. Maybe you care for the elderly, stack shelves in the local store or serve people their lunch. Regardless of what you do, you work hard.

You turn up every day – sometimes at short notice - and you do what is asked.

Yet at the end of the month something is not quite right. You struggle to cover all your bills and the weekly shop is getting smaller and smaller. The new shoes your child needs will have to wait until next month. Saving for that mortgage deposit is a distant dream.

For many working people in the UK, this situation is all too familiar. The rising tide of in-work poverty threatens one in eight UK workers.

This growing challenge will not be tackled without a commitment from companies to pay a real Living Wage to all of their employees, to help them stay afloat as well as ensuring the future sustainability and success of the business.

The investment case for living wages

Ignoring the social risks associated with precarious work, poor wages and a lack of core employee rights, such as access to sick pay, has a negative impact on the long-term business success of companies Acknowledging that employees deserve a decent wage can improve the reputation of the business, increase motivation and improve relations between managers and their staff.  

At the same time, workers with more money in their pockets spend more, which has a positive effect on the economy.

Not to mention the fact that more secure, healthier workers are often more productive workers. By investing in your workforce you will see staff turnover fall, employee motivation grow and, ultimately, your company will become more competitive – all of which enhance shareholder value in the long term.

More evidence is needed, but the signs are clear: paying the Living Wage makes good business sense.

Growing investor pressure

Investors themselves are waking up to this virtuous circle. Almost 30 institutional investors­ – including Candriam Investors Group and Strathclyde Pension Fund – with over £2 trillion in assets under management – are active members of ShareAction’s Living Wage Investor Coalition

With the aim of encouraging all FTSE 100 companies to apply the Living Wage to their UK operations, this Living Wage Week (11-17 November), the coalition continues to urge top companies to join other leaders – such as Ikea¸ Diageo and Nationwide  – to adopt this clear marker of best practice.

The rising costs of inaction

With investor interest on this topic rising, companies failing to take action could see themselves facing growing pressure.

For example, many stakeholders including institutional investors are beginning to see it as increasingly unconscionable to award companies substantial executive pay packets while failing to pay a real Living Wage to their staff.

The Church Investors Group (CIG), has led the way on using their voting power to limit inequality with a policy of voting against the remuneration reports of FTSE 100 companies in the telecommunications, financial and pharmaceutical sectors where they are not Living Wage accredited.

As the trend for responsible investment continues, investors are stepping up their role in building a fair and just society. They are playing a crucial part in shifting the perception within companies that see employees as costs not assets.

With almost 6,000 accredited businesses across the country, including 37 of the FTSE 100, it’s clear the Living Wage is here to stay.

As investor support continues to rise alongside the growing business case behind paying fair wages, we expect to see more and more companies swayed towards investing in their workforce and showing leadership by accrediting as Living Wage employers.



Advocating the real Living Wage

Read latest research from the University of Southampton Business School and Aviva Investors Global Responsible Investment team.

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13th November 2019, 15:00
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