• Professor Rosalind Searle, Chair in Human Resource Management & Organisational Psychology, University of Glasgow  
• Dr Ishbel McWha-Hermann, Early Career Fellow in International Human Resource Management, University of Edinburgh 

The current global pandemic has revealed in dramatic ways some important fissures and inequalities in our society. While these are likely to have been there for a while, they now expose in very stark ways differences between worker types. The first difference is between those who are employees on a payroll and so able to access furlough payments, and those who are self-employed and therefore not eligible for furlough. As a direct result this latter group is more likely to continue actively working, exposing themselves and thus those they live with to COVID-19, and working when sick to maintain an income stream. The second difference is between those who are able to work from home and those who cannot; again, with the latter group more likely having greater exposure to the virus. Both at-risk groups are already more likely to be working in low wage and insecure jobs.  

Living wages can play an important role for workers and their families in economically uncertain times, with clear interconnected benefits to support businesses and build their resilience. Living wages are those which are sufficient to maintain a decent quality of life rather than just meeting everyday subsistence. As this country enters a period of economic insecurity for individuals and firms, it is ever more important to assert that the living wage is a valuable tool to improve individual and firm outcomes. Below we outline some of the ways that the benefits to individuals have positive spillover effects on the resilience and sustainability of businesses in and through this crisis. 

Benefits of the living wage  

Sense of control: Critically, at this time living wages can provide a sense of control for employees. They offer a means for an individual and their families to be able to plan and have some certainty in an otherwise very uncertain world. Therefore any changes to employment status or wage levels need to be communicated carefully by firm in this time. People are likely to be wary and read more than is intended into any work-based communications regarding wages and job security. It is therefore important that there is transparency and clarity to organisational messages, delivered in a way that supports employees to shift from what they are used to into what is likely to occur in the future (Gustafsson, Gillespie et al. 2020). Speculation is not useful in these times, simply making people feel less in control and increasing uncertainty.   

Psychological boost: Second, living wages provide a psychological boost to recipients, giving a tangible demonstration that their employer cares about them. Consequently workers receiving a living wage are likely to be more satisfied about their employment. Building on this, simply noticing and acknowledging the extra effort of employees is a no-cost means of sustaining this psychological boost. Taking time to find out how employees are coping at this time is another important way of demonstrating care and respect, but it also opens up two-way communication that can provide invaluable information the organisation is currently unaware of (more on that below). Employees who feel cared about are more likely to also care about their employing organisation – through paying a living wage organisations are building a sustaining positive cycle.

Improving commitment: Organisations that survive the current crisis are likely to be those able to be more agile. A key part of such agility is fast and fluid sharing of information. The provision of a living wage can make workers feel more committed and engaged with their employer. A benefit of such commitment is that workers are more likely to detect and communicate areas of omission and concern. Their insights are also likely to be timelier, before a critical stage is reached. In this way the organisation can better navigate but also anticipate problems. In addition, these more committed workers are also more likely to think about and suggest ways to improve and innovative around such challenges. Novel inputs can be the sources for new income streams, or areas of competitive advantage.   

Negative emotions: Living wages can help reduce the prevalence of negative emotions, including fear and anxiety, but also anger. Living wage provision makes employees feel more fairly treated. The prevalence of negative emotions affects people’s capacity to think clearly and to process information – where they are fearful, they are also less open and creative.  

Being more aware about emotions is important to organisations’ success in navigating this pandemic (Gustafsson, Gillespie et al. 2020). Helping people to be aware of their emotions is critical, as they simply may not be aware that they are not behaving as they usually would. Employing organisations that are trusted, as living wage providers generally are, can help their employees process their emotions. At its simplest this can be done by greater awareness of emotions and how these can be triggered both through external surprises and shocks, and also through the various internal communications of the organisation. Helping to manage emotions can be important to reducing workforce burn-out and building individual resilience.  

Rest and recovery: Provision of a living wage offers support for workers’ rest and recovery through making resources available for their hobbies and active leisure. These spaces for rest and recovery are critical for reducing burn-out and supporting workers’ capacity to sustain their level of effort. While these are important at the start of a crisis, they are also very important over the long-term. Through improving workers rest and recovery, living wage organisations will reduce staff turnover and absence costs nor face the additional costs of recruitment, selection and eventually new staff induction and basic training. Instead their training can focus on upskilling their retained workforce, thereby further increasing the capability and agility of the wider organisation.  

Productivity and resilience: Living wages makes employees feel more satisfied in their work, which is known to boost individual and collective productivity (Carr, Haar et al. 2019). As a result of this productivity, tasks get done without additional costs and time. Employees are also more likely to care about delivering a high quality of services to customers and service users, and as a result the organisation’s external reputation will grow. At this time customers also want to support more socially responsible and trustworthy businesses, so they will seek out such firms to give their business to. Through these means the workplace will become more sustainable for employers, customers and investors.  

Cost neutral: Evidence shows that while the initial cost of a living wage is marginally higher for an employer, the additional organisational savings and increased productivity can make it cost neutral (Fairris 2005). In light of the substantial spillover benefits for employees and their families, living wages are more important now than ever.  

Living wages are an important source of positive psychological benefits to workers that cascade into positive benefits to organisations. A living wage makes employees feel more cared for and valued, and through this increasing job satisfaction likely comes more productivity. Increased job satisfaction also improves workers’ commitment and engagement which leads to them paying more attention to their work. This increased attention and engagement enables employees to better identify problems that they can resolve themselves, pass on to leadership, or can offer suggestions to innovate and improve the organisation. More engaged and committed employees also deliver better customer care so service users and customers are more likely to come back. In this way employees ensure suppliers are supporting the organisation to deliver its goals. Through these diverse means workplaces become transformed into a more pleasant place to work, which can make other employees feel more positive.

Each of these strands are a distinct source of resilience, sustainability and support that is likely to be critical in organisations that survive – maybe even thrive – in the current crisis. 

References

• Carr, S. C., J. Haar, D. Hodgetts, J. Arrowsmith, J. Parker, A. Young-Hauser, S. Alefaio-Tuglia and H. Jones (2019). An Employee’s Living Wage and Their Quality of Work Life: How Important Are Household Size and Household Income? Journal of Sustainability Research 1(1): e190007.
• Fairris, D. (2005). The Impact of Living Wages on Employers: A Control Group Analysis of the Los Angeles Ordinance. Industrial Relations: A Journal of Economy and Society 44(1): 84-105. (Subscription required)
• Gustafsson, S., N. A. Gillespie, R. Searle, V. Hope Hailey and G. Dietz (2020). Preserving organizational trust during disruption. Organization Studies: 0170840620912705.

Resources from the European Association of Work and Organizational Psychology

To cite this article: Searle, Rosalind; McWha-Hermann, Ishbel. Why living wages matter more than ever, Policy Scotland, 20 May 2020, https://policyscotland.gla.ac.uk/why-living-wages-matter-more-than-ever/

Living Wage briefings copyright: European Association of Work and Organizational Psychology

Image credit: Daniel Grosvenor. Published on Flickr | CC BY-NC-ND 2.0