Investing in the living wage: A toolkit for responsible investors
This toolkit details low pay risks for investors, particularly in industries such as retail, hospitality, and care homes. The toolkit urges investors to proactively tackle low pay issues by promoting the Living Wage through collaborative engagement, integrating ESG concerns into policies and guidelines, and encouraging incentive schemes in this area.
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OVERVIEW
Dignity in work
The report highlights the chronic problems of high levels of income inequality and in-work poverty and proposes that companies can be an active part of the solution by joining the growing ranks of accredited Living Wage Employers. The Living Wage is a rare example of a corporate policy that benefits all stakeholders. Companies that become Living Wage Employers can make a genuine difference to the lives of their employees and their families, as well as the communities they represent. The commitment to the Living Wage can also be a vital part of the development of stronger and more resilient business models.
The business case for the living wage
The report discusses the benefits of paying the living wage for businesses including improved staff retention, recruitment, and productivity. Furthermore, becoming a Living Wage Employer can help mitigate reputational and operational risks whilst also improving the sustainability of businesses in the long-term. High profile companies, such as SSE and Barclays plc, have implemented the Living Wage and have experienced reputational benefits whilst maintaining long-term sustainability.
Industry specific challenges and opportunities
Industry-specific challenges are discussed in the report, with particular emphasis on the retail, hospitality, construction, and gig economy sectors. The retail and hospitality sectors have been hardest hit by the Covid-19 pandemic, with a significant shortfall predicted in skilled staff in the upcoming years. The report suggests that investors can utilize a range of tools to bolster their positive impact on the Living Wage to drive further progress on this topic that is still badly needed.
Actions for investors
Investors should offer a strong focus on low pay and the Living Wage as the study on The Living Wage recommends that 85% of investors state that investment in employees is an important factor in their decision-making. Investors should create internal resource to engage companies directly on ESG issues. Investors should participate in engagement through co-signing company letters or attending meetings with companies. They should also consider incorporating the Living Wage as part of ESG considerations into investment decisions, and integrate it into voting policies. Publishing rationales for voting decisions on all controversial votes on executive remuneration, abstentions and special exemptions is recommended.
What to do now
The report suggests that investors get involved, for example, by publicly profiling Living Wage and low pay issues via outsource and proxy voting. Several simple and effective ways to engage companies on fair employment practices include raising progress towards Living Wage compliance raised to senior company executives from peers in the investment community. Also, the report suggests that companies can be part the ‘social’ component of the ESG agenda for Living Wage accreditation, align with the UN SDGs and creating diversified benefits of Living Wage.
