What is the role of business in reducing poverty in the UK?
by Caroline Hartnell
What is the role of business in reducing poverty? This was the question before a meeting hosted by the All Party Parliamentary Group on Poverty (APPG) and the Webb Memorial Trust at Portcullis House, Palace of Westminster on 3 May.
Why is the APPG focusing on business? One in nine people in the UK are in poverty and more than half of these have at least one person in the household in employment. So encouraging businesses to pay employees more and improve employee benefits could help lift people out of poverty, said Kevin Hollinrake MP, opening the meeting.
But businesses are not in the business of altruism. So the key question is: is there a business case for taking action on poverty? We should be asking not ‘what can business do to reduce poverty?’ but ‘what can reducing poverty do for business?’
Several speakers addressed this, including Peter Kenway of the New Policy Institute. In-depth interviews with 20 Scottish employers who are voluntarily paying the living wage showed that tackling poverty is not their primary motivation. For small employers starting out, paying the living wage creates a positive image with employees and customers. An employer in a remote community will hope that paying the living wage will encourage employees to stay. In fact these employers weren’t comfortable with the idea of links between poverty and their core business activity. If you want to talk to employers about poverty, it’s better to use terms like fairness and staff wellbeing, said Kenway.
For Abbeyfield Society interim CEO Bob Tindall, paying the living wage is largely about having a sustainable workforce. If you want your employees to stay, you have to pay them well, train them and develop their careers. People who are valued make better carers. The living wage cost around £1 million to implement, but lower turnover has meant lower recruitment costs and significantly reduced the use of expensive agency staff. There are also benefits for residents, who see the same person rather than a string of different people.
Cameron Tait of The Fabian Society talked about a growing body of evidence that investing in staff can lead to greater productivity. Ikea is paying a living wage, increasing staff skills and involving staff in decision-making – and reporting lower staff turnover and greater customer satisfaction as a result. US companies like Costco are reporting similar results.
Speakers did not focus exclusively on the living wage. Clare Ludlow of the Timewise Foundation talked about flexible working. While a recent report suggests that 47 per cent of the UK workforce want to work flexibly, this is rarely possible. Employers should be encouraged to advertise jobs as flexible – as part-time, a jobshare, term-time only, thus offering opportunities for people in poverty. And government and local councils should lead the way by example, said Ludlow.
Tina Hallett, a partner at PwC, talked about how businesses could address the poverty premium, which means that the poorer you are, the more you pay for goods and services. If you live in a sink estate, for example, car insurance will be higher. If you can’t use direct debit, goods and services cost more. One idea that emerged from talks with banks, energy companies and telecoms providers was a kitemark for businesses that have assessed whether their goods and services are fair to the poor.
But we shouldn’t expect too much from voluntary action by business, several speakers emphasized, among them John Philpott of The Jobs Economist. While some businesses treat employees as valuable assets to be nurtured and invested in, many others have ‘low-cost’ business models that see human resources to be employed at the least possible cost and dispensed with easily – think zero hour contracts. With this model, there is no point in motivating staff because turnover isn’t an issue: if someone leaves, you can replace them – and sadly the supply of labour willing to work in this way is greater than ever. So the best hope is working with the ‘better sort’ of employer. In his view regulation will be needed if we are to get the sort of workforce we’d like.
Cameron Tait stressed the key role of the public sector – ‘business can’t do this alone’. Tackling low pay has a comparatively small effect compared to increasing child benefit or reforming the tax system, he said. The public sector can target resources to where they’re most needed.
For Big Issue founder John Bird, the answer lies in social business. His dream: the complete transformation of business so we have social Amazons and social Tescos. ‘We can’t leave it to the big guys,’ he said. ‘Consumer power could create a new form of business, social business, providing the same services but with all surpluses ploughed back into the business rather than going to shareholders.’
Caroline Hartnell convenes the Rethinking Poverty blog.
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