Part two - Local priorities for economic regeneration: an Enfield view
Job quantity, or job quality?
Alan Sitkin, Senior Lecturer, Regents University London
My previous blog discussed an economic priority for all progressive politicians - accessible well-paid employment for constituents - and the challenges faced achieving it. Local authorities' ability to affect change in the world of work is hampered by objective factors, starting with cash-strapped councils’ inability to recruit, not to mention automation and the ensuing jobless growth. Within these constraints, however, economic interventionists pull any other lever we find. The name is on the tin – we intervene. Or as Barack said, “Yes we can”.
The specific work policies we deployed in Enfield can be divided into two strands: quantity tools maximising the number of job offers; and quality tools ensuring jobs were sufficiently well-paid to reduce wage inequality leading to social alienation. In all honesty, during my term as Cabinet Member I did better with the former strand (quantity of jobs) than the latter (quality). This blog explains why.
To some extent, the problem we had with low wages was a mechanical side-effect of the sectors dominating our jobs market. Having lost much of our historic manufacturing base, whole swathes of Enfield had turned into dormitories where most local employment opportunities were in retail or adult social care. As personal services run on extremely tight margins, they could never afford to pay high wages.
As for the industrial activities the borough still hosted, by my arrival in Cabinet in 2014 the sector was dominated by logistics providers often working out of large sheds, making extensive use of our limited industrial land and paying mediocre wages to sparse warehouse staff. I didn’t necessarily want to push them out (a bird in the hand is better than two in the bush) but tried to bring in other industrials willing to pay more – with the London Living Wage (LLW) being the benchmark we wanted for our people.
Enfield Council put its money where its mouth was and implemented the LLW (c.f. previous NPI blog). With one notable exception - Camden Town Brewery, a great company I was delighted to get - none of the many existing or prospective industries I visited would sign up to the LLW. I’d try to convince them, for instance by promising to name and fame any who agreed this higher wage floor, but they were fully within their rights to refuse – and generally did. Why should they let me – some minor Labour politician they had just met – dictate their profit margins to them?
The question then becomes why one industrial was prepared to pay LLW and others not. Camden Town Brewery’s stance reflected the founder’s progressive personal ethos and targeting of socially responsible consumers. Other industrials thought this too narrow a customer base, however, so they remained impervious to my arguments that behaving in a social responsible way and then publicising that would be good for sales.
Another problem, especially when pitching to newcomers, was competition from our next-door neighbours in South Hertfordshire. Being outside Greater London, their real Living Wage was the UK Living Wage, around 14% lower than the LLW (see chart below). On top of this, these Conservative-run authorities were generally more willing to consider low-tax enterprise zones, something I always refused because of my strong belief that the State should be appropriately funded. The net effect was to put Enfield at a negotiating disadvantage whenever cost became paramount in inwards investment decisions – as it so often does.
At one level, this raises questions about the effectiveness of a voluntary Living Wage in an open market where businesses have other options than to pay workers a 30% surcharge over the legal floor (called the National Living Wage for those aged 25 or above). This is similar to the negotiating advantage that multinational companies possess because they can move their capital from one country to another whereas governments are tied to their national territory. Expressed differently, politicians’ dilemma is that they need companies both to invest in their districts and pay local people good wages. Companies on the other hand are free to go elsewhere and may well do so if wages are lower. It’s a tacit blackmail where all local governments under pressure to lower their standards (in what is called the race to the bottom).
In the end, I figured that our only hope was to change the framework in which businesses made decisions about Enfield workers’ pay. Instead of a continued focus on quantitative cost arguments, I moved the goalposts to frameworks where qualitative and/or governance criteria might dominate.
An example of our using governance processes to improve local pay conditions was the stipulation placed in the massive Meridian Water development project that bidders had to commit to a given number of jobs paying wages exceeding X . But such conditions are only part of the negotiation between Council and developer: bidders can and do strike things like this out of their final bid. Even if they do agree, the higher labour costs will likely increase the price charged to the Council
None of these options are as easy as they seem when we would discuss them at my local constituency Labour Party meetings. But they are worth discussing and will become the topics of the next blogs in this series. One of my frustrations with politics today is the pretence that there are easy answers to complicated problems. This series will eschew that approach.