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A Toolkit for Responsible Investors September 2020

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A Toolkit for Responsible Investors September 2020 INVESTING IN THE LIVING WAGE a toolkit for responsible investors September 2020 supported by in partnership with JEREMY LAWSON Chief Economist and Head of the Aberdeen Standard Investments Research Institute, Aberdeen Standard Investments High levels of income inequality The underlying causes of inequality Just as importantly, becoming a and in-work poverty are a scourge and in-work poverty are complex. Living Wage Employer can be a vital on our society. Their existence The nature of technological change, part of the development of stronger means that access to economic failures in our education and training and more resilient business models. opportunities are unevenly and systems, government policies As such the Living Wage is a rare often unfairly distributed. They lower affecting taxes, transfers and the example of a corporate policy that participation in the political system regulation of labour and product benefits all stakeholders. Aberdeen and broader civil society, weakening markets all play important parts. It is Standard Investments is therefore the bonds that bind us and our easy for companies to feel impotent proud to be a Living Wage Employer communities together. And there is in the face of these realities. Yet and to be supporting the Living a growing body of evidence that by joining the growing ranks of Wage Foundation to produce this they act as a break on aggregate accredited Living Wage Employers, toolkit. We hope it will accelerate the economic growth, thereby weighing companies can be an active part growth of Living Wage accreditation on most people’s living standards. of the solution, making a genuine and the number of workers Quite simply, they are chronic difference to the lives of their benefiting from its protections. problems that all of us have an employees and their families, as well interest in confronting. as the communities they represent. KATHERINE CHAPMAN Director, Living Wage Foundation In 2021, we will be celebrating 10 struggling to keep their heads That’s why we are now asking the years of the Living Wage Foundation above water. Nearly three quarters UK’s wide network of responsible and 20 years of the Living Wage of children living in poverty are in investors to redouble their efforts campaign in the UK. In this time, working families.1 The COVID-19 crisis to engage their portfolio companies the simple message at the heart of has only made life harder for those on fair pay and encourage them the movement – that a hard day’s on low incomes – most tragically, to become accredited Living Wage work deserves a fair day’s pay – COVID-19 death rates in the most Employers. I hope this toolkit will has resonated with thousands of deprived areas of the UK have been help to explain why this is not only employers up and down the country. more than double those in the least the right thing to do, but is good for From FTSE 100 companies to micro deprived areas.2 The pandemic business too. start-ups, accredited Living Wage has exposed the vulnerability but Employers have put over £1bn also the value of the UK’s essential into the pockets of hundreds of workers like cleaners, carers, and thousands of low-paid workers. shop workers, who are now critical to the reopening of society and the But while recent increases to the economy. As businesses seek to government’s minimum wage have ‘build back better’, those with a long- been a step in the right direction, term view of success will be thinking there are still millions of people about how to put their people first. CATHERINE HOWARTH Chief Executive, ShareAction ShareAction have been mobilising retail and hospitality sectors. As the available to them. investors to press FTSE 100 economy continues to recover, it is companies to accredit as Living more vital than ever that workers This timely toolkit explains the Wage Employers since 2013. The earn a wage that meets their cost specific challenges faced by certain voice of investors has driven great of living. Not only is it the right thing sectors where low pay is prevalent progress – 41 FTSE 100 companies to do for workers and their families, and the range of tools investors are now accredited; up from investing in staff now could help can utilise to bolster their positive only two when our work with the companies ensure resilience to impact on the Living Wage, driving investment sector on this topic future shocks. the progress on this topic that is still began. badly needed. Now is the time for investors to In 2020, COVID-19 has shone a light strengthen their focus on low pay on the vulnerability of people with and the Living Wage. Over recent low-paid and insecure work, not years, investors have become least since so much of that work has critical players in the fight to tackle in fact been critical to managing climate change. Investors need now the crisis. Sectors where low pay to give equal emphasis to the Social is prevalent are amongst those hit dimension of ESG, making use of hardest by the crisis, including the the full range of rights and tactics INTRODUCTION Purpose and context .....................................................................................................................................................................................................6 What is the real Living Wage in the UK? ......................................................................................................................................................7 1 History of the UK Living Wage campaign ................................................................................................................................................. 8 Living Wage Employer accreditation..............................................................................................................................................................9 WHY THE LIVING WAGE MATTERS Systemic risk of inequality .................................................................................................................................................................................... 10 Rising in-work poverty ...............................................................................................................................................................................................11 2 Dignity in work ..................................................................................................................................................................................................................12 THE BUSINESS CASE FOR THE LIVING WAGE Benefitting business .....................................................................................................................................................................................................13 3 Mitigating reputational and operational risks .......................................................................................................................................15 INDUSTRY SPECIFIC CHALLENGES AND OPPORTUNITIES Retail .........................................................................................................................................................................................................................................17 Hospitality.............................................................................................................................................................................................................................19 4 Construction .......................................................................................................................................................................................................................21 Gig economy .....................................................................................................................................................................................................................23 ACTIONS FOR INVESTORS The power of investor engagement ............................................................................................................................................................ 25 How to engage companies on the Living Wage ................................................................................................................................27 5 Investor engagement case studies .............................................................................................................................................................. 29 WHAT TO DO NOW Getting involved ..............................................................................................................................................................................................................32 Going further: Living Hours ...................................................................................................................................................................................32 6 Get in touch ........................................................................................................................................................................................................................33 ACKNOWLEDGEMENTS ..............................................................................................................................................34 1 INTRODUCTION 1. Introduction PURPOSE AND CONTEXT This toolkit is primarily designed has created shockwaves felt across global Living Wage movement. to help investors in
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