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In these turbulent times, it’s never been more important for business managers and policy makers to support the creation of decent jobs that meet the real cost of living and provide stability, argues our colleague Dr Ishbel McWha-Hermann.

In a new research paper with Professor Rosalind Searle of the University of Glasgow, I explore how work is central to individuals’ identities and sense of worth. [1] Work is a source of connection, respect, and belonging. When we fail to provide meaningful work, people can feel disconnected, unwanted and hopeless. Where they receive less than the living wage, these workers can feel undervalued and not respected by their employing organisations.

As the Scotland hub of the Global Living Organisational Wage project, Prof Searle and I are working closely with Living Wage Scotland, and supported by the European Association of Work and Organizational Psychology. [2] Our research uses a psychological lens to examine how living wages impact individual employees, with important spill-over for families, organisations and communities. By understanding the consequences of earning a living wage for employees beyond purely economic considerations, we are helping understand the psychological dimensions of living wages, and using these insights to inform two key groups – those in organisations who decide wage levels, and those who develop public policy.

In the current climate there is an important clarification required between the significance of having a job (regardless of the wage), and those with work that pays a Living Wage – now £9.50 an hour. Evidence shows low wage jobs trap people into a cycle of poverty and debt. Their low pay can have a significant negative impact on their health and wellbeing and of their families, perpetuating poverty over generations. Workers on lower incomes and in insecure work are more vulnerable to job loss, hours reduction, or being put on furlough. They do not have the means to create a financial buffer. As a result they literally run out of money, and have far more limited access to viable loans and so can be forced to borrow at high interest rates, which pushes them further into debt.

A Living Wage enables workers to shift beyond just making ends meet, and into having choice and control over their future trajectory, and that of their family. It also provides time and resources to support the quality of their recovery from work. This allows them a space to catch up with home lives and their families. The added financial support helps ease their family tensions. The means to buy healthy food, and to recover from their exertion at work overtime makes these workers more resilient, especially important in a pandemic.

Right now, the pandemic is causing employers to be concerned about the viability of some important groups of workers, notably those who have dependent children. As a result traditional gendered views of women are re-emerging, with women targeted more typically in furlough and redundancy decisions. Pushing mothers out of the labour force and back into their homes and into unpaid home caring roles threatens years of progress. Single working mothers are particularly at risk of discriminatory COVID-related redundancy.

Beyond the important consequences for the quality of life of employees, we are starting to understand more about some of the positive psychological consequences associated with decent work. Research shows that treating people well and providing decent working conditions leads to improved retention of staff, lower absenteeism and increased engagement. This reduces costs from recruitment and selection, induction and training. It offers the means of delivering more productive but also capable workforces, delivering important savings to employing organisations.

Providing employees with a good working environment builds their trust, and sets up virtuous cycles as these more satisfied workers are more likely to do their jobs right first time – so producing less scrap and waste, offering savings in waste management and rectification. They are more likely to spot errors and tell you when there is a problem early, potentially reducing the severity of errors and resultant customer complaint management. They have time to enhance their capability and mental space now they are less exhausted, and can innovate and be creative around these problems which enhances the agility and competitive advantage for the organisation. They promote the creation of higher quality outputs, which enhances customer satisfaction. Living wage decisions help strengthen brands and reputation with customers more inclined to support and want to buy from living wage employers, but also enhances the quality and number of those who want to work with you. In a context where many organisations are facing an uncertain future, these small but incremental means of collectively enhancing output quality and quantity while also driving down costs make a difference.

Those who argue that in the current economic climate any job is better than no job fail to acknowledge the important benefits of a living wage and decent work for building sustainable and capable workforces. They also fail to recognise the societal costs of low paid work where the state covers costs associated with low pay, such as poor physical and mental health; costs which are ultimately picked up by tax payers. Policy makers must factor in these added costs of low paid work, and recognise that decent work that pays a living wage is essential for building a society that is resilient and sustainable, and for building organisations that can thrive in spite of the pandemic.

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Ishbel McWha-Hermann is a Lecturer in International Human Resources Management