Supermarkets make progress on shop worker pay – but they can still do better

Remember when Labour and the Tories engaged in a ding-dong battle over who could pledge the highest minimum wage rate? Lately, the supermarkets have been engaged in a similar battle.

First Tesco, which had been spluttering in the hourly pay slow lane, joined the £10-an-hour club by announcing an increase to £10.10 in the summer, up from the current £9.55.

Most of its workers will thus be paid more than the rate recommended by the living wage campaign (£9.90). It is based on the actual cost of living, by contrast to what the government likes to describe as the national living wage, which is not.

Tesco’s London workers, who will move up to £10.78, will still be a way off the £11.05 they need to clear the same hurdle.

Under pressure from a surprising source – some of its shareholders – Sainsbury’s trumped Tesco by announcing that it was increasing the pay of its workers in outer London to bring their wages into line with the living wage rate for the capital (£11.05), which their colleagues in inner London had already won.

However, while the company told me that it has held discussions with the Living Wage Foundation, it isn’t yet planning to seek accreditation, which would require it to commit to similar raises in future and to ensure people working for third parties (contract cleaners, security guards, etc) are similarly treated.

This is what a shareholder motion, backed by investors including Legal & General, HSBC and Fidelity, calls upon the grocer do do.

Companies are only rarely defeated by their shareholders when it comes to extreme executive pay, let alone poor worker pay, which could in theory result in lower dividends. So the motion has a steep hill to climb. But a substantial vote in favour would still be enough to send a message, not just to Sainsbury’s but to the entire sector.

The size of that vote matters, which is why Sainsbury’s investor relations people will be lobbying its shareholders in the meantime.

They will argue that it intends to do the right thing by its workers, and will seek to shadow the living wage as best it can. But they will also say that it needs to retain the flexibility to respond to market forces, which outsourcing its pay policy to a third party would deny it.

This isn’t a particularly good argument to make in public: low pay is never OK. Sainsbury’s is a big, and highly profitable, company which could easily fill one of its delivery trucks with its CEO’s salary if it were paid in cash.

However, it will probably play rather better with the institutional shareholders not already signed up to the motion. Sainsbury’s tweaking its pay rates so that it now shadows the living wage – which a lot of big companies do – may be enough to take some of the heat out of the issue, even if it shouldn’t.

It will take sustained pressure to change to deliver the first big living wage grocer. Do the big fund managers have it in them to exert it? That remains to be seen.

The sector-wide progress that has been made is welcome. Lidl is ahead of the living wage nationwide with the exception of London. Aldi beats it in both cases. Morrisons is in the £10-an-hour club, and the pressure on privately owned Asda – the new laggard – is being cranked up.

But it’s still a pity that Sainsbury’s has elected to paddle at the edge of the water with a view to running back on to the beach if the swimming gets too challenging rather than jumping in as some of its shareholders would like. Ditto its peers, some of whom (Asda) haven’t even put their own-brand swimming gear on.

We shouldn’t forget that it was the Covid-19 pandemic that drew attention to poor pay in the sector. Some of those writing in support of the motion explicitly referenced it, and rightly so. Low-waged supermarket staff risked their lives turning up to work when Covid was in its most lethal phases. The sector’s amply rewarded executives were, meanwhile, largely able to work from home.