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Agenda:
Employability, Welfare reform, poverty and inequality
Third Sector Support:
Research
Location:
UK
Living Wage Commission Logo larger

The final report of the Living Wage Commission demonstrates how  over a million people earning below the Living Wage could be lifted out of low pay by 2020 without any detrimental impact to the economy.

5.2 million people in Britain are paid below the Living Wage (currently £7.65 outside London) and the majority of households living in poverty have one or more adults in work.  There are 712 Living Wage accredited employers in the UK – those who have committed to paying the Living Wage to all of their directly employed and subcontracted staff, while around 61% of employers pay the Living Wage or above to those they directly employ.

The Commission has conducted a comprehensive analysis on its affordability and while they have not concluded that it should become the minimum wage, due to the risk of higher costs for some businesses leading to higher unemployment, they conclude that there are a number of industries that could accommodate paying their employees more with only fractionally higher costs.

The case is made on the following grounds:

  • Social case – reduces poverty and allows participation in activities that others take for granted
  • Business case – increased productivity, better morale, lower staff turnover
  • Public policy case – increased tax revenues, reduced spending on benefits, increased spending leading to higher growth, plugging of the productivity gap.

Increasing the number of people paid the Living Wage could be achieved by:

  • Paying the Living Wage to 500,000 public sector employees and 600,000 private sector employees, with the resultant increase in tax revenues and decrease in in-work benefits more than compensating for the higher wage bill.
  • Paying the 300,000 low-wage staff who work for professional-service firms, such as accountants and consultants and 75,000 bank and construction industry workers the Living Wage.
  • The UK Government adopting an explicit goal to increase the voluntary take-up of the Living Wage to at least 1 million more employees by 2020
  • Requiring publicly listed companies to publish figures on how many of their employees are paid below the Living Wage.

There is growing recognition among politicians and business leaders of the need to address low pay, with the director of the CBI warning earlier this year “of the need for a fair recovery – there were ‘still far too many people stuck in minimum wage jobs without routes to
progression, and that’s a serious challenge that business
and government must address.”  Opposition Leader Ed Milliband has promised a minimum wage linked to average earnings while Chancellor George Osborne has also called for a substantial increase in the minimum wage.

It is worth noting that the Joseph Rowntree Foundation argues that 44% of working households living in poverty have nobody paid below the Living Wage in them and that while important, it is only part of the answer to the problem of in work poverty.

Proposals to overhaul the Low Pay Commission, which sets the minimum wage each year, were outlined in an independent report by Alan Buckle, former deputy chairman of KPMG International, in May 2014.  He estimates that over a quarter of a million people in the UK are paid below the national legal minimum.

NCVO has called for public contracts that allow third sector organisations to pay the Living Wage, noting that “One of the drivers of low pay in the voluntary sector is the terms and fees for public service contracts.”

The current minimum wage is £6.31 for over 21’s, £5.03 for age 18- 20,  £3.72 for under 18s and £2.68 for apprentices.

Sources:  The Living Wage Commission, Low Pay: The Nation’s Challenge


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