Living wage in the United Kingdom

International standards such as the Universal Declaration of Human Rights^[1] and the International Labour Organisation agree that wages earned in a standard week should be sufficient to provide the basic needs of a worker and his or her family, plus a discretionary amount to cover emergencies, etc.

In the UK, some organisations voluntarily pay a living wage to their staff, at a level somewhat higher than the existing statutory national minimum wage. From April 2016 a National Living Wage will be obligatory for workers over 25, implemented as a significantly higher minimum wage rate, expected to rise to at least £9 per hour by 2020.^[2]

National Living Wage

The Chancellor of the Exchequer George Osbourne announced what he termed the "National Living Wage" at the end of his budget speech on 8 July 2015. The announcement was seen as a political coup for the Conservative government because the opposition Labour Party had proposed that the national minimum wage rise only to £8 per hour.^[3]

The National Living Wage will be phased in between 2016 and 2020, with the aim of reaching 60% of median UK earnings by 2020. For over-25 year old employees, the wage will begin at £7.20 per hour in April 2016 and is projected to rise to at least £9 per hour by 2020.^[2] HM Treasury claims that 2.7 million workers will benefit directly^[4] and the Resolution Foundation calculates the number of employees that are expected to benefit at about 6 million.^[3] Smaller employers will have employer National Insurance discounts increased, which will mitigate the higher costs of the National Living Wage.^[3][5] In September 2015 the proposed penalties for employer non-compliance were announced. They are expected to be double those for non-compliance with the National Minimum Wage Act 1998 (increased from 100% of arrears owed to 200%), although this will be halved if paid within 14 days. The maximum penalty will remain £20,000 per worker. An additional penalty of disqualification from being a company director for up to 15 years will also be available to the courts. The enforcement budget is due to double, and the creation of a dedicated HM Revenue and Customs non-compliance team to pursue criminal prosecutions was announced.^[6]

A survey conducted in November 2015 by the Resolution Foundation and the Chartered Institute of Personnel and Development revealed that the policy is expected to have its greatest impact in the retail, hospitality and healthcare sectors. The policy has received criticism from some large employers, particularly supermarkets and the food and drink sector, where profits may be reduced by up to 10%. Some large employers have said that they may pass on the additional cost to consumers in the form of higher prices and some intend to improve productivity.^[7] The supermarket chain Lidl has said it will implement a “living wage” without increasing any of its prices.^[4] A report by Moody's Investors Service stated supermarkets may employ a higher proportion of under-25 year olds to reduce employee costs. The Office for Budget Responsibility estimates the policy will result in 60,000 fewer jobs, though this is a small effect in total job market changes.^[5]

Although the policy is called a "living wage", it does not meet with internationally agreed definitions of a living wage. Opponents have objected to the government's use of the term 'living wage' on the grounds that the National Living Wage will be calculated from median UK earnings rather than the cost of living.^[8]

Campaigners

Various organisations and individuals have campaigned for voluntary or compulsory payment of a living wage in the UK.

Living Wage Foundation

Since 2011, the Living Wage Foundation has accredited over 1,800 employers that pay its proposed living wage, calculated by the Greater London Authority and the Centre for Research in Social Policy at Loughborough University.^[9] Their recommended rates for 2015 are £9.40 for London and £8.25 for the rest of the UK.^[8] These rates are updated annually in November. In 2014, research by the Office for National Statistics indicated that the proportion of jobs outside London paying less than the living wage was 23%. The equivalent figure within London was 19%.^[10]

Political support

The former Labour Party leader, Ed Miliband supported a living wage^[11] and tax breaks for employers who adopted it.^[12] The Labour Party has implemented a living wage in some local councils which it controls, such as in Birmingham^[13] and Cardiff^[14] councils. The Mayor of London's office hosts a Living Wage Unit which proposes a living wage level for London, which has considerably higher living costs than the rest of the UK.^[15]

The Green Party also supports the introduction of a living wage, believing that the national minimum wage should be 60% of net national average earnings.^[16] Sinn Féin also supports the introduction of a living wage for Northern Ireland.

The Welsh Health Minister Mark Drakeford decided that from September 2014 NHS Wales staff would be paid at least a living wage, resulting in about 2,400 employees receiving an increase in salary of up to £470 above UK wide Agenda for Change rates.^[17]

Others

Other supporters include The Guardian newspaper columnist Polly Toynbee, Church Action on Poverty,^[18] the Scottish Low Pay Unit, and Bloomsbury Fightback!.^[19]

Research

In 2014, new research was published in a number of reports on the potential impact of raising the UK's statutory national minimum wage to the same level as the Living Wage Foundation's living wage recommendation. This includes two Trust for London-funded reports^[20] by the Institute for Public Policy Research (IPPR) and Resolution Foundation: "Beyond the Bottom Line" ^[21] and "What Price a Living Wage?".^[22] Additionally, Landman Economics have published "The Economic Impact of Extending the Living Wage to all Employees in the UK".^[23]

Trust for London have also funded research on the costs and benefits of a living wage in London, carried out by Queen Mary University of London.^[24]

Data published in late 2014 by New Policy Institute and Trust for London found 20% of employees in London were paid below the Living Wage Foundation's recommended living wage between 2011 and 2013. The proportion of residents paid less than this rate was highest in Newham (37%) and Brent (32%).^[25]

See also

• Minimum wage law in the UK

References

External links

• Living Wage Foundation