The Case for a Living Wage « The Living Wage Campaign

The Case for a Living Wage

The Living Wage is a term used to describe the minimum hourly wage necessary for housing, food and other basic needs for an individual. The Joseph Rowntree Foundation has set out a methodology to calculate the level of pay that an average family with two working adults and two children would need to earn to fulfil basic needs. It does not cover ‘wants’ such as a car or holidays.

£7.85 is the living wage for London. The rate would vary in other parts of the UK, but £7.60 has been suggested as a national average.

Who suffers from poverty pay?

Lowest paying sectors of the UK economy

In 2008, 5 million employees in the UK were paid less than £7 per hour. Two-fifths of all part-time workers were paid less than £7 per hour in the same year . Around two-fifths of people from

ethnic minorities live in low-income households, twice the rate for non-BME workers. The 2009 annual report by the Low Pay Commission states that the four largest low paying sectors in the UK are retail, hospitality, social care, and cleaning respectively:

Real Change

The Living Wage will:

Create an increased incentive for employers to invest in workers (e.g., training, opportunities for career progression, better health and safety).
Result in a reduction in the need for tax credits and benefit payments. It may also indirectly reduce costs in education, health care and policing — by improving life opportunities for employees and their children.
Improve productivity, reduce staff turnover of staff and lower absenteeism.
You can read more about the business case for the Living Wage here.

Living Wage Toolkits

If you’re interested in finding out more, take a look at the following toolkits published by other organisations working across the country for a Living Wage .

Over the last decade the fight against poverty pay in the public and private sectors has continued through the innovative campaigning work of grassroots community organisations, faith groups and trade unions.

As a community organisation, the campaign to lift people out of poverty has been supported by many local Labour Party members and councillors. But the time has come to take this a step further – to broaden and deepen the campaign and ensure the Labour Party throws its full weight behind the cause for fair pay.

Frequently Asked Questions

How much is a living wage? And how is this calculated?

£7.85 is the living wage for London. The rate would vary in other parts of the UK but £7.60 has been suggested as a national average.
The Joseph Rowntree Foundation has set out a methodology to calculate the level of pay that an average family with two working adults and two children would need to earn to fulfil basic needs. It does not cover ‘wants’ such as a car or holidays.
The living wage is calculated through panel interviews and price checks in several regions and assesses the actual living costs across the country.
Under Mayor Ken Livingstone, the Greater London Assembly set up a Low Wage Unit which adopted the Joseph Rowntree Foundation methodology and set a target living wage for London. Mayor Boris Johnson continued this work and in July 2009 the Low Wage Unit set the London living wage at £7.60. It was increased to £7.85 in June 2010.

Why not just increase the minimum wage?

The minimum wage was created to provide a floor below which wages must not fall, but it was necessarily set at a basic level.
We want the Living Wage to become a standard of good practice, a target that civil society can push for and a kite-mark that employers want associated with their brand. But that means it will be voluntary.
The level will of course vary across the country unlike the statutory minimum wage.

In this economic climate, can businesses afford a living wage?

We are not expecting employers to move to a living wage overnight. Rather, this campaign wants to encourage them to move towards it over time .
Many companies will be able to do so in a cost neutral way by rebalancing the difference between high earners and low earners.
A living wage is also an investment which makes sound business sense. Businesses know that the cost of hiring and training workers is expensive and so retaining staff is a sensible way to save money. The accountancy firm KPMG has signed up to a national living wage and seen turnover among its cleaning staff fall by 50%. KPMG also saw lower levels of absenteeism and sick pay. Barclays Bank has also signed up and it has seen contract staff staying in their jobs for longer periods.
In addition every working person wants to feel that they are valued by their employer, and a happy, valued employee is more motivated. That can have an impact on the bottom line, for instance both Barclays Bank and KPMG found that introducing a living wage improved productivity.
In the longer term, businesses ultimately bear the costs of unsustainably low pay through the cost of tax credits, and the higher costs of healthcare, education and crime that are associated with a lack of investment in people. More importantly businesses understand that we all have an interest in a healthy, prosperous society, and that is why some of the leading businesses in Britain like PriceWaterhouseCoopers, Linklaters, Barclays Bank and KPMG have already signed up to provide a national living wage.
You can read more about the business case for the Living Wage here.

Won’t companies simply lay off workers if they have to pay higher wages?

Similar arguments were made when the National Minimum Wage was introduced and there was not an associated round of lay-offs.
Experience from employers that have switched to paying a living wage suggests that fair pay can increase productivity sufficiently to avoid any justification for sacking workers. With a lower levels of sickness and absenteeism as well as higher morale and productivity firms like KPMG were able to make significant gains from paying a living wage. The University of London Union was able to switch its cleaning staff contract to a firm that agreed to pay a living wage without increasing the cost to student union of the cleaning contract.

Will this undermine unions that are engaged in national pay bargaining?

No, all national pay bargaining is on a scale and this simply anchors the bottom of the scale at a higher point than previously. Unions and employers will still want to negotiate the exact pay levels for specific industries and jobs, but this will help shape those negotiations.
Unions are closely involved in the campaign, and Unison has been promoting a living wage for many years. Many unions believe that this campaign will bring much needed attention on the pay of ordinary working people and the work that unions do to help them.

Isn’t this just about London? Why should this be a national campaign?

No, although many people will be aware of the successful work of London Citizens to push for a living wage in London, other parts of the UK including Preston, Oxford and Glasgow have seen local councils signing up to a living wage.
One of Labour’s successes in government was to oversee real investment and growth in cities like Manchester, Glasgow and Leeds. But those cities and many others beyond are expensive to live in as an ordinary working person. London may have been the starting point of the campaign, but ordinary people in places like Derby, Cardiff and Birmingham are just as in need of a fair living wage.