Living Wage Week

By Editorial on November 5, 2015

It’s Living Wage Week, but what does that mean?

Did you know that the first week of November marks the annual Living Wage Week? Designed to coincide with the government’s yearly announcement of the revised Living Wage, the week consists of a range of events, from rallies to film screenings, all aiming to get more employers paying the Living Wage.

Led by the Living Wage Foundation, each event aims to increase awareness of the Living Wage, celebrate employers who already pay their employees the Living Wage, and to encourage more to follow suit.

But there still remains some confusion about the Living Wage. What exactly is it? Are employees obliged to pay it? And what are the benefits and drawbacks? I was confused myself, so did a little poking around to find the answers…

What is the Living Wage?

wages

The Living Wage is an hourly wage, calculated according to the basic cost of living. The Centre for Research in Social Policy makes an annual calculation of the cost of living in the UK as a whole, and another calculation f

or the cost of living in London, and then divides this to generate the hourly wage a person needs to earn, simply to cover their necessary outgoings.

On 2nd November 2015, the new Living Wage was announced to be £8.25, and £9.40 for workers in London.

So how is it different from the Minimum Wage?

A government-funded body, The Low Pay Commission, sets the National Minimum Wage. Employers are legally obliged to pay their employees the National Minimum Wage (currently £6.70 for over-21s).

There is no legal obligation for employers to pay the Living Wage – it is voluntary. However, the Living Wage Foundation criticises the Minimum Wage for not covering the basic cost of living. Therefore, an employee could work full-time, but if they are earning Minimum Wage, they still could not afford basic necessities, such as rent, clothing, food and utilities, over the course of a year.

What are the benefits?

The Living Wage Foundation cites three key areas of benefit that come from employers paying the Living Wage, pointing out that it’s “good for business, good for the individual and good for society.”

Research notes that over 80% of employers who pay the Living Wage feel that it has improved the quality of work completed by their staff, and also note that staff absences decreased by 25% on average. Two thirds also report that it has had a positive impact on recruitment and retention, and 70% feel that it had increased consumer awareness of their commitment to be ethical employers.
The Living Wage is beneficial for the individual, as they are able to provide themselves and their families with the necessities of life. 50% of employees report that earning the Living Wage makes them more likely to make changes at work more quickly, requiring fewer concessions in order to do so. 70% also report that their work quality had improved since earning the Living Wage.

Finally, society benefits as parents may not need to work as many hours in order to provide for their children. Consequently, they are able to be more involved in their children’s lives, as well as being able to provide the things they need for a positive start in life – all of which has a knock-on effect for the rest of us in society.

The voluntary Living Wage enjoys cross-party support from a range of politicians, including David Cameron and Jeremy Corbyn. Boris Johnson is also a keen supporter, stating that “Paying the London Living Wage is not only morally right, but makes good business sense too. There are now over 2,200 employees working for companies with contracts from the GLA who are benefitting from the London Living Wage.”

So why isn’t everyone doing it?

There is concern, similar to that expressed before the introduction of the National Minimum Wage in 1997, that a commitment to the Living Wage could put businesses under unsustainable pressure, which in turn has negative effects for workers.

If employers are unable to meet the costs of paying the Living Wage, they may be forced to make cuts in the workforce, reduce staff hours, or, where it might apply, replace staff altogether with cheaper machinery.

There are also some who criticise the calculation made by the Centre for Research in Social Policy as an arbitrary number.

Ultimately, it’s important to draw a line between sustaining a business and ensuring that employees are not forced to make decisions over whether they will eat that night or put the heating on instead.

However, if the employer can afford to do so, paying the Living Wage is surely an ethical obligation. It’s certainly good news that, in 2014, there were already 900 Living Wage employers, including many big businesses, encompassing banks, supermarkets and utilities companies. And based on the figures above, it also seems to make very good business sense too!


Guest post provided by Sarah KellewaySarah Kelleway

Sarah is a freelance copywriter and owner of Juniper Copy. She specialises in producing web copy for a range of businesses, but enjoys any form of writing project.  When she’s not typing away, Sarah can be found either hunting for treasure in charity shops, experimenting with new recipes in her kitchen, or being smothered by her two over-sized and over-friendly cats.

You can find out more about Sarah and Juniper Copy at www.junipercopy.com.

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3 responses to “Living Wage Week”

  1. Jill Poet says:

    Thanks you for the article Sarah. It is excellent and I completely agree with your comments.

    However, I do have a concern. You actually say employers that can afford to do so should pay the Living Wage and I agree. But I worry about the many small businesses who just couldn’t afford to increase their payroll liabilities. Many of these small business owners are decent people but are just not making a big enough profit. Many of them probably don’t earn the Minimum Wage themselves let alone the Living Wage if one considers the total hours they actually work each week!

    Sadly, if their larger competitors are paying higher salaries, these small businesses are going to struggle to attract and retain the right staff. The Living Wage will no doubt become mainstream, but I feel some sort of subsidy needs to be introduced by the Government to ensure small businesses are not penalised unfairly.

  2. Sarah says:

    Thanks Jill – I do completely agree with you.

    It isn’t enough for the government to make recommendations, or even stipulations if it gets to that point, without providing some sort of support for small businesses. I wonder if there are any groups currently making this the focus of a campaign….?

  3. Ian Cass says:

    I agree with the comments on the blog, while we at the Forum of Private Business support the idea of the Living Wage, the Government needs to give SMEs time to think it through and implement it.

    Those employee heavy businesses in particular will have to think long and hard how they achieve this, the hospitality industry in particular and also the care home sector, who are being told to pay a higher living wage while local councils set the prices they can charge. businesses may only have two choices: charge more or cut other costs. The Government can help in this and we are campaigning on this point.

    If the Government worked on reducing the burden of regulation and its associated costs, both in terms of money and time, that business owners spend on Red Tape, then that would provide a lower cost platform that small business could sustainably pay the Living Wage against.

    If we don’t get this right then small business will decide not to expand; they will make employee cuts and redundancies; we will see the freelance sector growing even more than it already has and it will lead to business stagnation rather than growth. We want a growing economy of thriving businesses that can sustainably afford to pay the Living Wage and the Government can help us achieve this by making it simpler and cheaper to do business

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