The Living Wage Foundation set the previous rate of £9.50 per hour in November 2020 and has recently increased the estimate to £9.90 across the UK — and £11.05 in London — to keep up with the rising cost of living. The group publishes the real living wage each year based on inflation and the cost of fuel, energy, rent and food.
Almost 9,000 accredited UK businesses choose to pay it, including nearly half the FTSE 100, insurer Aviva, TV channel ITV, IKEA and football clubs like Everton FC.
The newly calculated real living wage estimates the true cost of living in the UK as almost £2,000 per year more than the government’s national minimum wage allows.
Over the 20 years more than £1.5bn has been paid to 260,000 workers on a real living wage, according to research by the Living Wage Foundation and Cardiff Business School to mark the milestone.
The number of employees receiving the real living wage has even increased by 2,600 during the pandemic despite pressures on the jobs market and the economy as a result of Covid-19.
“Over the past twenty years we’ve seen hundreds of thousands of people’s lives changed by the real living wage,” said Graham Griffiths, director of the Living Wage Foundation.
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“It has allowed people to spend more time with their families, save for the future, and enjoy the stability and security necessary to thrive. We know too that the living wage has transformed employers across the country, and we’ve been delighted to see businesses continue to accredit at an astonishing rate during the pandemic.
“As we look to recover from this crisis, it’s clear that we must rebuild on the solid foundations that the real living wage provides.”
As part of that recovery, the campaign behind the real living wage is beginning to grow beyond individual employers to a more regional outlook.
Greater Manchester Mayor Andy Burnham has stated his intention to turn Greater Manchester into the first real living wage city region.
Following his re-election in the post, Burnham formed a Living Wage City-Region action group to work towards the goal of ensuring all workers in the city will be paid a real living wage by the end of the decade.
The action group brings Burnham together with businesses, unions, local authorities, faith groups and voluntary and charitable organisations to set out how the plans will come into force.
“The proposals we will be bringing forward will be about creating better jobs for our residents, but also about supporting our businesses to invest in people and grow in a positive and sustainable way,” said Burnham, announcing his plans. “Paying a real living wage isn’t just the right thing to do for workers – it’s the right thing for businesses too.
“People already in low-paying jobs with unpredictable hours were left exposed to the worst effects of the pandemic, on their health and on their livelihoods. Now, Greater Manchester is calling time on insecure and low-paid jobs.
“This is the first step towards making sure everyone working in Greater Manchester has the dignity of decent work, paid a real living wage for real living hours. This is what levelling-up looks like.”
What is the national living wage?
The Westminster government sets the national living wage, telling employers the minimum hourly rate that they are legally allowed to pay employees aged over 23.
As of April 1 2021, the national living wage works out at £8.91 per hour for workers, a 2.2 per cent rise on the previous rate of £8.72.
Chancellor’s Rishi Sunak announced the rise at the 2020 Spending Review, acting on recommendations from the Low Pay Commission – an independent body that advises ministers on pay rate.
The Westminster government has committed to a target of the national living wage reaching two-thirds of median earnings by 2024, meaning the rate should keep pace with the cost of living over the next few years.
In a bid to keep up with rising costs of living, the government announced in the autumn Budget that the minimum wage for all age brackets will be going up from April 2022.
The minimum wage for people aged 23 and above will rise from £8.91 per hour to £9.50.
Those aged 21 and 22 will see the greatest increase to their pay; up 83p to £9.18; while 16- and 17-year-olds will get just a 19p increase and 18- to 20-year-olds a 27p increase.
What is the London living wage?
There is no mandatory London-specific living wage from the UK Government but the Greater London Authority has set a London living wage since 2005. The Living Wage Foundation’s real living wage also sets a London-specific rate.
From November 2021, the foundation has recommended that Londoners are paid a real living wage of £11.05. This is an increase from £10.85.
Who is entitled to the national living wage?
Prior to the April 1 2021 rate rise, only adults aged over 25 were entitled to the national living wage.
That age threshold has also changed alongside the rate of pay – now 23 and 24-year-olds have been included for the first time.
Business Secretary Kwasi Kwarteng has advised 23 and 24 year olds to keep an eye on their pay packets this month to ensure they receive what they are entitled to.
He said the government made the move “to support our next generation of workers”.
Around 2.2 million people receive the national living wage or the national minimum wage, according to the Low Pay Commission. Less people receive the real living wage, amounting to around 250,000 people.
How much is the national living wage per year?
The national living wage is usually stated as an hourly rate – currently £8.91 – because annual pay will depend on how many hours are worked.
But for someone working a full-time job at a 35-hour working week, gross income would work out at about £16,200 per year before tax or pension deductions.
The government has said that the rise to the national living wage in April 2022 will boost annual income for full-time workers by £1,000 – but think-tanks replied that £265 is a more realistic figure.
While a person working full-time (35 hours a week) receiving the new and improved living wage of £9.50 per hour and receiving universal credit would see pre-tax pay rise by £1,074, they would see take-home pay go up by just £265 a year.
What is the difference between the national minimum wage and the national living wage?
The national minimum wage is the rate of minimum hourly pay for workers aged below 23 years of age.
Set by the UK government, it works out as a lower rate of pay than the national living wage.
Workers aged 21 or 22 are entitled to £8.36 per hour, as opposed to £8.91 for the national living wage that over-23s earn. This decreases to £6.56 for those aged between 18 and 20 years of age while those under-18 can be paid £4.62. The national minimum wage also applies to apprentices, who can be paid £4.30 per hour.
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The national minimum wage has been around for a lot longer than the national living wage. It was first introduced on April 1 1999 after the National Minimum Wage Act was approved the previous year.
The national living wage followed in 2016 while Citizens UK kicked off the campaign behind the real living wage in 2001.
Why is a minimum wage not a living wage?
The independent Low Pay Commission advises the UK government on the rate of pay for the national minimum wage and the national minimum wage.
But the Living Wage Foundation (LWF) recommends higher pay through the real living wage because they simply believe the mandatory rate is not enough to live on.
The national minimum wage and the national living wage are largely set as income floors which wages should not fall below but are not designed to ensure workers can maintain a decent standard of living above the bare minimum.
The real living wage looks at various measures taking into account a family’s basic day-to-day needs including housing, food and clothing before setting their higher rate.
Laura Gardiner, LWF director, said: “The introduction of the national living wage has delivered a solid pay rise to minimum wage workers, and it’s welcome to see the government continuing to commit to ambitious increases.
“However, there is still a substantial gap between this wage rate and one based on the cost of living, with national living wage workers falling billions of pounds short of a real living wage over the past five years. The result has been millions of workers and families struggling to keep their heads above water.
The LWF also argues that paying the real living wage can boost businesses through improving their reputation as well as improving motivation and staff retention.
What isn’t the government’s living wage not enough to live on?
Although the national living wage is intended to ensure people can live above the poverty line and with stability and security, members of the public told the Joseph Rowntree Foundation (JRF) they are still struggling to get by.
The anti-poverty group’s Minimum Income Standard report found single workers earned £17,400 working full-time on the national living wage. But members of the public quizzed by JRF said £20,400 a year is needed to reach an income that will enable them to cover rent, housing costs, food and other bills.
A single parent with two children will fall £46-a-week short of the £27,500 needed to have an acceptable income even while working full-time on a living wage. A family with two children can just about exceed the £34,200 required to make ends meet if they both work full-time while earning a living wage.
JRF said the report shows the need to prioritise the creation of decent jobs as the UK economy rebuilds in the wake of the Covid-19 pandemic – a view also shared by the Living Wage Foundation (LWF).
The findings show why the LWF campaigns for a real living wage to keep up with the cost of living.
Adopting the real living wage also brings economic benefits, according to the LWF.
If a quarter of those on low incomes saw their pay raised to the real living wage, the increase in wages, productivity and spending could deliver a £1.5bn economic boost, according to research by LWF and the Smith Institute.
But that impact is only taking into account lifting wages up to £10.85 an hour in London and £9.50 in the rest of the UK. There have been calls to go further amid the impact of Covid-19 on jobs and the economy.
Who is calling for a £15 minimum wage?
Raising the national minimum wage to £15 has been thrown into the spotlight after being backed at the Labour Party conference as part of a “new deal for working people.”
It comes after shadow employment rights minister Andy McDonald quit the shadow cabinet claiming he was instructed to argue against a £15 an hour national minimum wage and statutory sick pay at the living wage.
McDonald, who was also calling for statutory sick pay to be paid at the living wage, said the opposition party should be arguing for a minimum wage increase to combat rising prices through inflation and other additional costs families are facing in the post-Covid recovery.
Given that more than half of the entire workforce of the UK earns less than £15 per hour, many have asked whether a £15 minimum wage would actually work.
The median hourly earnings for all employees in 2020 was £13.68 per hour. So, not only would professions such as cleaners, waiting staff, and retail employees who have long been paid the minimum wage receive a hefty pay increase, so too would many in graduate level jobs.
However, the need to make work pay has been exemplified by the number of people who receive universal credit while also working. Around 40 per cent of universal credit claimants – over two million people – are working, according to the TUC.