A true Living Wage – 5 reasons it’s needed

The new real Living Wage was announced this week as part of the Living Wage Foundation’s ‘Living Wage Week’ and reveals the work still needed to ensure employees and families are paid what they need to live. As part of CLES’ belief in progressive economics for people and place, CLES has contributed to the Greater Manchester Living Wage Campaign and our work around community wealth building through anchors has supported the proliferation of the Living Wage.

There has been progress in this agenda, but there is work to do to ensure that everyone is paid a fair wage for a fair day’s work. It is not enough to view job creation as success, we need good employment, which is secure, paid fairly, and provides opportunities for progression. This blog highlights why the advancement of a true Living Wage is important.

1. The scale of in work poverty shows that for many, work does not offer the best pathway to economic independence: in 2014/15 there were 7.4 million people in working families in poverty (this accounts for 55% of all people in poverty), 78% of the adults in working families in poverty were themselves working, with female employees as the main demographic within this group[1].
2.  Insecure work is becoming more prevalent, with underemployment still an issue: in 2016 there were over half a million workers who were on a temporary contract because they were unable to find permanent work; out of a total of 1.65 million workers on a temporary contract (6% of the total UK workforce).
3. There is still a significant challenge around low pay, with 5.1 million low paid employees in 2015 (this is defined as having an hourly rate of pay below two thirds of the UK median – or £7.87). In addition, real-term incomes have been squeezed as prices of goods have risen, for example food costs are up 40% and energy by 73% in the last decade – the effect of which is that a minimum standard of living is becoming less affordable.
4. A true Living Wage plays a role in increased quality of life for employees and their families, with increased disposable income and wider benefits. A study by the Living Wage Foundation[2] found that a third of workers felt the introduction of a Living Wage benefitted their family life, and over half of employees felt more positive about their workplace.
5. Paying the Living Wage is beneficial for businesses, with fair pay a key factor in staff loyalty. Paying the Living Wage also enables businesses to retain staff as their wages will be more attractive than an organisation which does not pay the Living Wage. In addition, the adoption of the Living Wage can lower costs associated with staff turnover and absenteeism. Cardiff University surveyed Living Wage Foundation accredited organisations and their report[3] revealed that:

However, in building a fairer economy, increasing wages levels are likely to be insufficient in isolation. The technological revolution and the acceleration of automation are speeding up a longstanding shift from wealth through employment and wages, to wealth through investment return. Automation increasingly means that lower/medium skilled production jobs will disappear. The task is clear: we must reorganise our economy and build more forms of democratically owned investment and return vehicles, and advance ownership forms which seek to capture and broaden out wealth gains, such as cooperatives. This is the agenda which the Living Wage must be part of.

[1] https://www.jrf.org.uk/report/monitoring-poverty-and-social-exclusion-2016

[2] https://www.livingwage.org.uk/news/living-wage-costs-benefits-report

[3] https://www.cardiff.ac.uk/__data/assets/pdf_file/0008/722429/The-Living-Wage-Employer-Experience-Report.pdf