In many ways, the real living wage is self-explanatory – it’s paying someone enough money to live on. The Living Wage Foundation (LWF) sets the rate of pay based on up-to-date living costs, taking into account the cost of bills, the weekly shop and other measures.
It also applies to all workers over 18, whereas the government sets different minimum wage levels for 16 to 22-year-olds and over-23s.
This year, the LWF brought its annual rate calculation forward by two months, due to the escalating cost of living crisis and rapidly rising inflation. The foundation decided that an extra £1 an hour will be added to the pay packets of workers who earn the real living wage, or an extra 90p for those in London, bringing the rates up to £10.90 an hour across the UK and £11.95 an hour in London.
The 10.1 per cent pay rise is the biggest ever jump calculated by the foundation in its 11-year history, and takes into account inflation hitting 10.1 per cent in July, then 9.9 in August.
Nearly 11,000 accredited UK businesses choose to pay it, including nearly half the FTSE 100, insurer Aviva, TV channel ITV, IKEA and football clubs such as Everton FC. The recent rise is mandatory for all employers who are signed up to the scheme if they want to keep their status as a Living Wage Employer. They must make sure all contractors such as cleaning or catering staff are paid the rate too.
“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.
“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.”
What is a Living Wage City-Region?
As part of the UK’s recovery from the pandemic, the campaign behind the real living wage is shifting from solely focusing on individual employers to also include a 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, 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.
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Last month, the mayor announced that social care staff across Greater Manchester would be paid the real living wage.
Implementing the pay level is a crucial part of ensuring that people “receive fair pay, have decent working conditions, and experience opportunities to develop and progress,” Burnham said.
“The pandemic has laid bare inequalities in our city-region. In this new era for this place, all parts of Greater Manchester will come together and deliver a fairer, greener, more prosperous conurbation for every person living and working here.”
He also announced that the local authority and its ten borough councils would only procure from companies that pay their staff the living wage by 2023.
What would be the annual salary for someone earning the real living wage?
Someone working a full-time job at a 35-hour working week, gross income would work out at about £19,840 per year before tax or pension deductions.
If they were working in London, that would rise to £21,750.
The new rates are now worth almost £3,000 more a year than the government’s national minimum wage, and almost £5,000 more in London.
What is the national living wage and how is it different to the national minimum wage?
The Westminster government rebranded the national minimum wage for workers aged 23 or over as the “national living wage”. It tells employers the minimum hourly rate that they are legally allowed to pay they staff who are at least 23-year-old.
On April 1 2022, the national living wage increased to £9.50 per hour, a six per cent rise on the previous rate.
The government called it the largest ever increase to the national living wage – which has existed in its current form since 2016 – and said that it would mean a £1,000 per year pay rise for full-time workers.
Bryan Sanderson, chair of the Low Pay Commission, said: “The business secretary’s strong support is especially welcome at this difficult time.
“Workers on the minimum wage care for our elderly and sick, harvest and deliver our food, and do a multitude of other tasks which help us all.
“They all deserve to be properly remunerated and respected as key members of our society.”
But with inflation set to reach a high of around eight per cent this spring, campaigners warned even this increase is too little to compensate for the real-terms pay cut workers face as daily essentials soar in price.
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Nye Cominetti, senior economist at the Resolution Foundation, said: “This is the fourth biggest rise in the 23-year history of the minimum wage, though it is unlikely to be enough to keep up with rising prices.”
Katherine Chapman, director of the LWF, agreed that the change is “welcome news” for low-paid workers but said: “It remains significantly lower than a real living wage based on what it actually costs to live.”
Meanwhile the national minimum wage – the government’s term for the lowest legal wage given to workers aged between 16 and 22 – will increase at different rates depending on a worker’s age.
- 21 and 22-year-olds get a 9.8 per cent increase to £9.18 per hour
- 18 to 20-year-olds get a 4.1 per cent increase to £6.83
- 16 and 17-year-olds get a 4.1 per cent increase to £4.81
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. But the government changed the age threshold at the time to include 23 and 24-year-olds.
Around 2.2 million people receive the national living wage or the national minimum wage, according to the Low Pay Commission. Fewer people receive the real living wage, amounting to around 250,000 people.
What would be the annual salary for someone earning the national living wage?
The national living wage is usually stated as an hourly rate – currently £9.50 – 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 £17,290 per year before tax or pension deductions.
The government said the latest rise to the national living wage in April 2022 is boosting annual income for full-time workers by £1,000 – but think-tanks replied that £265 is a more realistic figure for extra take-home pay per year.
Why is the 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.
What about a £15 minimum wage?
There has been a strong campaign to raise the minimum amount employers can pay their workers to the real living wage, but some are saying that is still not enough.
A £15 minimum wage was thrown into the spotlight into the spotlight after being backed at the Labour Party conference last year as part of a “new deal for working people.”
It came 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.
Unions are leading the way in demanding the government find ways to boost the economy, with many throwing their weight behind the campaign.
The Trades Union Congress has unveiled a “road map” to a £15 minimum wage in the UK, calling on the prime minister to deliver a high wage economy as the country faces a deepening cost of living crisis.
“Every worker should be able to afford a decent standard of living,” said Frances O’Grady, general secretary of the TUC. “But millions of low-paid workers live wage packet to wage packet, struggling to get by – and they are now being pushed to the brink by eye-watering bills and soaring prices.”
The solution, according to a report laying out the proposals, is to set a new minimum wage target at 75 per cent of median hourly pay. To get to a £15 minimum wage, hourly median pay would need to rise from its current rate of £14.85 to approximately £20 an hour. This would see the minimum wage rise at a rate on par with average wages, making sure that those earning the least don’t fall too far behind.
The TUC is calling on the government to work with the Low Pay Commission (LPC) to deliver this “as soon as possible” – with the roadmap detailing how this would be economically viable by 2030.
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.
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