The real Living Wage is a win-win for workers and businesses – here's why

Since 2011, the real Living Wage movement has quietly transferred £3.85 billion to Britain’s lowest-paid workers. That’s the finding of a new study from Cardiff Business School into the impact of the Living Wage movement. It confirms what thousands of employers already know: paying the Living Wage is good for people and good for business. 

We hear every day about the difference the real Living Wage makes for workers, and nearly all the feedback we get from our network of over 16,000 accredited employers on the impact of the Living Wage is positive. Taking a step back, this new report considers the broader impacts of the Living Wage movement on challenging low pay in the UK. How has it impacted government policy or other forms of wage setting? How much difference does it make to workers and who benefits? This new study helps shed light on all these questions – and the evidence is compelling. 

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The real Living Wage is the only UK wage rate based on the cost of living. It is voluntarily paid by more than 16,000 UK businesses who believe their staff deserve a wage which meets everyday needs – from energy bills to unexpected car repairs. The Living Wage campaign began nearly 25 years ago in East London among low paid workers struggling to survive on the minimum wage. The Living Wage Foundation was set up in 2011 and since we accredited the first Living Wage employers over a decade ago, the movement has grown to cover a staggering 3.8 million workers today. Half a million people receive a higher pay packet each month than they otherwise would, with the average full-time worker getting an extra £1,950 a year because they work for a Living Wage Employer.

Crucially, the study finds that the greatest impact has been for those who are most vulnerable to low pay, including part-time employees and workers on outsourced contracts. Over half of workers who received a Living Wage pay rise work part-time, and more than a quarter work for outsourcing firms providing services like cleaning and security to large corporates and the public sector.

It’s not only workers who have benefitted from the Living Wage – their employers have too. A survey of accredited Living Wage employers found that virtually all employers – 94% – report benefits from Living Wage accreditation. Benefits include reputational gains, improved ability to recruit and retain staff, better staff motivation and improved working relationships. Some challenges were identified, such as increased staffing costs and the need to adjust existing pay structures, but they find that the benefits outweigh the costs. 

Accreditation therefore leads to a win-win: staff get a pay rise, and employers report positive impacts. Interestingly, there’s even a positive relationship between these two things: employers are more likely to see benefits when a larger proportion of their workforce gets a pay rise. These positive outcomes have been seen across all sectors and organisation sizes – from large corporates and local authorities to small businesses and charities – showing that the Living Wage can work for a wide range of employers.

The authors also looked at how the Living Wage movement interacts with other ways of improving working conditions. They found that far from undermining statutory or union-led approaches, the success of the voluntary Living Wage has helped to strengthen them. In particular, the campaign’s ability to win support from employers has given government the confidence to raise the minimum wage floor and drive up standards. This is most clearly reflected by the UK government’s decision in 2016 to rebrand the legal national minimum wage as the “National Living Wage”, borrowing the language of our campaign as a signal of ambition. The real Living Wage is found in both unionised and non-unionised workplaces, with trade unions playing an important role in spreading the standard, often using it as a benchmark in pay negotiations. In many areas and on specific campaigns, unions have worked together with Citizens UK and the Living Wage Foundation to push for better wages in workplaces across the country. 

The Living Wage movement is a testament to what can be achieved when civil society and responsible  employers come together to make change. This new report shows how the voluntary Living Wage works as a form of civil regulation – complementing other approaches to raising wages and becoming a core part of the civic infrastructure shaping pay discussions in the UK.

The Living Wage movement has grown quickly in recent years. In the past four years alone, we’ve doubled the number of employers committed to paying their staff a wage that reflects the real cost of living. This new research is a moment to take stock, and a reminder of how far we’ve come in driving up standards of good work so everyone can have a decent standard of living, now and in the future.

Katherine Chapman is director of the Living Wage Foundation.

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