Real Living Wage rises for 150,000 UK Workers
This week an estimated 150,000 workers in the UK will be granted a pay-rise, by companies signed up to the Living Wage Foundation’s scheme. The foundation has calculated that UK workers should be paid at least £8.75, or £10.20 for London, in order to maintain a comfortable standard of living in the midst of inflation.
Who’s getting a Pay Rise?
Although paying employees that Real Living Wage is voluntary, around 3,600 companies in the UK do so, including giants such Google, IKEA and Nestlé. Heathrow airport is also part of the initiative, organised by the Living Wage Foundation, and some of its lowest paid staff can now expect to be paid up to £100 extra per week. Katherine Chapman, director of the Living Wage Foundation, said that the increase has been triggered by the high inflation rates of recent years, which currently stands at 3%. According to Chapman, “The new living wage rates will bring relief for thousands of UK workers being squeezed by stagnant wages and rising inflation”. The Real Living Wage is separate from the National Living Wage, a lower rate which employers have been legally obliged to pay staff over the age of 25 since 2016. Under the age of 25, employers are only required to pay staff minimum wage, which is lower still. This latest increase to the Real Living Wage comes in the wake of a study which found that one fifth of workers in the UK are earning below the Real Living Wage. The auditor, KPMG, who carried out the study, also noted that this figure rose to one in four for women in work. People in part-time work were also more likely to be paid below the Real Living Wage than those in full-time work.
The Issue of In-Work Poverty
Initiatives like the Real Living Wage aim to tackle the growing issue of “in-work poverty” being experienced by workers in the UK. Earlier this year, a study carried out at the University of Cardiff discovered that 60% of people living in poverty in the UK lived in a household with at least one working person. Families with a single earner were more likely to experience poverty, with those in privately rented accommodation experiencing the highest risk due to the ever-mounting cost of renting and cuts to housing benefits. The leader of this research, Rod Hick, suggested that low wages were not the most important factor for this kind of poverty, however. Having only one working partner appeared to be the most significant reason that families fell into poverty – Theresa May agreed that getting into work was proposed as “the best route out of poverty”. However, this view fails to take into account the fact that, for some families, childcare is so expensive that both partners being in work actually means a lower total income once childcare costs are accounted for.
The worst affected
The Living Wage Foundation found that a shocking number of UK workers are taking extreme measures to stretch their wages. More than a third of workers earning less than the Real Living Wage reported regularly taking steps as drastic as skipping meals to save money. More than a third of low-income workers also resorted to topping up their wages with a credit card or loan, and over half had borrowed from a friend or family member in the last year. High interest borrowing through credit cards and payday loans can quickly spiral out of control, putting these workers at risk of problem debt.
What can be done?
Where debt is an issue, solutions such as IVAs or Trust Deeds can go a long way to ease the burden on struggling households. Ultimately, though, affordable childcare and more companies agreeing to pay the Real Living Wage would go further in addressing the problem of in-work poverty. Despite worries that paying the Real Living Wage could reduce companies’ earnings, firms which have implemented it have reported overwhelmingly positive results. Andy Bagnall, the director of KPMG for the UK, said that since adopting the Real Living Wage, “KPMG has seen improved staff morale, a rise in service standards, improved retention of staff and increased productivity”. IKEA has witnessed similar success. Their UK director, Gillian Drakeford, claims that adopting the Real Living Wage has been vital for the company’s ethos and profits. “Happy coworkers lead to happy customers” claimed Drakeford: “For us in retail, our people are our biggest asset”. Since introducing the scheme, IKEA saw its UK turnover increase by 8%. The Real Living Wage can also improve recruitment – in 2016, after becoming the first UK supermarket to pay this wage, Lidl saw the number of job applications it received increase by 20%.
With such success, it is likely that more UK employers will get on board with the Real Living Wage in the near future, which could give workers the boost they need to avoid debt as the cost of living continues to rise.
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