For the third year in a row, the number of people earning below the Living Wage (LW) has increased, now standing at a record 6m – nearly one in four workers.
The news comes as the Living Wage Foundation, the charity which calculates the voluntary minimum wage able to cover basic expenses, yesterday (November 2) announced this year’s revised LW – now set at £8.25 an hour outside of London and £9.40 an hour in the capital.
The KPMG report that estimated the growing numbers of sub-Living Wage workers also found that part-time workers, women and young people were much more likely to earn below the LW.
The report’s regional analysis showed that low pay blighted certain parts of the country more than others. For example, in Northern Ireland the number of workers earning below the Living Wage was nearly one in three.
While the Living Wage Foundation celebrates the 2,000 employers now committed to paying the LW with its Living Wage Week, there’s little to celebrate against a backdrop of a government unwavering in its aim to slash tax credits for low-income workers and use the smokescreen of its own so-called National Living Wage to cover it all up.
In his summer budget, Chancellor George Osborne announced to much fanfare a new National Living Wage (NLW) – to be set at £7.20 an hour from next April, incrementally rising to £9 an hour by 2020. Unlike the charity-calculated Living Wage, the NLW is not linked to the cost of living.
While it is true that next year’s pay rise will represent the largest percentage increase in the wage floor in more than a decade, a Resolution Foundation report noted that the minimum wage would have risen to nearly £9 an hour by 2020 anyway.
And the impact of the planned cuts to tax credits, set to come into full effect in April if the government does not agree to change track, will completely wipe out any gains made from Osborne’s new National Living Wage.
The Child Action Poverty Group recently released figures showing just how hard families will be hit by cuts to tax credits. More than 3m workers will lose an average of £1300 annually, with some families set to lose much more.
For example, a full-time security guard with two children and is the sole earner of the family will lose an estimated £2,304 each year, while a teaching assistant could stand to lose £1,896.
The Institute for Fiscal Studies (IFS) has confirmed that any other changes to benefits and tax, such as an increase in personal tax allowance, will not be compensated by Osborne’s National Living Wage.
The IFS goes on to highlight that those benefiting from the NLW will not be the same people who are likely to be slammed by cuts to tax credits.
That’s because individuals who earn the statutory minimum often live in households with one earner in the middle or top of the income distribution, and so don’t qualify for tax credits.
On the other hand, workers earning slightly more than the wage floor are those most reliant on tax credits because they often live in households where all earners are trapped in low-paid work.
IFS research economist William Elming put it simply, noting that “the new NLW cannot be considered a direct substitute for benefits and tax credits aimed at lower income households.
“The wage increases are not as large as the benefit cuts,” he said. “And, it is not targeted at the same group who lose from the cuts.”
While the voluntary Living Wage applies to all age groups, the Chancellor’s rebranded minimum wage will only benefit those 25 and older.
So, for example, if you’re a young, 24-year-old couple working in the hospitality industry and with two children, you’ll be doubly robbed by the £4.4bn tax credit raid as well as the unilateral exclusion from Osborne’s National Living Wage – simply because you weren’t born in the right year.
Still, more and more employers have signed up to pay the “real” Living Wage calculated by the Living Wage Foundation.
Just yesterday (November 2), consumer goods giant Unilever agreed to pay all of its workers, even those who are indirectly employed or outsourced, the LW. The announcement came on the same day that Lloyd’s Banking Group committed to paying its workers the LW as well. Both were the outcome of concerted campaigns from Unite and its members.
Unite assistant general secretary Steve Turner hailed the growing number of companies committing to paying the Living Wage.
“We welcome any company that voluntarily agrees to pay all of its workers the Living Wage, and it is great news that the number of these employers is increasing every year,” he said.
“But credit, too, should go to workers and their unions, who are on the frontlines pressuring their employers to do the right thing and pay up.
“Companies do not become Living Wage employers out of the kindness of their hearts – it’s only after the pressure is on that they give in. Unite’s year-long campaign at Unilever, which just ended with the company agreeing to pay the Living Wage, is one great example.”
Turner criticised Chancellor George Osborne’s “shameless rebranding” of the minimum wage, which he said has only served to “confused and bamboozle”.
“Osborne’s so called National Living Wage is far from it – even if workers earn the £9 an hour now that he promises in 2020, that’s still not enough to get by in London today,” he said.
“Taking into account skyrocketing living costs and the government’s planned cuts to tax credits and other benefits, what seems like an impressive £9 an hour, in five years’ time, will be a pittance.
“We at Unite have called for the government to introduce a true, statutory Living Wage, which will mean £10 an hour, not in five or ten years, but now,” he added.
“Companies, with large cash reserves, can well afford it and it would be an immediate leg-up to hardworking people across the country.
“These families will in turn spend their increased wages in shops across the country – in this sense, a wage boost for working families is a boost for the wider economy as a whole,” Turner explained.
“If Osborne is really intent on putting forward a ‘long-term economic plan’, he could well start with the idea, backed by prominent economists worldwide, that it is high wages – and not tax cuts and other freebies for cash-flush corporations – that are part of a sustainable, growing economy.