By Daniel Hunter
The problem of in-work poverty has been underlined by new research which estimates that there are now 5.24 million people being paid less than the Living Wage, an increase of around 400,000 from an estimated 4.82 million in last year’s report.
This highlights the fact that whilst the Living Wage has grown rapidly and successfully as a concept, wider take-up is needed if more people are to earn a wage that supports a basic standard of living.
The research, conducted for KPMG by Markit, suggests that 21% of employees are being paid less than the Living Wage, up from 20% a year ago. This has largely been driven by living costs outstripping earnings growth — median hourly wages have risen by just 1.1%, while the Living Wage rate increased last year by 3.5% nationally and 3% in London (also less than the rise in the cost of essential goods).
Unsurprisingly, the proportion of jobs paying below the Living Wage is highest among the younger age groups, with 72% of 18-21 year olds receiving less than the Living Wage, which then falls to 27% of 22-29 year olds. Women are also significantly more affected than men (27% compared to 16%), while part-time workers are far more likely to receive low pay than full-time workers (43% compared to 12%).
The research also finds that sub-Living Wage pay is less prevalent for direct employees in the public sector (less than 10% of the workforce) than it is in the private sector (27%), largely due to differing job types. In addition, many low paid workers in the public sector are employed by private contractors.
The Living Wage is a voluntary rate of pay designed to enable workers to afford a basic but acceptable standard of living. The rate is currently £8.55 an hour in London and £7.45 outside — compared to the national minimum wage which stands at £6.31.
The Living Wage has been growing rapidly as a concept, with over 400 organisations now accredited payers of the rate compared to just sixty this time last year. This week is ‘Living Wage Week’ with new Living Wage rates for London and the rest of the country due to be announced today, Monday 4 November.
Commenting on the findings Marianne Fallon, Head of Corporate Affairs at KPMG, said:“Low pay is a real problem in Britain, particularly at a time when the cost of living is rising at a faster rate than earnings. This was underlined by the Social Mobility and Child Poverty Commission recently. People on less than the Living Wage can seriously struggle to make ends meet. Whilst it is still not easy, earning a Living Wage can make a huge difference to individuals and their families, enabling them to afford a basic standard of life.
“For many businesses, paying the Living Wage rate need not actually cost any more. At KPMG, we have found that better staff performance and motivation combined with lower absenteeism and turnover cancels out the extra salary costs.
“Living Wage Week is the perfect opportunity for employers to consider whether they can make the move. It may not be possible or practical for everyone, but all employers need to do what they can to address the problem of low pay. In practice, transition to the Living Wage is a phased programme that does not happen overnight. Making an initial assessment is an important first step.”
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