More than 200k reasons to celebrate the Living Wage

As the new real Living Wage rates get announced — £9.50 in the UK and £10.85 in London — it is a good moment to reflect on the impact of the Living Wage campaign over recent years.

For all the publicity it attracts, what do we really know about how much difference it has made? Sure, we know that almost 7,000 employers have signed up — but how many workers has it helped lift up?

That’s a tricky question to answer. Before now there hasn’t been reliable independent data on this.

Thanks to a new analysis by Nye Cominetti at the Resolution Foundation (RF) we can shed some light. His work shows us that between 400k-500k get paid the Living Wage rates but he also reminds us that many of these people would have received that pay rate anyway, even if the Living Wage didn’t exist, so it would be silly to lay all this at the door of the Living Wage campaign. To try and gauge its additional impact the analysis compares how many people get paid at the Living Wage rates in a given year to the numbers getting paid that exact amount in the previous year (i.e. before it represented the Living Wage figure). The answer is almost 200k more workers were paid the Living Wage in 2019 compared to the number that we’d otherwise have expected.

Just to make extra sure that this is a ‘real’ result we can look at the overall distribution of pay across the country and assess the size of the ‘spikes’ (see second chart which looks at London) in the numbers of workers paid the Living Wage rates to test how significant they are (sometimes there are arbitrary spikes at particular points in the pay distribution, not least at round numbers). Again, this analysis shows the Living Wage spikes to be [highly] significant.

Finally, we can compare the Resolution Foundation’s numbers to data collected by the Living Wage Foundation (LWF) when employers sign up, which details the numbers of workers receiving a pay uplift as a result of accreditation. Both sets of numbers broadly tally and are rising in tandem over time. In 2019, for instance, the LWF’s figure was 167k compared to RF’s 190k. RF’s slightly larger number may well reflect the fact that we know that some employers shadow the Living Wage rates but opt not to accredit with the Living Wage Foundation (so wouldn’t show up in their figures). The LWF’s new figure for 2020 is 250k and we’d expect the RF 2020 figure to rise when this year’s official data becomes available.

We should also bear in mind that RF’s estimates are very likely a (significant) understatements of the impact of the living wage meaning the real number benefiting is likely to be well over 200k. Why? Because it only counts those getting paid exactly the Living Wage rates. As we know from many studies of the minimum wage, there will also be other workers, already paid at Living Wage rates or a little above, who will have received pay boosts as wage differentials are protected.

How should we interpret this 200k figure? The first thing to say is that it’s a remarkable achievement. The Living Wage Foundation is a small, relatively new, organisation that has grown organically out of a worker-led campaign in East London. In 2012 it estimated that just 5,000 workers benefited from the Living Wage. As a voluntary initiative, the Living Wage obviously hasn’t had the force of law behind it, nor are there any tax-incentives easing its path. It has relied on pure voluntarism fired by moral suasion and campaigning energy. Nor should we forget that the quantum leap made over the last decade has been achieved against a backdrop of extraordinary pay stagnation and in the face of a brazen attempt by government to put the campaign out of business by appropriating the ‘Living Wage’ brand. That’s no mean feat.

It’s perhaps no coincidence that this progress has coincided with the rise of new sites of political power in the age of devolution. In Scotland the campaign has its own voice and presence and the Scottish Government has strongly advocated for it. The Welsh government is also an accredited Living Wage employer and champions it across the Welsh public sector. Across many of the key city-regions of England it has been backed and pushed by mayors — first in London, then in the likes of Manchester, Liverpool and Bristol among others. New political leadership is helping shift the social norm on low pay.

But the 200k figure also needs to be seen in the harsh light of the remaining challenge. For starters, it needs to be held up against the fact that over 5 million workers were paid less than the fair pay benchmark before the pandemic struck. And if we look across the different nations and regions of the UK we see that in each there are typically between 0.5% and 1.25% more workers being paid the Living Wage rates than we’d otherwise expect — but that needs to be set against the fact that the overall share of employees paid less than the Living Wage ranges between 17% (South East) and 24% (East Midlands). Sure, some places are doing better than others but there is an awful long way to go in every corner of the UK.

It’s also salutary to bear in mind that the success of recent years has been achieved against the backdrop of a steadily tightening jobs market which has resulted in some big employers, like Amazon and Aldi, opting to pay Living Wage rates even though they’ve never opted to make the commitment to formally accredit. In the years ahead, by contrast, gains will have to made in the face of a slack labour market with many employers in low-paying sector facing profound challenges to their current business models.

And for all the importance of city leaders in making the case for the Living Wage, to really make their mark they would galvanise all their key economic institutions — local universities, the airport, major football clubs, local councils, iconic employers — to commit to making it the new civic pay floor. No UK city has yet made that leap.

The fact that in 2020 over half of the nation’s million care workers — those who we all clapped so loudly earlier this year — are paid less the real Living Wage brings home both the enormous challenge still faced, as well as the great potential that surely exists to mobilise public sentiment.

The success of the Living Wage in reaching 200k workers a year should instil confidence. As the nation seeks to renew itself following the pandemic it will need yardsticks to help navigate its way towards a more equitable and resilient economy. One of them will be the real Living Wage. Now, for the first time, we can say that it’s making it’s mark in the nation’s pay data, as well as its public discourse.