The Living Wage - London experience

The Living Wage
The London Experience
Alan Freeman 24 July 2007

Timeline
 2000 Greater London Authority established
– Ken Livingstone Mayor on independent ticket
– Re-elected 2004 on Labour ticket
 Living Wage Unit established 2004
– 2005 Living Wage established
– Rolled out over 3 years
 Boris Johnson (Conservative) 2008 and 2012
– Continues the Living Wage
– 2010 KPMG report finds significant efficiency
gains
 2010 Scotland adopts

Three annual reports published in
2006 and 2007
 March 2005 established an initial
London living wage of £6.70 an hour
 Updated this to £7.05 an hour in May
2006
 Updated to £7.20 in April 2007

Why?
 A ladder to dignity
 Triple win
– Valued employees get more from the job
– Low turnover, low absenteeism, high
commitment
– Value to the public
 Poverty does not come free
– Somebody picks up the tab
– If employers don’t, the public will
 The smart economy
– Smart, respected employees deliver value to the
client

Where are residents earning less
than the living wage, £7.05 per
hour?
Source: APS 2004

London is a rich city but
with extremes of poverty
After housing costs in 2001
41 per cent of children were below the poverty line
In Inner London this rose to 53 per cent
The next highest was the North East at 37 per cent
30 per cent of Inner London adults were below the poverty line
Between 1987 and 2000
The average wage of the top 10 per cent
of male earners rose by 37 per cent
The average wage of the lowest 10 per cent rose by 37 per cent
Wages for the lowest 10 per cent of male earners rose 10 percent
In 2001
•Women’s earnings in full time employment
were 77 per cent of men’s
•White Londoners’ average earnings were £12.11
•Bangladeshis were £5.92

Minimum and Living Wage
compared
 Statutory
– evasion is criminal
 Uniform
– in all regions
– in urban and rural areas
 Low
– smaller than living wage
– leaves many Londoners in
poverty
 £5.35 until October 2007
 £3.30 for 16-17 year olds
 Non-statutory
– but written into contracts
 Different
– for urban and rural areas
– in each town
 Higher
– Takes local costs into
account
 £7.20 at March 2007
Minimum
Wage
Living Wage

Statutory and political framework
Living wage
‘We will campaign
against poverty pay in
London working with
trade unions,
community
organisations and
responsible employers.
We will establish a
Living Wage Unit within
the Greater London
Authority to monitor the
cost of living and levels
of wages and salaries in
Minimum wage
Must have regard to
the ‘likely effect on
employment levels;
the impact on the
costs and
competitiveness of
business; and the
potential costs to
industry and the
Exchequer’.

How many low earners are there?
0
100
200
300
400
500
600
Thousands
of
workers
15%
(ASHE);
10.6
%(APS)
3.2%
Annual Survey of Hours and Earnings 2005 (ASHE)
Annual Population Survey 2005 (APS)
Between
minimum
and living
wage
Below
minimum
wage
Above
living
wage

Young earners under the living
wage
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
16-17 years 18-21 years 22+ years
0
50
100
150
200
250
300
350
400
Percent of thisage group (left hand scale)
Thousandsof workers(right hand scale)
15 % of Londoners
are under the living
wage (ASHE)
Over
18
78%
22%
Under
18

Gender
0
50
100
150
200
250
300
Below Minimum Wage Below Living Wage
Thousands
of
workers
Male
Female
Men
44%
Wome
n
56%
Men
41%
Wome
n
59%

Ethnicity
0%
5%
10%
15%
20%
25%
30%
35%
40%
Mixed Chinese Other Asian or
Asian British
Black or
Black British
White
0
50
100
150
200
250
Percent of thisgroup (left hand scale)
White
62%
BAME
38%
10.6 % of
Londoners are
under the living
wage (APS)

0%
5%
10%
15%
20%
25%
30%
35%
40%
Disabled Not disabled
0
50
100
150
200
250
300
350
Disability
Able
86%
Dis-
abled
14%

By low paying sectors
0%
5%
10%
15%
20%
25%
30%
35%
40%
Security and Cleaning Social Care, Hairdressing,
Textiles and agriculture
Hospitality and Retail
0
10
20
30
40
50
60
Others
77%
Low
Pay
Sectors
23%

Mode of work
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Full-Time Part-Time
0
50
100
150
200
250
300
Full-
Time
47%
Part-
Time
53%

By qualifications (NVQ)
0%
5%
10%
15%
20%
25%
30%
35%
40%
No
qualifications
Level
2
Other
qualifications
Below
2
Nvq
level
3
Apprentices
Level
4
and
above
0
10
20
30
40
50
60
70
80
NVQ4>
16%
<NVQ4
84%

By occupation
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100% Professional
Managers
Technical
Process,
plant
and
machine
S
killed
trades
Administrative
and
secretarial
Personal
service
S
ales
and
customer
service
Elementary
0
20
40
60
80
100
120
140
160
180
Skilled
20%
80%

Calculating the London Living
Wage
AVERAGE yields a
POVERTY THRESHOLD wage
£6.25
Wage Wage
A margin of 15 per cent is applied to
the poverty threshold wage to obtain
the LIVING WAGE in LONDON
£7.20
Basic Living Costs
approach £6.15
Income distribution
approach £6.35

Components of the Living Wage
Insurance, pension
Food, Clothing, Personal care
Household goods and services
Leisure; Fuel; NHS charges
Charitable donations; Pets
+COSTS
Shopping basket
goods
Housing
Council tax
Transport
Childcare
Least-cost affordable
HOUSEHOLD
INCOME
Less BENEFITS
AND
TAX CREDITS

Living costs approach (Family
Budget Unit)
How much would they need to spend to meet their
costs?
Weighted average taking into account all families
Four household types
couple with two children
childless couple
single person
household
lone parent with two
children,

Income Distribution Approach
 Government’s poverty threshold is 60% of
median income
 Hence we calculate the wage required to
meet this income level
 Costs in a household depend on household
composition; hence adjust for each
household type (‘equivalisation’)
 Weighted average wage again calculated

The Living Wage - London experience

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