There are two main Geography-based categories that define the term Living Wage: those who live in London, and those who live in cities in other areas of the UK. There are also differences in the way which the two are calculated: London’s Living Wage is derived by using a combination of two approaches, the Basic Living Costs and Income Distribution, while the Living Wage is calculated using the Basic Living Cost approach alone for those living outside of London.
There is an underlying principle connecting the two calculations, however, and that is to answer the question “how much does a person need to earn in order to ‘maintain an acceptable standard of living’ across the UK?” The infographic below looks at how much it can really cost to live around the UK, and whether the Living Wage is enough.
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The National Minimum Wage at the time of writing is £6.31 p/h for those over 21. The Basic Living Costs approach calculates the Living Wage to be £7.10 p/h, and the Income Distribution approach calculates the Living Wage to be £7.80 p/h. The average of these two amounts determines the ‘poverty threshold range’, which is increased by a ‘London weighting’ of 15% to give a London Living Wage of £8.55 p/h.
The London Living Wage has risen between 2001 and 2013, but not in line with inflation. The National Minimum Wage has fallen against inflation between 2001 and 2013. Earning the National Minimum Wage on full-time hours (37.5hrs) will allow a person to rent a room sharing a three bed property outside the city centre of Leeds, Glasgow, Cardiff and Belfast, but not in London or Bristol, which require a London Living Wage to a small (though not insignificant) extent. A London Living Wage will likely not cover the costs for a one-bedroom flat in any of the cities measured.
In London 88.6% of full-time and 53.7% of part-time workers earn the London Living Wage, and 6.8% of full-time and 33.6% of part-time workers earn less than the poverty threshold range according to the Annual Survey of Hours and Earnings.
Many will ask “what does ‘an acceptable standard of living’ mean?” After all, not everybody lives in a city centre, and at least some of those earning National Minimum Wage will constitute young workers carving a career for themselves while living in their parents’ home. This does not mean that such data is empty, however, as it gives an important guideline as to how wage disparities affect the UK. The data also gives clues as to what wage groups Housing Benefit, Council Tax Benefit and Tax Credit affects.
The data is particularly startling when it comes to the National Minimum Wage, which has not risen in line with inflation. Therefore, it is fair to state that it is those working in minimum wage roles, perhaps in one or more inconsistent part-time roles, who are facing the most consistent pressure regarding their wages. There are a multitude of reasons for this, including globalisation, the rise of remote working, immigration/emigration, general education/skill levels and technological progress (i.e. competitive factors) amongst others, although the debate rages on as to which has the most influence in the long-term. The solutions to the problem are as complex as the problem itself.