London Living Wage

60 second overview

There are a number of important differences between the Chancellor’s ‘national living wage’ and the independently calculated, voluntary Living Wage rate of pay. The ‘national living wage’ is a statutory minimum and all employers have to pay it to employees over 25 years of age. There is one rate (£7.83 per hour as of April 2018) for the whole country with no allowance for the higher costs of living in the capital. The Living Wage, on the other hand, is independently calculated, voluntary and based on the costs of living. There are two rates to recognise the higher costs of living in London: The London Living Wage rate is £10.20 per hour and the rate for the rest of the UK is £8.75 per hour. We provide funding for the campaign to increase the number of employers paying the Living Wage.

What’s the issue?

Although work is the most important route out of poverty, more and more poor households in the capital include someone who is working. The proportion of low-paid jobs in London fell very slightly in 2016, in contrast to the previous five years of increases. It remained unchanged in 2017 at 18%. However, there are still 750,000 jobs that are low paid in London, which is more than twice as many as in 2006. This increase in the number of low paid jobs is in part because the overall number of jobs has increased and in part because the rate of low pay has increase since 2006, from 11% to 18%, so that in 2017 almost 1 in 5 jobs in London are low-paid.

On 1 April 2016 a new higher minimum wage for over-25s was introduced, known as the ‘national living wage’. There are a number of important differences between this higher minimum wage and the independently calculated, voluntary Living Wage rate of pay.

The new higher minimum wage (the Chancellor’s ‘national living wage’): 

  • It is a statutory minimum and all employers will have to pay it to employees over 25 years of age.
  • There is one rate for the whole country with no allowance for the higher costs of living in the capital.
  • It does not apply to employees under 25 years of age.
  • It is set by the Low Pay Commission.
  • It is currently set at £7.83 per hour (from 01/04/2018).

The Living Wage (the independently calculated, voluntary rate of pay, based on the costs of living): 

  • It is voluntary; employers choose whether or not they pay it.
  • It is independently set, based on the cost of living.
  • There are two rates to recognise the higher costs of living in London.
  • The London Living Wage rate is £10.20 per hour and the rate for the rest of the UK is £8.75 per hour (from 6/11/2017).
  • The Living Wage rate applies to all employees 18 years and over.
  • The rates are calculated annually by the Resolution Foundation and overseen by the Living Wage Commission, based on the best available evidence about living standards in London and the UK.
  • The annual rate is announced as part of Living Wage Week (November) and employers have 6 months to increase salaries from the date of the announcement.
  • Before 2016 the London Living Wage was calculated by the Greater London Authority and the UK rate was calculated by the Centre for Research in Social Policy at Loughborough University.

You can found out how to become an accredited Living Wage employer, through the Living Wage Foundation, here.

What are we doing?

We were concerned about the growth of low pay and in-work poverty and although the Living Wage campaign had been around for a number of years it lacked resources. We felt that with significant additional investment a step-change in the campaign could be achieved including, signing up more employers; wider recognition of the LW amongst stakeholders (especially employers and politicians) and the general public; developing a formal accreditation system for employers; and improving the evidence base on the costs and benefits of a LW.

Since 2008 we have invested around £1.2 million into the initiative. It had three elements:

  • Campaigning and employer accreditation; 
Citizens UK was awarded £850,000, over four years, for campaign work in the higher education, retail and public sectors and to establish a body to accredit employers and promote the Living Wage (the Living Wage Foundation). Further funding of £240,000 was awarded in December 2013 towards developing the Living Wage in London’s retail and hospitality sectors.
  • Research 
at Queen Mary, University of London was commissioned to undertake independent research on the longer-term impact and potential benefits to employers and employees of a Living Wage. We also made a contribution to research undertaken by IPPR and Resolution Foundation to examine the costs to employers of paying a Living Wage.
  • Evaluation – Cambridge Policy Consultants were commissioned to undertake a four-year evaluation to assess the impact of the Living Wage special initiative.

The special initiative was supported by an Advisory Group of representatives from a range of interested parties and included the TUC, London Councils, Greater London Authority, Business in the Community, KPMG and Joseph Rowntree Foundation. Members also included individuals from Trust for London and Citizens UK. Our funding of the Living Wage forms part of our wider work around low pay. 

The special initiative has now come to an. However, we currently sit on the Steering Committee of the Living Wage Friendly Funders scheme which supports charities to pay the real Living Wage through their grant-making and to tackle low pay in the charitable sector.  There are currently 31 Friendly Funders including People's Health Trust, Barrow Cadbury, Joseph Rowntree Foundation and Comic Relief.  

What we’ve learnt

Research we commissioned Queen Mary, University of London to undertake of over 400 workers and a dozen employers found that in Living Wage workplaces:

  • Staff leaving rates fell by 25%
  • 54% of workers felt more positive about their workplace
  • 52% were more positive about their employer
  • 38% felt they had greater spending power
  • 32% felt it improved their family life
  • There was an improvement in psychological well being.

Cost-benefit analysis by IPPR and Resolution Foundation showed the government could make annual savings of £2.2 billion if everyone was paid a living wage and 4 million people would benefit. This research also showed that the cost of paying a Living Wage would add less than 1% to the wage bills of firms in sectors such as construction, food production and banking.

Data from London’s Poverty Profile shows that some groups are particularly low paid: 46% of employees of Bangladeshi and Pakistani origin in London are low paid, more than twice the rate for White British employees. 37% of disabled people are low paid compared with 27% of non-disabled people.

The proportion of employees who are low paid is extremely high in the hospitality sector (hotels and restaurants) at 64%. The industry with the second highest proportion of low paid workers is retail and wholesale at 41%.

Wider lessons from the initiative include a strong endorsement of funding campaigning work and that this can have clear tangible benefits for disadvantaged communities.

What’s the evidence?

We have funded three research reports on the LW:

October 2012

The Costs and Benefits of a Living Wage Full Report 2.7 MB

January 2013

Beyond the Bottom Line – The Challenges and Opportunities of a Living Wag 1.0 MB

May 2012

What Price a Living Wage? 663.1 KB

The latest available data on low pay in London can be found at the Trust’s London’s Poverty Profile.

What’s been achieved?

The Living Wage Foundation was established and it has been accrediting employers since 2012. 

In the retail sector, LUSH became the first champion in May 2011. 

In October 2013 we awarded Citizens UK further funding (£240,000 over 3 years) to strengthen the campaign specifically in the retail and hospitality sectors. Combined, these two sectors contain the largest number of people earning less than the Living Wage.  These sectors are the greatest contributor to the problem of working poverty and in London. Since then, major retailers such as IKEA, Lidl and Aldi have committed to paying the Living Wage and have become accredited employers.

In September 2013, Professor Jane Wills at Queen Mary, University of London calculated that the living wage campaign had benefitted 23,000 low-paid workers and this generated income for these workers of £46 million.

In 2018, over 3,800 employers are signed up, including a third of FTSE 100 companies and household names including Ikea, Aviva, Nationwide and Everton FC. 

In 2018 the number of accredited employers has reached 4,000.

Where can I find out more?

Work: Funding opportunities

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