Average London worker needs over £2000 more in London Weighting to cover higher costs of living in capital.
New research shows that pay supplements for living in London are falling far short of meeting the extra cost of living there. Most public and private sector employers pay their workers in London more than equivalents doing similar work elsewhere in the UK – this London supplement is often called London Weighting. It is paid for a variety of reasons: to attract people to work in London; as well as to recompense them for the additional costs of working in the capital.
Higher living costs in London
It has been shown that it costs at least 20% more to achieve a decent standard of living in London, compared to the rest of the UK, and in some cases it can be as high as 50%. This is mainly due to the high costs of housing, transport and childcare.*
Current London Weighting
New research – from the Centre for Research in Social Policy at Loughborough University, funded by independent charity Trust for London – shows that London Weighting needs to be almost £7,700 per year in Inner London and just over £6,200 in Outer London to cover the additional minimum cost of living here.
Currently, London Weighting averages under £4,000 and varies significantly across employees and different industries, with more paid in Inner London than Outer London; and more in finance, manufacturing and public sectors than retail or the not-for-profit sectors.
Changing value of London Weighting, by sector
London Weighting has risen relatively little over the past 15 years, despite a rapid rise in costs, particularly housing. This could be partly due to the fact that there is no longer a body which is responsible for the calculation or promotion of it. Changes to London Weighting in Inner London include:
- A prison officer gets £4,250 today compared to £3,000 in 2002.
- A police officer gets £6,687 today. This is up just 10 per cent since 2000, when the Metropolitan police allowance was more than doubled to £6,000.
- A nurse gets a minimum of £4,158 today compared to £3,268 in 2002.
- In the financial sector, banks pay an average of around £4,000 today and were reported to be paying the same amount in 2002 which was not much changed from 1987/88 when they were paying of the order of £3,000.
- Allowances in the private sector range from £900 to £5,500 today and, ranged from £1,050 to £3,000 in 1988.
To put this in context, public transport is around 3.5 to 4 times more expensive now than in 1987, according to the Retail Price Index, and the cost of a London home has doubled in a decade, which is over five times as high as in 1987, according to the Nationwide Index.
Recommendations
As well as helping those on low pay, London Weighting should help those on modest to medium pay who struggle to afford the additional minimum costs of living in London (those earning up to £40,000 per annum, including London Weighting).
An initial target should be a weighting reflecting the cost of living in Outer London (£6,200), since it is the minimum that would allow someone to access a job anywhere in London.
“London Weighting was originally based on a calculation of additional costs in London, but since the 1980s it has been used in a much more ad hoc way to try to recruit and retain selected staff. As a result, many modestly paid workers in London are unable to afford a basic standard of living.
“Our research, shows how much more Londoners need to afford a minimum standard. While not all employers can afford to pay a large London supplement, these figures provide a benchmark. They are not based on an extravagant metropolitan lifestyle, but rather on what ordinary Londoners told us is needed to meet a minimum household budget. They accepted that you may need to live in less spacious housing in the capital than elsewhere. Even with this adjustment, basic housing costs are so high that without this additional income, many Londoners will end up with too little to meet their other needs.”
Professor Donald Hirsch, Centre for Research in Social Policy at Loughborough University
“Costs in London have rocketed over the last thirty years, particularly housing, transport and childcare. But the amount those working in London receive to compensate for these higher costs has failed to keep pace, particularly in lower paid jobs.
“London weighting must better reflect what Londoners actually need to make ends meet. Everyone deserves to have a decent standard of living and employers need to play a greater role in ensuring we all receive a fair wage. If this is not addressed, there is a real danger that services will not be able to attract the skills and talent they are seeking and will threaten the future success of the city.”
Mubin Haq, Director of Policy and Grants at independent charity Trust for London
“Once again, we see that hard pressed London families need more cash to to help them deal with sky high costs and low incomes. Strengthening London Weighting would help ensure that earnings, particularly for the lowest paid, go further, but wages alone cannot fully the meet costs of children. We also need social security to respond better to the costs of children, childcare and housing in the capital.
Full Report: London Weighting and London costs - a fresh approach?Key Findings: London Weighting and London costs - a fresh approach?We fully support actions to raise wages: not only does this help put a few extra pounds in families’ pockets, but gains to the Treasury through lower benefit entitlements and higher tax receipts can be re-invested in children’s benefits to help tackle child poverty.”
Alison Garnham, Chief Executive, Child Poverty Action Group