Pay
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Living Wage

Making the Living Wage: The Resolution Foundation review of the Living Wage

Conor D’Arcy
Conor D’Arcy
David Finch
David Finch

The recommendations outlined in this review aim to further strengthen the Living Wage campaign. They set out an improved Living Wage methodology to underpin the campaign as it moves into the next stage of its development while being more firmly grounded in the cost of living.

Recommendations

  • While the National Living Wage is a welcome boost to low earners, the Living Wage with its genuine link to an acceptable cost of living, remains as vital as ever.
  • But as we have made clear, improvements are possible in both methods and seeking alignment will inevitably lead to change. We believe the recommendations we have outlined in this review represent a genuine improvement over the current methods. The aligned method should be more representative, more robust and, most importantly, driven to a greater extent by changes in the cost of living.
  • Inevitably, calculating a Living Wage requires judgement calls. Policy changes like the introduction of Universal Credit would always have required judgements on how the new system is phased into the rate. Having a body like the Living Wage Commission to make such decisions when required in future can only be an asset to the Living Wage campaign as it moves forward.
  • The natural question which follows these recommendations is what impact is likely on the rates themselves. However, the next steps are for the Living Wage Commission to consider our recommendations. The options they choose will determine the extent to which the rates vary from their current levels.
  • Broadly speaking however, the aligned method we have recommended is likely to have an upward effect on the London Living Wage. We consider this to be an unavoidable consequence of a Living Wage rooted in an up-to-date basket of goods with a more diverse mix of family types. There is a clear discrepancy in the target income between London and the rest of the UK, and as highlighted by recent analysis on the size of London salary weightings[1] the differential between rates should be larger than at present. The exact size of the increase will depend on the Living Wage Commission and Mayor’s response to our review. They also have a role in setting out a how to implement and transition to the new rates in London and the rest of the UK.
  • The Living Wage Commission is expected to respond to our review in September 2016. With a strong, aligned methodology and an enhanced governance structure, we see no reason why the Living Wage cannot continue to raise the wages of workers across the UK, delivering more families an acceptable standard of living.

Further reading

Calculating the Real Living Wage for London and the rest of the UK: 2024
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Nye Cominetti, Louise Murphy
Narrowing the youth gap
Exploring the impact of changes to the minimum wage on the incidence of low pay among young people
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Louise Murphy, Esiri Bukata
Pressure on pay, prices and properties
How families were faring in October 2023
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Mike Brewer, Felicia Odamtten, Hannah Slaughter, Hannah Slocombe, James Smith
Conor D’Arcy
Conor D’Arcy Senior Research and Policy Analyst
David Finch
David Finch