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News - 10 November 2012

Living wage debate heats up as rate is increased to £7.45/hour

The city council increased its own minimum pay rate to £7.19/hour last year to comply with the [then] current rate for the living wage and it encourages businesses to follow its example. But the rate suggested by the Joseph Rowntree Foundation has just been increased.

Not to be confused with the statutory “minimum wage” [currently £6.19/hour for those over 21], the voluntary living wage is the hourly rate needed for an acceptable standard of living; £8.55 in London and £7.45 everywhere else.

At national level such disparate allies as the Labour Party’s Ed Miliband and the Mayor of London Boris Johnson have both assumed the mantle of living wage champions. The former has even gone so far as to adopt the living wage as a manifesto pledge for 2015 also suggesting that Whitehall contracts should only go to firms paying the living wage, while those who paid less should be "named and shamed".

Across the UK it is estimated that 5 million people are not paid a living wage. The Institute for Fiscal Studies [IFS] has published research that indicates that for every person moved onto the living wage rate the Treasury would save around £1,000 from reduced spending on working tax credits and from higher tax revenue. The study by KPMG published last week found that 90% of waiters and bar staff and the majority of catering staff and cleaners were paid below the living wage rate.

Locally a debate held by the Chamber of Commerce overwhelmingly favoured the living wage [see earlier story] but it is not a universally popular idea. The local Tourism Alliance is opposed to it on the grounds that the hospitality and retail sector in the city is not profitable enough to be able to pay it.

ECONOMIC PARTNERSHIP COMMENT

There is no doubt that, at 20% above the minimum wage, many small shops, restaurants and service providers would struggle to pay the living wage especially in the current climate where consumer confidence [and spending] is weak.

But there are few business owners who would not want to pay a higher wage rate if they could and perhaps the answer to the living wage conundrum is to find ways to make the low wage sectors more profitable so that an increase in wages becomes a possibility.


Read related items on:
Wages
Brighton & Hove City Council
Institute of Fiscal Studies
Tourism Alliance


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