by Katherine Chapman, Director of the Living Wage Foundation
Low pay and insecure work are holding back millions of workers and exacerbating long-standing inequality between and within regions across the UK. The government is therefore right to recognise "boosting pay and productivity in the places that need it most" as one of its 12 priority missions (policy objectives) set out in today's Levelling Up White Paper.
To truly deliver on the plans to reduce inequality across the UK, we need to invest in people, not just places. In addition to reform and growth for local economies, it is vital to also have interventions that directly improve people's living standards. Put simply, this needs to start with "levelling up jobs": guaranteeing a real Living Wage and decent Living Hours for those on the lowest incomes.
Almost 5 million workers are trapped in low pay and more than 3.5 million are in low paid, insecure work. Workers in all parts of the UK are affected by low pay, with the highest percentage of jobs paying below the Living Wage in Northern Ireland (21.3%), the East Midlands (20.2%), the North East (19.6%), the West Midlands (19.3%) and Yorkshire and the Humber (18.5%).
Our nation's key workers, who cared, fed, and protected us over the past two years, are disproportionately affected by low pay. Almost two years on from the start of the pandemic and still over 600,000 care workers and 366,000 supermarket workers paid below the real Living Wage.
Low paid workers and their families cannot wait for a "long term economic and social plan" to be lifted out of poverty. And they do not need to. Employers can, and are already, taking steps to improve living standards for their employees by always guaranteeing them a real Living Wage based on the cost of living.
There are already almost 10,000 Living Wage employers committed to paying staff a real Living Wage, including household names like Aviva, Everton FC, and LUSH plus thousands of small to medium sized businesses. By accrediting as Living Wage Employers they guarantee that all staff, including third party contracted staff, will always be paid a wage calculated based on the true cost of living. Living Wage employers are in turn strengthened through reduced staff absenteeism, higher morale, and greater productivity from staff.
The real Living Wage is the only rate based on what workers and their families need to get by: the weekly shop, energy bills, a school uniform for growing kids, a trip to the dentist. It is calculated annually based on the best available data and is currently £9.90 in the UK and £11.05 in London, to reflect the higher cost of living.
Increasing the number of people earning a real Living Wage has a knock-on effect for "levelling up" the UK economy, too. Research by the Smith Institute last year found if just a quarter of those on low incomes saw their pay raised to the real Living Wage based on everyday needs, a subsequent increase in wages, productivity and spending could deliver a £1.5 bn economic boost to the UK economy. The report also found there would be significant benefits for local economies too, with 11 city regions, including London, Greater Manchester, Liverpool, Cardiff, and Glasgow, benefitting from a combined economic boost of almost £700 million.
There is no silver bullet to a problem that is as difficult and complex as closing the vast divide of inequality across the UK, but part of the answer to the government's mission to "boost pay and productivity," is to increase the number of people earning a real Living Wage.
When living costs are rising so sharply, and more workers and their families are being pushed into poverty, it has never been more important for employers to step up and pay a wage that covers the cost of living.