Updates from the Living Wage Foundation

Where does the Living Wage come from?

Since we launched the site we have had some great feedback, we are very glad you like it. We have also received queries from employers about where the Living Wage figure comes from and whether it is possible to backdate national living wage payments for previous years.

The national minimum wage is a statutory minimum calculated by taking into account the economic and labour market context. In the UK the Low Pay Commission sets the minimum wage. They accept stakeholder (employee and union) views and they take consideration of average weekly earnings. They do not make detailed calculations of the cost of living.

The Living Wage is calculated by looking at the basic cost of living. The living wage describes the minimum hourly wage necessary for an individual to meet their own or their family’s basic day-to-day needs including housing, food and clothing.

The living wage is distinct from the statutory minimum wage, which was created to provide a floor below which wages should not fall, but is not designed to ensure that workers and their families are able to achieve a decent standard of living.

The London Living Wage has been set by the Greater London Authority since 2005. They take into account costs of living such as housing, council tax, childcare and transport and use this to calculate what the average Londoner needs to live.

At the same time Living Wage campaigns were taking off across the UK offering a great opportunity to lift thousands more families out of poverty. We brought together Living Wage campaigners and employers from across the UK, working closely with colleagues on the Scottish Living Wage Campaign in particular, to agree a standard model for setting the National Living Wage for outside London. The agreed formula which is calculated the Centre for Research in Social Policy at Loughborough University, combines aspects of the Minimum Income Standard calculation with aspects of the London Living Wage calculation. The first National Living Wage was published in 2011 and the rate is £7.20. The rate will be calculated in future years using the agreed formula. Accredited Living Wage employers have 6 months from the date of the announcement to implement the new Living Wage across their organisation.

13th December 2011
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