4 Sep 2013

Low pay Britain: one in five Brits earning below living wage

Despite some sectors embracing the so called living wage to tackle poverty in the UK, Channel 4 News finds that some workers are still being left behind.

According to a new study, 25 per cent of women and 15 per cent of men were paid below the living wage in April last year.

In total 4.8 m Britons, 20 per cent of employees, were paid at a level below the rate deemed necessary for a basic standard of living, an increase from 3.4 million in 2009.

Unlike the minimum wage, it is up to employers to decide whether their staff are paid the living wage, which is currently £7.45 an hour or £8.55 in London.

The report by the Resolution Foundation think-tank found 77 per cent of employees aged under 20 earned less than the living wage.

Two-thirds of restaurant and hotel workers (67 per cent) were paid below the benchmark, the study found.

The report’s author Matthew Whittaker, senior economist at the Resolution Foundation, said: “For most of the working population real wages have been flat or declining for many years and as a result more and more people have dipped below the level of the living wage.

“This means an increasing struggle to keep up with the cost of living.

“Britain has a sorry story to tell on low pay. Only a handful of our close competitors do worse and the large majority have much lower rates of low pay – sometimes half as much.

“The challenge for all parties is to find ways of boosting rates of pay, especially for those who earn less, without putting economic growth at risk.”

Retail and hospitality

The living wage is calculated annually by the Living Wage Foundation according to the basic cost of living in the UK.

It has received widespread political support, but limited endorsement by employers.

Director of the Living Wage Foundation Rhys Moore, said: “The new figures revealed in this report highlights a critical challenge for those workers on low pay as we enter a period of recovery. It is even more important that the recovery is for all.”

Out of our 347 organisations currently accredited by the Living Wage Foundation, just five are in retail and five in hospitality.

Mr Moore added: “We know the bigger challenges are in retail, hospitality and care where low pay is prevalent.

“We hope to see leadership from large chains like Sainsbury’s, John Lewis and Tesco standing alongside our other responsible employers.”

Despite the low numbers, some hospitality companies are bucking the trend.

The company behind Holiday Inn and Intercontinental in May 2012 became the first hotel chain to back the London Living Wage – raising the earnings of hundreds of staff members to £8.30 an hour for a five year period.

Average weekly pay

TUC research shows that the average weekly pay in the north west has fallen from £11.43 in 2007 to £10.52 in 2012.

Full-time workers in the region are taking home £36.41 less in real terms a week as a result.

The average weekly pay in Wales also fell by 7.3 per cent – or £32.36 – between 2007 and 2012, according to TUC figures.

TUC General Secretary Frances O’Grady said: “Across the UK families are still really struggling to make their money go far enough – and are often having to go into debt – as they experience a huge squeeze on their household incomes.”

“With real wages still falling, most people are being forced to use their credit cards or their dwindling savings if they need to purchase anything beyond the most everyday of items.”

The growing number of hungry children in poverty Britain - Read Jackie Long's blog

The TUC next week launches its new campaign Britain Needs A Pay Rise to push for decent and fair wages across both the private and the public sectors.

Ms O’Grady added: “We will be urging those employers who can afford to pay a living wage to start doing so.

“If workers have more money in their pockets, they will feel more confident about spending that extra cash and that’s something that families, businesses and UK the economy can all benefit from.”

Resorting to savings

A YouGov survey commissioned by Citizens Advice shows that over half of those on low incomes have had to resort to savings accounts in the past six months in order to meet living costs.

37 per cent of respondents on low incomes report that they have no savings to turn to in an emergency, meaning many have no safety net when they run out of money.

The charity has warned that its bureaux are beginning to see people in employment seek emergency food supplies before they get paid, despite positive unemployment figures earlier this week.

Citizens Advice Chief Executive, Gillian Guy, said: “Millions of families are facing a perfect storm of pressures on their budgets.

“The combined impact of welfare upheaval, cuts to public spending, low wages and the high cost of living are putting unbearable pressure on many households, forcing them to seek emergency help putting food on the table.

“The alarming rise in foodbanks enquiries in the past six months shows that despite good news about falling unemployment, millions are still facing hard times.

Councils leading the way

Some big local authorities have adopted the living wage, such as Cardiff, Birmingham and Newcastle. At Cardiff Council eligible employees saw an increase in their basic salaries from £6.38 to £7.20 an hour.

Cllr Heather Joyce said: “At this time, 2,000 staff are in receipt of the Living Wage Supplement.

“The council has seen many benefits since introducing the Living Wage with anecdotal and direct evidence from staff affected that they valued the council taking this initiative and over the next 12 months we will continue to monitor the situation.”

Despite initiatives by local authorities, some workers in the private sector are still finding it a struggle.

A government spokesman said: “We encourage employers to pay above the national minimum wage when they are profitable and when it’s not at the expense of jobs, which is what the Low Pay Commission takes into consideration when it sets the national minimum wage.

“Despite being in tough times, this Government is doing absolutely everything it can to help people on low pay with the cost of living.

“That’s why we’re taking two million people out of tax altogether, cutting income tax for those on low incomes and freezing council tax.”

Rachel Reeves MP, Labour’s Shadow Chief Secretary, said: “David Cameron and George Osborne would like us to think that our troubles are over, good times are here again. But most families know that this complacency is misplaced.

“Not just a few families on the lowest incomes – but many who thought they were doing alright, yet now find themselves struggling.

“They know that things are getting harder, not easier.”

See our 22 August film on poverty in the Lake District below