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The Guardian - UK
The Guardian - UK
Phillip Inman

Real living wage rises to £12 an hour as cost of living crisis continues

A woman walks past a Lush shop
Lush is one of the 14,000 employers that pays the real living wage. Photograph: Dave Rushen/Sopa Images/Rex/Shutterstock

Almost half a million workers in the UK whose employers are signed up to pay the voluntary real living wage are in line for a pay rise to at least £12 an hour, taking their annual wage to £3,000 a year above the government’s minimum wage.

The Living Wage Foundation said employers in London that are part of the scheme will pay an enhanced rate of £13.15 an hour to cope with the extra costs of living in the capital.

According to the charity that sets the rate, the rise was needed after research found the cost of living crisis continued to affect many of Britain’s low-paid workers.

It said recent polling of those earning below the real living wage found 60% had visited a food bank in the past year and 39% regularly skipped meals for financial reasons.

The real living wage is paid by more than 14,000 employers and their contractors, up from 11,000 last year, including Aviva, Ikea, Burberry and Lush.

These firms will increase basic pay levels by £1.10 to £12 an hour across the UK, and by £1.20 to £13.15 an hour in London.

The statutory national living wage – a different measure set by the state, otherwise known as the minimum wage – currently pays £10.42 to workers over the age of 22.

Katherine Chapman, the Living Wage Foundation’s director, said employers that signed up to pay the higher wage were rewarded with “a more motivated and engaged workforce”.

She said the scheme had given £3bn in extra wages to low-paid workers since 2011 and remains the only one in the UK “independently calculated based on what people need to live on”.

Employers that pay the real living wage can push through the increase immediately or wait until a final deadline next May.

Labour created the minimum wage in 1998 to raise the incomes of the lowest paid. Believing the rate to be too low, the Living Wage Foundation’s real living wage, based on research by the Resolution Foundation into the day to day costs of low income earners, was established in 2005.

In 2015, the then chancellor George Osborne said a higher rate band for 25-year-olds would be rebranded as the national living wage. This left the remaining three bands for younger groups to continue as national minimum wage levels, which are currently £5.28 for 16 to 17-year-olds, £7.49 for 17 to 20-year-olds and £10.18 for 21 to 22-year-olds.

This month the government said the national living wage will rise from £10.42 to at least £11 an hour from April 2024, though the chancellor is not expected to give a final figure until the autumn statement on 22 November.

Inflation soared last year above 11% in response to steep rises in the cost of oil, gas and food before falling back to 6.7% last month, according to official data. Wage increases tracked below inflation for more than 18 months to take their inflation-adjusted level back to 2008 levels.

While recent increases in pay have surpassed the consumer prices index, City workers and business executives have been the ones to benefit the most.

Recent research by the foundation found that despite easing inflation, 50% of low-paid workers were worse off financially than a year ago.

This year the foundation said analysis of pay for 3.5 million low-income workers showed that half a million more working women are paid below the real living wage than their male counterparts.

It said women had been harder hit by the cost of living crisis because they tend to earn less.

More than 2 million women are paid below the real living wage, the foundation said, representing 14% of all working women, compared with 1.4 million (9%) men. Overall, 60% of all jobs that pay below the real living wage are held by women.

A government spokesperson said it would abide by the Low Pay Commission, which recommends the level of the national living and minimum wages. The commission has not yet confirmed its proposals for next year, but it estimates the rate needed to meet a government target that it should be at least two-thirds of median hourly pay by October next year, will mean the level is between £10.90 and £11.43.

“Unlike other organisations, the Low Pay Commission also considers the impact of changes to our National Living Wage on businesses and the economy to ensure we strike the right balance,” they said.

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