06 November 2015
Article by Robin Wilkinson, National Assembly for Wales Research Service
According to figures recently produced by KPMG, between 2014 and 2015 the proportion of jobs in Wales that pay less than the Living Wage rose from 24 to 26 per cent. Of the 12 devolved administrations and English regions in the UK, Wales now has the second highest proportion of jobs that pay less than the Living Wage (jointly with East Midlands, West Midlands and Yorkshire and Humber), behind Northern Ireland, where the figure is 29 per cent.
How much do people need to pay for minimum living costs?
The Living Wage (outside of London) is set every November by academics at Loughborough University. It is based on a calculation as to how much money is needed for an average person to meet average minimum living costs. However, the final figure is subject to a cap, to ensure that increases to the Living Wage do not outstrip increases to average earnings in the UK. This means that even though academics think that people need to earn £9.31 an hour, the 2015 Living Wage has been capped at £8.25.
The Chancellor’s National Living Wage is entirely separate, and is not linked to minimum living standards. Instead, the UK Government has instructed the Low Pay Commission (the independent body that advises the government about the National Minimum Wage and National Living Wage) that the minimum wage for over 25s should reach 60 per cent of median earnings by 2020 (estimated to be around £9 an hour). This means that the level of the National Minimum Wage will be determined by the employment market, not people’s needs.
What is the Living Wage?
The Living Wage is a voluntary benchmark which employers choose to adopt. It is set by academics and is intended to reflect the amount of money that someone needs to live a decent quality of life. The current UK Living Wage is £8.25 an hour.
The National Minimum Wage is the minimum pay per hour almost all workers are entitled to by law. The minimum wage rate depends on a worker’s age and if they are an apprentice. The current Minimum Wage for people aged 21 and over is £6.70 an hour.
The National Living Wage was introduced by the Chancellor in the 2015 budget, and is a compulsory minimum wage premium for all staff over 25 years of age. It will be introduced in April 2016. The government has instructed the Low Pay Commission that the minimum wage for over 25s should reach 60 per cent of median earnings by 2020 (estimated to be around £9 an hour). From April 2016, the national living wage will be £7.20 an hour for workers aged 25 and older.
What’s the situation in Wales?
The KPMG figures show that between 2014 and 2015 the number of jobs in Wales that pay less than the Living Wage increased by 26,000. At 35 per cent Gwynedd is the local authority with the highest proportion of jobs that pay less than the Living Wage – an increase of 6 percentage points from last year. The Office of National Statistics also produces Living Wage statistics: although the most current data it has available only covers up to 2014, this page of its website contains some useful infographics and further analysis of jobs paying less than the Living Wage.
The increase in the proportion of jobs paying less than the Living Wage in Wales has taken place alongside a growth in in-work poverty. Recent research conducted by the Joseph Rowntree Foundation concluded that, over the last decade, poverty has risen in working families and fallen in workless families in Wales. In the coming weeks a series of Research Service blog posts will explore other recent developments related to in-work poverty, such as the proposed changes to tax credits and the National Living Wage.