The Living Wage and the working poverty trap

The Living Wage and the working poverty trap

Mark Williamson urges employers to investigate the benefits of the Living Wage


Partner, People Powered Performance



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It’s been good to see the Living Wage getting more headlines in the news in recent weeks. A growing number of organisations are waking up to the fact that paying the Living Wage goes a long way towards boosting productivity and reducing the costs so often associated with high staff turnover. The importance of the Living Wage was also echoed by the Archbishop of York, Dr John Sentamu, who recently cited KPMG’s research.

A big part of the value of this campaign, aiming to widen the adoption of the Living Wage, is that it’s a powerful voice – it speaks up for those members of the UK workforce who are arguably most in need of being heard. These are employees who may be caught between the desire to contribute to society and the inability to afford to do so; those sometimes referred to as being caught in the ‘working poverty’ trap. With that in mind, it’s no surprise that our research highlighted that it’s younger workers, part time workers, and women who are most likely to be earning less than enough to support a basic quality of life. Drill even further, and you can even see that the individual most likely to be earning less than the Living Wage is a 26 year old female working in Outer London as a sales assistant.

Although the number of young unemployed continues to fall, it is clear from analysis of the data that younger workers remain the most likely group to be caught in the ‘working poverty’ trap. eventy two percent of 18-21 year olds are currently earning less than the Living Wage, compared to just 15 percent of those aged 30-39. In real terms this equates to 1,175,000 employees of traditional university age failing to earn enough to support the purchase of basic necessities.

Our research also shows that the proportion of people earning less than £7.85 per hour (or £9.15 in London) – which are the rates announced during Living Wage week - is much higher among part-time workers. More than 4 in 10 (43 percent) take home less than the Living Wage, compared to 13 percent of full-time employees.

And more than forty years after the first Sex Discrimination Act was passed, the research also finds that women are more likely to be paid below the Living Wage than men. This year’s data shows, for example, that 1 in 4 women (25 percent) earn less than the benchmark, compared to 16 percent of men.

There are more than 1,000 organisations Accredited Living Wage Employers, and while this can be a complex issue and it may not be right for every business, I’d urge employers to investigate the potential benefits of the Living Wage – not just the benefits to staff, but the business benefits such as better retention and performance of staff.

This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.

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