What Counts as a Living Wage in London?

The mayor says it's $14.15 (or £8.80) per hour, but has no plans to introduce legislation to force employers to pay it.

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Reuters

Everyone knows London is expensive, but exactly how much pay do you need to just get by in the city? According to an announcement from Mayor Boris Johnson last week, the rate is $14.15 (£8.80) per hour's work. 

This is the level set for London's next 12 months by the Living Wage Foundation, a body that works with the Greater London Assembly to calculate how much people need to live decently. While some North American cities have recently been trying to get living wage laws on the books (not necessarily with much success), Britain's efforts for fairer pay have so far stood back from actually forcing employers' hands. The Foundation, which sets separate wage rates for London and the rest of the U.K., shows the strengths and weaknesses of the voluntary approach.

While it has no legislative powers, the Living Wage does at least have cross-party support, perhaps because its softly-softly approach means elected officials know they won't be pushed to implement it. The scheme also throws up some interesting questions. What marks the difference between living decently and merely surviving? Can a campaign pushing for decent wages have any effect without legislation to make employers cough up?

Crucially, the Living Wage Foundation insists that for a genuinely healthy economy, we need to be pushing for wages that do more than simply stave off dire want. Its own literature says it calculates what people need to manage:

[an] adequate level of warmth and shelter, a healthy palatable diet, social integration and avoidance of chronic stress for earners and their dependents.

The "avoidance of chronic stress" is perhaps the key concept here, as the hourly rate needed to reach London's poverty threshold is actually lower that the Living Wage. Working out the minimum cost of five key expenses – rent, transport, local tax, childcare and the cost of a "standard shopping basket" – for different types of household, the Foundation's weighted calculation is a rate of $12.30 (£7.65) per hour.

The Living Wage increases this level by 15 percent, to allow earners a small contingency for basic but erratic expenses or emergencies that couldn't be met at a poverty threshold rate. So in London, they estimate the difference between scraping by precariously and living basically but in relative security is a question of $1.75 an hour.

The ultimate $14.15 Living Wage figure for London is still on the low side. It assumes low earners will also apply for the various in-work welfare benefits they are entitled to in Britain, which could top up their income by a dollar or so an hour. While that sounds generous to recipients, critics of government policy have pointed out that these benefits are really a way of keeping wage bills down for employers, shifting some of the burden of paying living wages from businesses to taxpayers.

Recommending decent wages is one thing, enforcing them is another entirely. So far, there is no obligation for any employer to adopt the Living Wage, which is far higher than the U.K.'s official minimum wage of $10.10 per hour. Up until now, the Living Wage’s supporters have relied on the promise of reputation boosts for employers. There's also the economic argument that paying people properly is better for business because it "increases the loyalty of staff, reduces staff turnover and therefore cost [and] increases productivity," as Mayor Johnson told the Standard newspaper.

This is persuasive enough for some, and 432 London companies have so far agreed to pay the wage, an increase of 78 from last year. Among this number are 214 major businesses, a group that includes big name companies such as Barclays Bank and Transport for London, the body that runs the city’s public transit. Beyond this, a pledge from the mayor to make the Living Wage standard by 2020 (by which time he will have stood down) doesn’t really have teeth without clear plans on how to get there. 

In the meantime, many Londoners are falling behind, a pattern repeated across a country that has seen some of Europe's worst wage declines. Twenty-eight percent of Londoners are now below the poverty line, and 17 percent of employees earned less than the Living Wage last year. With average housing costs rising up 12 percent in the last year alone, more and more are likely to be pushed into poverty. At its current rate of expansion, the Living Wage may not help this bottom 20 percent for years.  

What the scheme has done, however, is push low pay up the public agenda. Following last week's announcement, the London press has been full of stories about which companies will and won't pay the Living Wage, from Soccer clubs to Catholic Schools. Meanwhile, Britain's opposition Labour Party has launched a plan to give tax breaks to employers who pay it if they win the next election. With new campaigns for the Living Wage focusing on major supermarkets Tesco and Sainsbury's, The Living Wage Foundation is making it increasingly hard for firms who underpay their employees to slip under the radar.

Top image: Cashier Margaret Thomas scans a customer's shopping at a Tesco supermarket, a current target of London's Living Wage campaign. (REUTERS/Suzanne Plunkett)

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