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The Living Wage: because a fair day's work deserves a fair day's pay

By Neville White, Head of SRI Policy & Research
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The Living Wage Movement

To mark Living Wage Week recently, investors, companies and campaigners gathered at the London Stock Exchange for the traditional market opening and to celebrate perhaps one of the most successful grass roots campaigns of recent times.

Begun in 2001 as a citizens’ campaign for fair wages, the Living Wage movement has flourished into a national network of responsible businesses committed to paying a minimum hourly wage necessary to provide housing, food and other basic needs for an individual and their family. This ‘minimum necessary’ was first set in 2005 with endorsements from the Mayor of London in particular, with a London and national rate applicable to all workers and contractors over the age of 18. 

It is sobering to remember that 21% of all those in UK employment earn less than the voluntary Living Wage, equating to 5.5m people, and disproportionately affecting women (26% of all women in general employment versus 16% for men). The hidden victims of ‘in work poverty’ are children with two thirds of child poverty occurring in families with a parent or guardian in work.

How it is Calculated

The Living Wage is calculated on a basket of goods that reflect how people actually live rather than what the market can economically bear. It includes food, housing heating and money needed to buy occasional treats such as birthday gifts. It reflects the needs of real people in real households in every part of the UK.

This compares to the statutory ‘National Living Wage’ (NLW) introduced by former Chancellor George Osborne, which is based on a percentage of median earnings. The NLW applies universally, with no regard for the higher cost of living in London, and importantly, is age discriminated, applying in law only to those over the age of 25. Younger workers continue to receive the much lower National Minimum Wage introduced by the Labour government in 1997, with rates set by the Low Pay Commission.

The landscape has become complex with different rates applying to different target groups (there are four national minimum wage rates depending on age and status for instance that go as low as £3.50 an hour for the apprentice rate). By comparison the Living Wage is the only recommended metric paying a ‘cost of living’ wage for all employed and contracted adult staff of 18 years and above. At age 18 the differential is most stark and of greatest value; £5.60 under the National Minimum Wage versus £8.75 (national rate) or £10.20 (London rate) under the Living Wage.

Advancing the Cause

From grass roots origins, the Living Wage has grown to encompass 3,600 employers with around 150,000 workers receiving the enhanced hourly wage. Just over a third of FTSE 100 companies have become accredited Living Wage employers affecting 15,000 low-paid staff. A further 12 FTSE 100 companies apply the standard by have not yet pursued formal accreditation.

The incidence of ‘in work poverty’ is among the most disheartening and pernicious of modern phenomena and we view the Living Wage as the natural pursuit of social justice for low paid workers. There is also a strong business case; employers adopting the Living Wage report enhanced staff morale, motivation and productivity, with improved retention and reduced absenteeism. It also sets a high bar of leadership and demonstrative responsibility for an employer.

EdenTree has long championed the Living Wage with our parent, Ecclesiastical, an accredited Living Wage employer. As part of our 2018 engagement strategy we will renew efforts to nudge FTSE 100 companies towards accreditation, and will for the first time integrate it holistically into our voting policy as part of our overarching approach to assessing remuneration.

We do not underestimate the challenges which some companies face in applying the Living Wage; by and large FTSE 100 companies that have already accredited do not represent those industries with the most significant numbers of lower paid staff, e.g. retail, care, service and hospitality. Nevertheless, the success of the Living Wage campaign in lifting working families out of in work poverty has to be an aspiration worth pursuing so that a ‘fair day’s work always deserves a fair day’s pay.’



EdenTree Investment Management Limited (EdenTree) Reg. No. 2519319. Registered in England at Beaufort House, Brunswick Road, Gloucester, GL1 1JZ, UK. EdenTree is authorised and regulated by the Financial Conduct Authority and is a member of the Investment Association.