# 97 (2013) What’s The Point Of The Living Wage?
For all the fuss we keep on hearing about the living wage, how many of us will actually benefit from ideas being toyed about in Government right now? The living wage is defined as ‘the amount an individual needs to earn to cover the basic costs of living’. It is not the same as the minimum wage. It is ‘an informal benchmark, not a legally enforceable minimum level of pay’. Crucially this means that no one has to pay it to you if they don’t want to, or can’t.
But that amount will depend on where you live, what your outgoings are, who you are financially responsible for and ultimately whether your employer thinks you deserve it. What if you’re working part time or have several jobs? Is that amount before or after tax and National Insurance, both factors likely to take you under that threshold after net pay.
If you’re living in London the living wage (currently £8.55ph) is significantly higher than for someone living outside of the capital (£7.45ph). But equally, the minimum wage (£6.19ph rising to £6.31ph on 1st October this year) is still the legal norm and therefore no one is obliged to pay more. So the chances are that, in austere times such as these, there are many people who are not going to see the benefits of any new legislation that might come into force.
There are currently 4.8m people earning below the living wage. That’s 4.8m people not able to pay their bills and ultimately getting into debt or living in sub-standard conditions somewhere along the line. And that’s a situation unlikely to change much if the living wage becomes an actual thing.
Bearing in mind that I am still exempt from paying tax at the moment, the job I have (not the business) is a minimum wage job. I am told it’s not worth any more so the chances of me seeing £7.45ph with this employer are non existent, even though they are a big corporation. I can see why they think it’s only worth the minimum but that means bugger all to the person trying to pay bills with it. Still remembering I don’t pay tax, if I was doing this full time on the current wage I would still not be earning enough to pay my basic bills but would on the living wage before tax. After tax and NIs, I would then be under the living wage and back to square one again. I have fairly limited outgoings. It is only the personal allowance that means I can even consider jobs like these, which is why the allowance is there, to get poorly paid and part time jobs filled.
So far only 277 employers are using the living wage scheme although that doesn’t take into account those who are paying well above the minimum as standard. But that’s still pretty poor figures for the UK as a whole and it’s a reflection of how companies are keeping their purse strings tightly drawn for now. If staff are getting by somehow on what they are earning, no one is going to offer more. And how many employees are likely to inquire about a rise anyway?
It is clear there are financial benefits to some employers to keep staff on minimum pay. Some companies who ‘pay their staff too little are benefiting from taxpayers, who subsidise the low wages of their staff by paying their employees top-up state benefits such as tax credits’.
But ironically ‘…If basic pay levels were higher on average’, so the argument goes, ‘then the state would save a fortune in benefits’.
Sometimes you have to speculate to accumulate. But I suspect there’s more chance of the minimum wage rising to the living wage levels we’re on now, than most employers embracing the living wage ethos. And that’s still some way off yet.