Since the rise of the national minimum wage last month, Britons have been asking if minimum wage is sufficient to cover the basic costs of living. On the 1st of October, the national minimum wage in the UK increased by 3% for adults over the age of 21 from £6.31 per hour to £6.50 per hour. The rate for 18-20 year olds increased by 2%, from £5.03 to £5.13 per hour.
However, 25% of the Welsh workforce earns less than the ‘living wage’, compared with 17% of the rest of the UK. Not to be confused with national minimum wage the so-called ‘living wage’ is calculated by university researchers as the rate that should, in theory, cover the basic costs of living. Currently, the minimum living wage needed to sustain a basic standard of living is calculated at £7.65-£7.85 per hour outside London. This rate is 21% higher than the current legal minimum wage.
More than 1,000 UK employers have voluntarily adopted the recommended rate for a living wage, benefitting over 35,000 workers, but recent research conducted by KPMG showed millions were still paid well below this rate.
According to KPMG, 5.28 million of the 30.76 million people in employment are being paid less than the living wage. KPMG identified the most likely sector to pay below living wage as the hospitality and catering trade. 90% of people working in bars are paid less than living wage, along with 85% of waiting-on staff and 80% of kitchen and catering assistants.
Miles Kelly, a spokesman for KPMG, said there are sound, economic reasons to increase minimum wage. He stated that, as well as providing workers with a better standard of living, adopting the living wage had actually been proven to increase an organisation’s overall profitability.
A recent KPMG case study on a company that increased the hourly rate for its cleaning staff to living wage showed that, during the first year of improved pay, staff turnover fell from 47% to 24%, saving the company an estimated £75,000 in recruitment costs.
He dismissed claims that the spectre of UK recession was still dictating rates of pay. He said: “For some time it was easy for businesses to hide behind the argument that increased wages hit their bottom line. There is ample evidence to suggest the opposite – in the shape of higher retention and higher productivity.”
Also lobbying to bring national minimum wage in line with living wage is the Trades Union Congress (TUC). The TUC national officer for Wales, Julie Cook, suggested such a move was crucial because low pay was “blighting the lives” of many families. She said: “It is now time for all responsible employers to commit to adopting this standard, which enables workers to earn just enough to be able to live a decent life.”
Whilst industry watchdogs like KPMG and the TUC may think it right and proper for companies to assess the feasibility of paying a “living wage” the reality may be somewhat different. The Confederation of British Industry (CBI) Wales stated many firms are still unable to afford to paying anything more than the national minimum, because a higher rate would come at the expense of jobs.