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What is the real Living Wage?



Logo of Living Wage accreditation

The real Living Wage is a voluntary minimum hourly rate designed to cover the average person’s living costs. Over 14,000 organisations are committed to paying their employees the real Living Wage, including Grace Enterprises and its related businesses. 22% of people in the UK live in low-income households (below the real Living Wage), and we are passionate about playing our part in seeing that figure come down.


In this article, we will compare the real Living Wage to the National Living Wage, explore the history of the Living Wage and consider the role that businesses can have in bringing about positive change to society.


 

How is this different from the National Living Wage?


The National Living Wage (NLW) is the legally mandated minimum hourly rate that a person over the age of 23 must be paid in the UK. This rate is based on a percentage of the median UK salary. The NLW is currently £10.42 (£11.44 from 1st April 2024), which is about 63% of the median income. Although this is officially above the poverty line, it is not based on actual living costs or the actual composition of UK households. For example, the Child Poverty Action Group states that 70% of children living in poverty in the UK have at least one parent in paid work.


The real Living Wage is determined by an independent commission that considers the actual costs of the goods and services required to provide a minimum acceptable standard of living – food, rent, childcare, school uniform and so on. Then an appropriate hourly rate is calculated (currently £12.00), taking into consideration the current tax and welfare systems, as well as different household types. The rate is higher in London (currently £13.15) to reflect the elevated cost of living, particularly in terms of housing, compared with the rest of the UK.


The NLW is significantly less than the real Living Wage. For 2023, the average UK citizen living outside London and working 30 hours a week who was paid the NLW would have earned £2,465 below the minimum income required for an acceptable standard of living as determined by the Living Wage Commission. A survey into households below the average income showed that in 2022, there were 9.5 million people in the UK whose weekly pay was below the poverty line.



 

What is the history of the real Living Wage?


In 1997, the Low Pay Commission was established, with their first report leading to the passing of the National Minimum Wage Act of 1998. The first National Minimum Wage was brought in on 1st April 1999, ensuring that everyone aged 22 and over should be paid at least £3.60 per hour. 


In 2001, Citizens UK launched the Living Wage campaign due to their concern about ongoing widespread low pay. In the following years, the group lobbied the government and major employers for a real Living Wage. Slowly the movement gained momentum and influence. In 2011, the first real Living Wage rate for the whole UK was published and the Living Wage Foundation was recognised nationally. A major milestone came during the 2012 London Olympics, where all workers were paid the real Living Wage. 

In 2016, the UK government brought in a higher rate of pay for those aged 25 and over, which they branded the National Living Wage. The specified goal was for the NLW to contribute to moving the UK from “a low wage, high tax, high welfare society to a higher wage, lower tax, lower welfare society”. A target was set for the NLW to be  60% of the median UK income by 2020. 


Since then, the NLW has been applied to lower age groups, and will include 21-year-olds from 1st April 2024. The NLW reached the target of 60% of the median UK wage and it has been extended to 66% in 2024. The improvements to the NLW are good progress, but unfortunately the NLW still does not meet the basic costs of living as determined by the Living Wage Commission. 


In 2024, more than 14,000 companies are committed to paying their workers a real Living Wage. However, there are still 1.6 million people paid at or below the NMW, according to the National Minimum Wage statistics report



 

Why does Grace Enterprises pay a real Living Wage?


At Grace Enterprises, we are committed to paying all our employees the real Living Wage, in line with our vision to see lives transformed through supportive employment in our sustainable businesses. According to the National minimum wage statistics, 45% of all jobs paying at or below the minimum wage are in retail, hospitality, cleaning, and maintenance occupations. As our businesses are within the most vulnerable sector of the workforce, paying a real Living Wage significantly benefits our employees’ lives. 

It is obviously positive for our teams, but what about our businesses? Can a business succeed while paying its employees more? Our experience has been an emphatic “yes”! Businesses that voluntarily champion the real Living Wage truly can outperform those that might begrudgingly pay the NLW. Of the thousands of real Living Wage employers, over 94% say that their business has benefitted from being accredited with the Living Wage Foundation. Our people are at the heart of all we do, and we find that our staff are more invested in the success of our businesses because they can see that we care about them and want them to be paid a proper wage.  

As businesses in the local economy, we feel it is our responsibility to positively contribute to the community. Grace Enterprises supports the community by employing people who have faced multiple barriers to work, helping them to transform their lives and providing purpose, dignity and hope for the future.


If you are interested in partnering with Grace Enterprises, or in buying from any one of our real Living Wage social enterprises, we’d love to hear from you. And if you are an employer yourself, you might like to read abut even more benefits of becoming registered with the Living Wage Foundation.



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