Sunday, 2 November 2014

The Living Wage and perceptions of pay

Andrew Fisher, author of The Failed Experiment ... and how to build an economy that works, assesses whether fair pay is in the eye of the beholder

We know that five million UK workers are paid less than the living wage of £7.65 per hour (£8.80 in London). For a full time job - 37.5 hours a week - the living wage equates to just under £15,000 a year (or a little over £17,000 at the London rate).

Of course due to the 10% drop in real incomes since the recession, the public sector pay cap, the rise in insecure temporary and zero hours contracts, low income self employment, and the rise of low skill jobs in the economy, many more people have slipped down the income scale.

While 60% of those on low or medium incomes report that their wages have not kept up with the cost of living, that drops to 50% for those earning over £50,000 (TUC/YouGov poll data).

In a more stark comparison, less than a quarter those on the lowest wages (less than £15,000 a year) report that they "get good benefits" on top of their pay, while over two-thirds of those earning £50,000 or more say that they do. This is merely a reflection of the insecure nature of low paid work - much of it temporary, non-unionised, and on zero-hour contracts.

There is some unanimity between the lowest paid (<£15k) and the higher paid (>£50k) in that the a little over 50% of both groups believe "my employer can afford to give better pay rises". However, while there might be unity against the boss, there is divergence on the question of fairness.

When the lowest paid were asked if the pay gap was too great in their organisation 59% agreed, with only 7% disagreeing. The higher paid agreed overall but by a much narrower margin (45% to 27%).

Similarly on whether "pay for those lower down in the organisation has not gone up as much as pay for those at the top". The lowest paid agreed by a margin of 52% to 13%, but the higher paid only narrowly by 36% to 29%.

Interestingly on performance-related pay (where it operated), all income groups below £50,000 said the system was not fairly operated by a margin of over 10 percentage points, but those earning over £50,000 said it was fair by over 10 percentage points.

Finally, on the living wage, 48% of those earning less than £15,000 (less than the UK living wage full-time) agreed with the statement that their employer does "not pay the living wage but I think they could afford to", whereas only 7% of those earning £50,000 said the same. However, since 73% of £50K+ earners say their employer does pay the living wage, it is possible that we are talking about different groups of employers (e.g. in different sectors), or it is that higher earners have a more benevolent view of the company and the boss than lower earners?

Due to the fact that over 1,000 employers have signed up to be Living Wage employers, it is expected that when the UK living wage rate increases tomorrow (Mon 3 Nov) then 35,000 workers will be getting a pay rise.

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