Voluntary living wage rise to ‘pose a real challenge’ for low-paid sectors

This week, the voluntary living wage for workers living in London has increased 35p to £9.75 per hour, to reflect the higher cost of living facing families in the city – an increase of 3.7%

This means that a full-time worker aged 25 or over on the voluntary living wage in London could earn £95 a week more than if they were paid the government’s national living wage (NLW).

Meanwhile, over-25s elsewhere in the UK would be £45 a week better off, as elsewhere in the UK the voluntary living wage rate, as calculated by the Living Wage Foundation, has increased by 20p to £8.45 per hour, making it 17% higher than the government’s NLW of £7.20 for over 25-year-olds.

However, the new rates will pose a challenge to employers in low-paying sectors such as retail, caring and hospitality, according to Dr Angela Wright, Senior Lecturer in Human Resource Management at Westminster Business School.

“The rise in the Voluntary Living Wage rates announced today will pose a real challenge to employers in low paying sectors such as retailing, caring and hospitality. While there are employers in those sectors who have agreed to pay the minimum pay rates of £8.45 outside London and £9.75 an hour in London, whether or not organisations will agree to pay these rates will in large part depend on the proportion of their workforces currently earning at least these levels,” she said.

She continued: “Several strands of research indicate that the business decision to voluntarily pay the higher rates is based on managerial judgements about the relative costs and benefits of doing so. When the benefits of the higher pay rates – principally, positive reputational value and higher productivity – do not outweigh the extra costs, then organisations may not sign up to the voluntary living wage.”

When the increase was announced on Monday, Katherine Chapman, Director of the Living Wage Foundation, said: “Today’s new living wage rates bring a welcome pay rise to thousands of workers across the UK.

“One in five people earn less than the wage they need to get by. That’s why it’s more important than ever for leading employers to join the growing movement of businesses and organisations that are going further than the government minimum and making sure their employees earn enough to cover the cost of living.”