The Living Wage
The voluntary living wage adopted by thousands of employers throughout the UK is set at a level based on CRSP’s Minimum Income Standard.
Accredited Living Wage Employers must currently pay £8.45 an hour outside London and £9.75 in London, to help enable workers to reach a minimum acceptable living standard. The calculation, endorsed by the high-level Living Wage Commission as the best method of setting the figures, uses the MIS budgets to calculate minimum weekly living costs for different household types. This information is combined with data on housing and childcare costs (averaged for different parts of the country) to produce a single living wage figure outside London and another to cover Londoners’ higher costs. The Living Wage Foundation is the body that campaigns for the living wage and accredits employers who pay it.
The MIS research looks in detail at what households need in order to have a minimum acceptable standard of living. Decisions about what to include in this standard are made by groups comprising members of the public. The Living Wage is therefore rooted in social consensus about what people need to make ends meet.
From 2011 to 2015, when a national version of the living wage was being established, CRSP directly calculated its level outside London, while GLA economics calculated the London figure based on an earlier method for estimating living costs. In 2016, the present common method was devised for calculating both figures, with the Resolution Foundation making the calculations in close consultation with CRSP.
The method used from 2011 to 2015 is set out in this paper and applied in the uprating calculation for 2015. The current calculation method follows the same principles as these earlier calculations for the Living Wage outside London, but brings in some additional data on housing and childcare costs and adjusts some technical details of the calculation.
The government's National Living Wage, set at £7.20 an hour from April 2016, is not connected to these calculations: it is a version of the compulsory National Minimum Wage, applying to workers over 25. It is not linked to living costs; by 2020 the aim is that it should be 60% of average wages for over 25s.