The idea of a living wage and its effects on the economy is hotly debated. Critics argue that implementing a living wage establishes a wage floor, which harms the economy. They claim that companies will reduce the number of employees hired if they have to pay increased wages. This creates higher unemployment, resulting in a deadweight loss, as people who would work for less than a living wage no longer get offered employment.
These payments are for:
All other payments made out of your wages, such as tax and National Insurance, should be included when your employer calculates whether you ‘ve been paid the National Minimum Wage.
There are a number of important differences between the government’s ‘national living wage’ and the independently calculated, voluntary Real Living Wage rate of pay. The ‘national living wage’ is a rebrand of the National Minimum Wage, and is £8.72 per hour (as of April 2020) across the whole country. It is a statutory minimum and all employers have to pay it to employees over 25 years of age. There is one rate for the whole country with no allowance for the higher costs of living in the capital. The Real Living Wage, on the other hand, is independently calculated, voluntary and based on the cost of living. The Real Living Wage has different rates for London and the rest of the country, recognising the higher costs of living in London. The London Living Wage rate is £10.85 per hour and the rate for the rest of the UK is £9.50 per hour. We have provided substantial funding for the campaign to increase the number of employers paying the Real Living Wage.
A living wage refers to a theoretical income level that allows individuals or families to afford adequate shelter, food, and other necessities. The goal of a living wage is to allow employees to earn enough income for a satisfactory standard of living and prevent them from falling into poverty. Economists suggest that a living wage should be substantial enough to ensure that no more than 30% of it gets spent on housing, and this amount will often be substantially higher than the legal minimum wage.
Supporters of a living wage, on the other hand, argue that paying employees higher salaries benefits a company. They claim that employees who earn a living wage are more satisfied, which helps to reduce staff turnover. In addition, they believe that a living wage reduces expensive recruitment and training costs for a firm. And they point out that higher wages boost employees' morale, which may mean they are more productive, allowing a company to benefit from increased worker output.
The Living Wage campaign had been around for a number of years, but it lacked resources. We felt that with significant additional investment, a step-change in the campaign could be achieved. We wanted to see more employers signing up; wider recognition of the real Living Wage among politicians and the general public; a formal accreditation system for employers being designed; and a better evidence base about the costs and benefits of a real Living Wage.
These payments are for:
All other payments made out of your wages, such as tax and National Insurance, should be included when your employer calculates whether you ‘ve been paid the National Minimum Wage.
The Real Living Wage (the voluntary rate of pay, based on the cost of living)
Calculating the Living Wage
As noted above, a living wage is not the same thing as a minimum wage. Earning a living wage means you can pay necessary costs, including shelter, food, healthcare, childcare, taxes, and transportation. In addition, a living wage may be different depending on your circumstances, including the state and town in which you live. In 2003, the Massachusetts Institute of Technology created a Living Wage Calculator, and it updates annually in the first quarter.
The online calculator provides the living wage, minimum wage, and poverty wage for 50 states, plus counties. If you are using the calculator, first plug in the state and choose from a list of counties. The calculator will show you the wages for individuals, couples (one or both working), and families with up to three children.
An alternative to a living wage could be a liveable federal minimum wage that allows individuals and families to earn enough to pay for basic necessities and medical care. Another alternative is a form of universal basic income from the federal government that would cover basic costs of living. There are various plans around universal income, from only giving money to those earning below the poverty line to paying every citizen a certain amount of money.
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