The Living Wage

Topics: Minimum wage, Employment, Wage Pages: 6 (2097 words) Published: March 18, 2013
Assess the case for and against the setting and enforcement of a living wage in the United Kingdom.

The living wage is supposed to be set high enough to allow people to be able to afford the basic costs of living. The basic costs of living are defined by “an adequate level of warmth and shelter, a healthy palatable diet, social integration and avoidance of chronic stress for earners and their dependents.”[1] In many areas of the UK, minimum wage is not high enough to meet these standards especially in areas of London where costs of living are much higher than other areas of the country. The current minimum wage in the UK for people aged 21 and over is set at £6.19[2] whilst the current living wage rate in the UK is set at £7.45 and £8.55 in London[3]. The living wage is set at a higher rate than the minimum wage and set even higher in London as the basic costs of living in London are much higher. It is calculated according to the basic cost of living in the UK and so should make sure that people can afford the basic necessities and not be in poverty. The living wage is a very important issue as the minimum wage is not set high enough for some people to maintain a normal standard of living. Many families earning the minimum wage are living in poverty as they can’t afford to pay the basic cost of living. When the minimum wage was first introduced in 1999 it was set at £3.60 for workers aged 22 and over. It has increased every year since. In 2010 the minimum wage was set at £5.93 for workers aged 21 and over and currently sits at £6.19 for workers aged 21 and over. However the increases in the minimum wage will leave it lower than it was in 2004 in real terms when inflation is taken into account. When the national minimum wage increased to £6.19 in October it had increased by a lower percentage than inflation 3 years in a row leaving it 6% lower in real terms than it was in 2009[4].This shows that the minimum wage is not adequate enough to pay the basic cost of living. This also adds to the argument that the living wage is extremely important, as in real terms the minimum wage is becoming less sufficient as a policy to reduce poverty. There are important arguments for and against the living wage. The living wage will provide higher wages for workers if employers decide to pay it. Independent studies have shown that the living wage has caused an increase in the quality of the work of staff and also a fall in absenteeism. Also, firms that have opted in to pay the living wage felt a positive reception from customers who are aware of the organisations commitment to be ethical employers[5]. The living wage also provides households with a higher income, this provides families who work more than one job and spend little time together the chance to work less, see an increase in their standards of living and spend more time together. The living wage should help households to afford the basic cost of living, leading to a decline in poverty, better standards of living and many other benefits both in the short term and the long term. However there are no exact figures to show much more productive the workers are. If workers are more productive because of the living wage that isn’t to say that the workers are being productive enough to cover the extra cost caused by the living wage. A living wage however means any firms who adopt the living wage will see an increase in costs of production to the increase in wages. For many larger firms this may not be as much of a problem but it may be difficult for small firms or firms just entering the market to afford the living wage. Customers may then choose not to shop there and take their custom elsewhere because of the social and ethical factors behind the living wage. Also because of the increase in wages, firms may have to increase prices to cover the rise in costs. This can lead to cost-push inflation. The living wage can also lead to a fall in employment. Many firms would not be able to...
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