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Making the Living Wage: The Resolution Foundation reviews the Living Wage

The recommendations outlined in this ‘Making the Living Wage’ review launched today by the Resolution Foundation aim to further strengthen the Living Wage campaign. They set out an improved Living Wage methodology to underpin the campaign as it moves into the next stage of its development while being more firmly grounded in the cost of living. The main recommendations of the report are:

  • While the National Living Wage is a welcome boost to low earners, the Living Wage with its genuine link to an acceptable cost of living, remains as vital as ever.
  • The report argues that improvements are possible in both methods and seeking alignment will inevitably lead to change. The authors assert that the recommendations outlined in this review represent a genuine improvement over the current methods. The aligned method should be more representative, more robust and, most importantly, driven to a greater extent by changes in the cost of living.
  • Inevitably, calculating a Living Wage requires judgement calls. Policy changes like the introduction of Universal Credit would always have required judgements on how the new system is phased into the rate. Having a body like the Living Wage Commission to make such decisions when required in future can only be an asset to the Living Wage campaign as it moves forward.
  • The natural question which follows these recommendations is what impact is likely on the rates themselves. However, the next steps are for the Living Wage Commission to consider the recommendations. The options they choose will determine the extent to which the rates vary from their current levels.
  • Broadly speaking however, the aligned method recommended is likely to have an upward effect on the London Living Wage. This is an unavoidable consequence of a Living Wage rooted in an up-to-date ‘basket of goods’ with a more diverse mix of family types. There is a clear discrepancy in the target income between London and the rest of the UK, and as highlighted by recent analysis on the size of London salary weightings[1] the differential between rates should be larger than at present. The exact size of the increase will depend on the Living Wage Commission and Mayor’s response to this review. They also have a role in setting out how to implement and transition to the new rates in London and the rest of the UK.

The Living Wage Commission is expected to respond to this review in September 2016. With a strong, aligned methodology and an enhanced governance structure, the report’s authors see no reason why the Living Wage cannot continue to raise the wages of workers across the UK, delivering more families an acceptable standard of living.