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The Real Living Wage: more important now than ever

Spearheaded by the Living Wage Foundation, an increasing number of businesses are committing to the principle that a fair day’s work deserves a fair day’s pay by paying their employees the ‘Real Living Wage’.

November 11, 2020

Earning the Real Living Wage increases my motivation at the workplace, I feel happier because being paid a decent wage makes me feel valued as an employee.”

Lorena, Housekeeper, JLL London
Gemma Piggott, Community and Sustainability Director

Employers have a key role to play in tackling poverty. Spearheaded by the Living Wage Foundation, an increasing number of businesses are committing to the principle that a fair day’s work deserves a fair day’s pay by paying their employees the ‘Real Living Wage’. In JLL’s view, this is the right and proper thing to do. With strong support across government and business – a third of FTSE 100 companies hold a Living Wage Foundation accreditation – it is a critical lever in supporting the alleviation of poverty.

Context: An extraordinarily challenging year

For many people, COVID-19 has brought disruption to livelihoods and incomes quite unlike anything else we’ve experienced, and it continues to have a huge impact on people’s ability to manage their day-to-day costs of living. It is now well documented that the worst effects of the pandemic have fallen unevenly across society, with a disproportionate impact on many already disadvantaged communities. Such is the extent of the problem that in the topsy turvy climate of government-celebrity-responsibility, the footballer Marcus Rashford recently added Front Bench duties to his Forward duties, teaming up with charity FareShare to call for an extension of free school meals for children during the school holidays.

Even before the pandemic took hold, the proportion of people living in poverty who are in a working family had hit a record high. According to the Joseph Rowntree Foundation, a charity and independent social change organisation working to solve UK poverty, “tackling the root causes of poverty has ‘taken on a new urgency’ as COVID-19 risks compounding challenges facing people on low incomes”.

What is the Real Living Wage?

UK wage rates can be confusing. The Real Living Wage differs from the ‘national living wage’, which in turn differs from the ‘minimum wage’. Calculated every year by the Resolution Foundation, an independent think-tank focused on improving the living standards for those on low incomes, the Real Living Wage is an hourly pay rate that is paid voluntarily by organisations. It is distinct from the government-set ‘minimum wage’ (the legal minimum wage for employees under 25), and the ‘national living wage’ (the legal minimum wage for employees over 25).

The Real Living Wage is higher than both the national living wage and the minimum wage and differs in three key ways:

  1. Whereas the ‘minimum wage’ is established through negotiation with business and trade unions, and the ‘national living wage’ is simply a higher tier of the minimum wage and based on a % of median incomes, the Real Living Wage is calculated by looking at the most up-to-date information on what people actually need to get by – inevitably this is more than both the minimum wage and the national minimum wage. It draws on the Minimum Income Standard methodology to produce budgets for different household types, based on what members of the public think you need for a minimum acceptable standard of living in the UK. This is then fed into a calculation of what someone would need to earn as a full-time salary, which is then converted to an hourly rate.

  2. The Real Living Wage includes a separate higher rate for London employees which the others don’t. So, for example, in 2019-20, a 24-year-old employee in London on minimum wage earned just £8.20 an hour. The same employee working for a Real Living Wage employer would have earned £10.75 an hour.

  3. It applies to all workers over 18 – in recognition that young people face the same living costs as everyone else.

Simply put, the Real Living Wage is based on what people truly need to maintain a decent standard of living. It could mean the difference between providing healthy food for a family or skipping meals; or sleeping at night versus worrying about the next overdue bill notice coming in that you can’t afford; and it helps with the little things, like giving a loved one a birthday treat.

You can see an example of how the Real Living Wage compares to the minimum wage and national minimum wage in the table here.

What it means for businesses like JLL

We’ve been championing the Real Living Wage since 2017. In line with the nature of our business, we are one of 150+ ‘Recognised Service Providers’, and our commitment means a couple of things. It means we pay at least the Real Living Wage to all our directly employed staff and third-party staff members not tied to client contracts. (We also took the decision to extend this to our apprentices and interns, even though the accreditation does not require us to do so). It also means that we submit a Real Living Wage costed bid to clients and potential clients at every contract opportunity, giving them the chance to decide if the real Living Wage is right for their organisation. Our experience is that more and more of our partners are demonstrating a willingness and commitment to opting for this.

Why it matters

The Real Living Wage has a tangible impact on people’s lives. Since the launch of the Living Wage Foundation in 2011, over 250,000 employees have received a pay rise, with leading employers such as Aviva and Google part of the movement.

Paying an employee the Real Living Wage recognises and fairly rewards the value of employees and supports people to live with dignity and security. Lorena, a housekeeper and cleaner at JLL’s offices in London shared her thoughts:
“Although it’s only two pounds higher than the living wage, it has a significant impact on my living standards. Being paid the Real Living Wage provides me with an opportunity to rent a flat instead of living in shared accommodation, cover constantly increasing travel expenses, helps to save for the future, support my extended family back home, as well as afford to have holidays abroad. It also means that I don’t have to work additional hours and have more family time. Earning the Real Living Wage increases my motivation at the workplace, I feel happier because being paid a decent wage makes me feel valued as an employee.”

And with social purpose high on the agenda for many forward-thinking businesses, the Real Living Wage delivers not only societal but also business benefits. Businesses are increasingly aware that employees want to work for organisations that place equality, fairness and purpose at their heart. The Living Wage Foundation has found that 85% of those accredited reported an enhanced reputation as an employer, 76% of large organisations reported improved recruitment and retention, and 78% of large employers reported an increase in staff motivation. This isn’t something which is likely to fade in importance with employees of the future too: 93% of university students want to work for living wage employers.

Conclusion: Recovering from COVID-19 with fairness

If the basis of the Real Living Wage is a fair day’s pay for a fair day’s work, it’s hard to get comfortable with the opposite, particularly in the context of COVID-19. If people aren’t getting paid what is needed to at least enable them to meet the costs of living, it is obvious that many individuals and families will be having to make very difficult decisions about how they manage their lives. Paying the Real Living Wage not only improves the lives of individuals but brings benefits to businesses and the economy overall. And as discussed in our recent paper, Reimagining real estate: Achieving a sustainable and just recovery, the Real Living Wage is a key feature of crafting a recovery from COVID-19 which prioritises social and economic justice. As is the way with issues such as these, it's about ensuring companies understand the real impact they can make on people's lives by introducing the Real Living Wage.

The Real Living Wage rates for 2020/21 were announced on Monday 9th November 2020.