The real living wage is the rate the Real Living Wage Foundation sets and updates. Independent experts calculate the wages that UK workers need to live comfortably.
It differs from a national living wage and the minimum wage set by the government. This guide provides all the essential information on the real living wage and its meaning.
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The Real Living Wage is the only rate calculated based on the cost of living. It accounts for inflation, rapid market changes, rent, etc.
The rates are released annually, considering the current population’s needs and the economic environment. Who calculates the living wage? The Resolution Foundation is responsible for all the calculations the Living Wage Commission verifies.
Currently, there are over 14,000 accredited living wage employers in the UK. Those are businesses that pay the real living wage to their employees based on yearly calculations. However, some organisations also use these estimations without acquiring accreditation.
A living wage employer can provide a better package for workers and guarantee comfortable living.
Let’s compare the government’s national living wage, minimum wage, and real living wage rates for 2024.
The minimum wage applies to workers from school-leaving age to 21. In 2024, it will be £8.60 across the whole country. It has been statutory for citizens UK since April 1st.
The national living wage applies to workers over 21 years old. As of 2024, it is £11.44 for the UK. The national living wage is statutory for all employers.
The Real living wage rate is the only UK wage rate based on the cost of living. Currently, it is £12 for all cities besides London. The London living wage is £13.15. It is a voluntary wage rate for every worker from 18 years old. It means that employees are not obliged to pay it legally. However, more than 14,000 organisations choose to do so.
The real living wage is the only wage rate that weights London separately. The cost of living in the capital is significantly higher, especially regarding rent. Because of that, people living and working in London need higher living costs.
So, how does the Living Wage Foundation ensure the rates are relevant? Here is what they are based on:
The voluntary paid real living wage for a year is released to the public only after all stages are complete.
The primary influence of the living costs is inflation. Many products and services have risen in price with increasing inflation. That’s why the basket calculations are given with a strict regularity.
Living costs also differ by region. For most UK cities, they are approximately the same. However, the London living wage is higher. One of the main reasons is that rent is a higher proportion of the basket for citizens of the capital. At the same time, property prices in London are also significantly higher.
That is, employers accredited by the Foundation voluntarily paid more to workers residing in London.
Employers that agree with the real living wage rate aim to provide dignified living to their workers. The main implication is that the government’s national living wage does not truly represent UK citizens’ needs.
For instance, governmental agencies calculate the minimum wage based on recommendations from businesses and trade union organisations. The national living wage is based on a percentage of medium earnings. None of the governmental estimations provide the weight of London.
As a result, if organisations pay an hour’s wage based on the minimum or national living wage, they need to provide what is essential to employees.
The main goal of independent living wage calculation is to ensure more social equity and stability. The root here is direct communication with representatives of different households. Only they can define what comes into the minimal living standard.
The cost of living is not defined only by utility bills and rent. Paying for school uniforms or presents for family members is also a considerable part of a dignified living. For some, it is easy, but for others, it might be much more complicated.
Also, the age groups defied by the governmental policies in terms of pay per hour are not really about equality. Government estimation also falls short of London weighting.
More employers need to join the movement and get accredited. Accreditation gives them a competitive edge when attracting talent and shows their desire to provide decent living conditions for their workers.
More companies joining the initiative would benefit society as a whole. A new rate provides more security and stability to households and the economy. Workers could live comfortably, be economically active, and perform better at the workplace.
The Real Living Wage is a powerful initiative that prioritizes living costs in rate-per-hour estimations, fostering responsible salary practices among businesses. It’s a testament to the UK’s commitment to ensuring its citizens can lead dignified lives. With such a strong foundation, it’s only a matter of time before more companies recognize its value and join the movement.
Government agencies may also account for independent estimations in the future.
