Contemporary UK wage floors and the calculation of a living wage
| Pages | 815-824 |
| Published date | 02 October 2017 |
| Date | 02 October 2017 |
| DOI | https://doi.org/10.1108/ER-03-2017-0048 |
| Author | Donald Hirsch |
| Subject Matter | HR & organizational behaviour,Industrial/labour relations,Employment law |
Contemporary UK wage floors
and the calculation of a
living wage
Donald Hirsch
Centre for Research in Social Policy,
Loughborough University, Loughborough, UK
Abstract
Purpose –The purpose of this pape r is to describe how the voluntary living wa ge (LW) in the UK is set.
It examines how this calc ulation relates to contempo rary approaches to setting wage floors, both in relatio n
to their goal of supporting ad equate living standards a nd in relation to the place of wage f loors in the
labour mark.
Design/methodology/approach –The paper examines how compulsory and voluntary wage floors are
being determined, in the UK and in particular the role of public consensus in contributing to the calculation
and adoption of a LW. It then reflects on the future sustainability of a system of wage floors in which the
concept of the LW plays a significant role.
Findings –The central finding is that widespread support for wages delivering socially acceptable minimum
living standards has transformed the context in which low pay is being addressed in the UK. The LW idea
has stimulated more decisive efforts to do so; however, if a compulsory version of a LW were to reach a level
shown to be harming jobs, this could seriously undermine such efforts. Moreover, the extent to which
adequate wages are compatible with high employment levels can also be influenced by state support for
households, especially tax credits and Universal Credit.
Originality/value –The paper clarifies how the setting of the UK LW contributes to objectives related both
to living standards and to labour markets, and critically addresses some key issues raised.
Keywords Minimum wage, Living wage, Minimum income, Living standards
Paper type General review
1. Introduction
The central idea behind a living wage (LW) is that it should provide workers with enough
income to live at a level considered sufficient in terms of contemporary norms and values.
This immediately distinguishes it from a minimum wage, which refers to a statutory
threshold that employers are required to pay, regardless of the basis on which its level is set.
However, these concepts start to overlap where minimum wages seek in some explicit way
to support adequate living standards, and in particular where the term “LW”is used to
campaign for or to make claims about a compulsory minimum. The introduction in 2016 of
the UK’s“National Living Wage”(NLW), a compulsory rate for workers over 25, aiming to
improve workers’living standards yet not calculated with reference to living costs, has
partially merged policy debates on LWs and minimum wages that had previously been
largely separate.
This paper describes current approaches to wage floors in the UK, the methods by which
they are set and their distinctive and overlapping objectives. It then goes on to consider how
living and minimum wages might develop in the UK over the next few years, and how they
Employee Relations
Vol. 39 No. 6, 2017
pp. 815-824
Emerald Publishing Limited
0142-5455
DOI 10.1108/ER-03-2017-0048
Received 1 March 2017
Revised 31 May 2017
Accepted 28 June 2017
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/0142-5455.htm
© Donald Hirsch. Published by Emerald Publishing Limited. This article is published under the
Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and
create derivative works of this article (for both commercial and non-commercial purposes), subject to
full attribution to the original publication and authors. The full terms of this licence may be seen at:
http://creativecommons.org/licences/by/4.0/legalcode.
815
Calculation of a
living wage
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