An Evaluation of the Living Wage: Identifying Pathways Out of In-Work Poverty

Abstract

This article reports the results of a case study on the introduction of the living wage. Three employers in the City of York became living wage employers. Using data derived from a sample survey of their employees and qualitative interviews, this article explores what impact the receipt of the living wage had on poverty and deprivation. It found that not all living wage employees were income poor or deprived, although those on living wage rates were more likely to be poor and deprived than those on even higher wages. The more important determinant of the employees’ living standards was the household they lived in, and there were a high proportion of living wage employees living in multi-unit households. Also important were the number of earners in the household and the hours worked by the living wage employee. Lone parent families and single people appeared to be most vulnerable to poverty and deprivation. In addition, whether the employee took up their entitlement to in-work benefits was critical and, using benefit checks by welfare rights experts, it was found that some were not.

The Living Wage in the UK: testing the limits of soft regulation?

“…Indeed, as a poverty fighting tool, living wages have been argued to be ineffective as many poor workers are not low-wage workers; and many low-wage workers are not poor (Macpherson, 2004). Certainly, the effects of living wages on overall household incomes are strongly shaped by household composition effects, and living wage calculations assume that workers are aware of and claim all additional benefits to which they are entitled, such as housing benefits and in-work tax credits among others (Linneker and Wills, 2016;Swaffield et al, 2018). Clearly it is not a zero-sum choice between higher wages and stronger systems of social protection; as Heery et al (2017: 810) argue: 'the Living Wage should be conceived of as a complement, a means of adding to the redistributive effect of statutory regulation of wages and of tax and benefit policy rather than as an alternative to these methods'.…”

“…However, evidence from the UK also suggests that those paid at or below the Living Wage are more likely to be income poor and materially deprived than employees with wage rates above the Living Wage, and that paying employees the Living Wage or higher is likely to reduce the risk of poverty (Linneker and Wills, 2016;Swaffield et al, 2018). This is particularly the case for single earners and lone parents who are likely to be most dependent on their own earned income (Swaffield et al, 2018). From a social justice perspective, studies have suggested that living wages can have strong redistributive effects to low earners while also reducing the tax burden on the state (Linneker and Wills, 2016).…”

Poor Workers in Rich Democracies: On the Nature of In-Work Poverty and its Relationship to Labour Market Policies

“…This demonstrates the potential of raising wage floors as a means of tackling working poverty. Swaffield et al (2018) present data from the UK showing that the voluntary Living Wage does not eliminate poverty or material deprivation amongst working families, but it does leave them somewhat better off. Since most low paid workers live in non-poor households, however, aimed at the low paid as a group will also have a very substantial spillover: much of the benefit will go to the non-117; Marx et al, 2012).…”

The Role of Social Support Networks in Helping Low Income Families through Uncertain Times

“…However, in-work poverty is a growing issue, accounting for around two-thirds of all child poverty (Hick and Lanau, 2018;JRF, 2018). The introduction of the 'National Living Wage' for over twenty-five year olds in 2016 has increased the hourly pay of low earners, but family incomes also depend on working hours, pay progression, how many in the household are working, and the impact of reductions in in-work benefits (Bangham, 2017;Cribb et al, 2018;Swaffield et al, 2018). Furthermore, labour market insecurity is being fed by an increase in 'non-standard' workself-employment, temporary, agency and zero hours contract workingassociated with part time, irregular hours, short term jobs, lower earnings and 'one-sided flexibility' (CAB, 2016;Caraher and Reuter, 2017;Judge, 2018;Low Pay Commission, 2018).…”