Experts have warned the NLW, which became compulsory last week, is not a 'true' living wage.
On Friday the National Living Wage (NLW) raised the minimum wage to £7.20 per hour for those over 25, and will increase to £9 per hour by 2020.
Angela Wright, senior lecturer in human resources and management at Westminster Business School, explained why the National Living Wage is not actually a ‘living wage’.
“It is set above the current national minimum wage but is considerably below the ‘living wage’ paid voluntarily by several hundred employers,” she said. “The current ‘living wage’ in London is £9.40 an hour, and the figure outside London is £8.25 – set by the Living Wage Foundation – also substantially higher than the National Living Wage of £7.20, which is only payable to people over the age of 25.”
Amanda Arrowsmith, HR and operational management lead at Bid Lead, warned that the National Living Wage will keep people in working poverty. “When the chancellor announced the new minimum wage for over 25-year-olds he hijacked the term National Living Wage – which is a misnomer,” she told HR magazine.
“Based on an average working week (according to the ONS) of 39.1 hours per week, this is equal to a salary of £13,097 and a take home pay of £1,091 [per month]. The Joseph Rowntree Foundation 2015 study on essential living costs calculates that a single adult would need £632.80 to live on. That's before rent, clothes, pension contributions or money for socialising. In London an average rent for a room in a shared house is £500. The numbers don't add up – this is nowhere near a living wage. Even the actual London Living Wage at £9.40 is hard [to live on].”
Arrowsmith suggested that paying the real living wage, as set by the Living Wage Foundation, is good for business. “An independent study of the living wage in London found that 80% of employers believe it has enhanced the quality of the work of their staff and reduced absence by 25%,” she said. “It makes good business sense and HR teams should work with their owners, CEOs and CFOs to build the business case and make the positive move to support this important measure to end poverty."
“As employers we have an opportunity to support our employees to live well – and this is about paying a good basic wage as well as providing good work and security where we can,” she added.
Katherine Chapman, director of the Living Wage Foundation, said that businesses who can afford to pay a rate that reflects the real cost of living should do so. “For profitable organisations or those who see themselves as innovators and leaders, simply not breaking the law on pay is not enough. Many businesses want to aim higher,” she said.
“The landscape on low pay has shifted. This is down to the employers we work with who have over the past 10 years voluntarily chosen to pay beyond the minimum wage rates set by government. However, the job is not done when it comes to tackling low pay. Around six million people earn below the voluntary living wage in the UK, with women, young people and part-time workers most affected by low pay.”