Against a backdrop of rising income inequalities and the decline in collective trade union wage bargaining in many countries, the living wage (LW) has become an increasingly important issue for public policy, practitioners, academics and, most importantly, workers who are paid it and those who are seeking to be paid it. Civil society organisations like Citizens UK/The Living Wage Foundation in the UK, and other actors like unions, have mobilised LW campaigns to tackle the symptoms of income inequality. A real living wage (RLW) is the minimum income deemed necessary for workers to be able to afford their basic needs. Such needs include food, housing, and other basic essentials like clothing. The goal of a LW is to enable workers to afford a basic but decent standard of living. A RWL is voluntary and is therefore distinct from compulsory legal national minimum wages set by the state and its agencies. Real living wages tend to be quite significantly higher than statutory minimum wages. The latter are viewed by many observers as not providing enough for many people to live on, factoring in rising living costs. Our book will provide important new comparative insights from academics and public policy experts and researchers into the operation and outcomes of LWs in a variety of sectors in the UK, Europe, and globally.
History of living wages
Although the LW is attracting substantial interest in modern times, the concept has a long history. Figart (2004) evaluated the historical development of LW activism and how movements developed the LW in the past. Historically, the LW rate can be traced to medieval times and classic philosophical thinkers including Plato, Thomas Aquinas, and even modern religious statements such as Pope Leo XIII’s Rerum Novarum (1891); all are highlighted by Anker (2011). Classical economist Adam Smith (1776) stated:
A man must live by his work, and his wages must at least be sufficient to maintain him. They must even upon most occasions be somewhat more; otherwise it would be impossible for him to bring up a family.
(p.46)
Smith essentially argued for the provision of bare necessities to provide food, accommodation, and health for the family to sustain their labour, known as a sustainability approach (Stabile, 2008). Between the 1890s and the 1920s, there was a social movement that challenged the poverty and exploitation in England during the Industrial Revolution, which was highlighted by Friedrich Engels (1845) in The Conditions of the Working Class in England. Karl Marx would later use Engels’ work as an exposé of exploitation by capitalism in Capital (1885). As a response, social reformers considered how to establish acceptable standards of living to develop and secure acceptable living standards (and wages). Early philanthropic employers such as Robert Owen (1920), Joseph Rowntree, and Seebohm Rowntree conducted detailed studies of costs of food, clothing, and other necessities that shaped how much a head of the family should earn (Rowntree, 1901). In 1912, theologian John Augustus Ryan, a US Catholic thinker, argued that ‘every member of a community has an abstract right to a decent livelihood’ (Ryan, 1912, p.37). In the UK, social reformers such as Sidney and Beatrice Webb (Webb and Webb, 1920) called for selective application of a minimum wage floor for all employment, providing more than a basic subsistence, rather than wages and conditions sufficient to both survive upon and sufficient to prevent the need for dependence on charity. Essentially this higher wage enables freedoms and provides the capacity to allow the worker to spend more time with their family and wider community, and experience a more meaningful life (Searle and McWha-Hermann, 2020).
Winston Churchill, when president of the Board of Trade in Britain, argued against low pay and sweated trades. He developed trade boards for wages, setting minimum wages in each industry, negotiated by employers, unions, and independent members. Churchill argued that there should be protection of low-paid workers who do not have access to representation of unions and collective bargaining. This was the first discussion of state protection by a statutory wage floor:
It is a serious national evil that any class of His Majesty’s subjects should receive less than a living wage in return for their most utmost exertions […] where you have a powerful organisation on both sides […] there you have healthy bargaining […] But where we have what you call sweated trades, you have no organisation, no parity of bargaining, the good employer is undercut by the bad, and the bad employer is undercut by the worst […] where these conditions prevail you have not a condition of progress, but a condition of progressive degeneration.
(Churchill, 1909)
In contrast, the first national minimum wages were developed in New Zealand (1894) and in Australia (1907) with the landmark Harvester Decision (Fair Work Australia, 2011). This case arose out of an application made by a combine harvester manufacturer to seek exemption from excise duty on the basis it paid a ‘fair and reasonable wage’. The case ruled in favour of the employee, stating that pay should not just ensure wages for survival but cover ‘the normal needs of an average employee, regarded as a human being in a civilised community’. It formed the basis of the Australian minimum wage system (Fair Work Australia, 2011, p.57).
In the 1930s, the United States instituted a minimum wage as part of Franklin D. Roosevelt’s New Deal, stating ‘no business which depends for existence on paying less than LWs to its workers has any right to continue in this country’ (Roosevelt, 1933). The US Supreme Court rejected the original edict as they argued it exceeded state power, but it should be at subsistence level, whilst Roosevelt argued for the ‘wages of decent living’. In recent years, this level for ‘decent living’ has been increased predominantly at state level, enabling individual states to set their own state levels of pay higher than the US national minima (Hirsch and Valadez-Martinez, 2017, p.11).
This develops and follows in the tradition of the original International Labour Organization (ILO) Constitution and convention for ‘the provision of an adequate living wage’ and the ILO Philadelphia Declaration in 1944 calling for ‘a minimum living wage to all employed and in need of such protection’ (ILO, 2020a). The UN Universal Declaration of Human Rights Article 23 (3) (1948) recognises the ‘need for workers to earn a living wage’ (United Nations, 1948). A key issue is that global institutions and initiatives such as the ILO (ILO, 2020a) and the Project GLOW (2016) have evaluated the potential for a sustainable LW, which will be reviewed in the present volume in Chapter 14. Institutional support for international LWs also includes the influence of civil society organisations and associated global networks, such as the UK-based Living Wage Foundation/ACCA (2017a), which have developed a global and regional network of partnerships based on principles and global perspectives of the LW (LWF/ACCA, 2017b).
Living wages versus minimum wages
So, what exactly is the difference between national minimum wage regulations that set and establish legal and regulatory wage floors and the real LW? This definition can be best summarised by Anker and Anker (2017) in their review of the Global Living Wage Coalition (2016):
Remuneration received for a standard work week by a worker in a particular place sufficient to afford a decent living standard of living for the worker and his family. Elements of a decent standard of living include food, water, housing, education, health care, transport, clothing, and other essential needs, including provision for unexpected events.
(p.8)
Anker and Anker (2017) outline a methodology calculation relating to developing countries, but other commentators have also provided methodology for specific countries including the UK and New Zealand (Hirsch, 2017; King, 2016). The UK Low Pay Commission (2021) (LPC) method states in its terms of reference:
The aim of the LPC is to recommend levels for the minimum wage rates that will help as many low-paid workers as possible without any significant adverse impact on the economy.
Finally, Searle and McWha-Hermann (2020) review articles on the LW from 2000 to 2020 to examine how the context of LW research has developed since early sociological and economic analysis, to incorporate a broader range of disciplines since around 2014. Articles now introduce more management and employment relations insights, as well as insights from psychology, medicine/health, sociology, and social/public policy, along with rekindling interest from theology. Special issues of journals covering the LW from an employment relations perspective have included Labour & Industry (Parker et al., 2016), Employee Relations (Prowse et al., 2017), and a special issue of Transfer: European Review of Labour and Research (Müller and Schulten, 2019). It is within the tradition of employment relations that this book has mainly focused and developed its approach.
The structure of the book
The chapters in the book distinguish between statutory minimum wages and LWs, both in the UK and other countries internationally (ILO, 2020a). In so doing, it also assesses sectoral differences in the UK and other country contexts. The book has three primary aims. Firstly, to examine the development of how the LW as a concept has emerged and developed in the UK and internationally. Secondly, how LWs are designed not simply to reduce poverty, like statutory minimum wage regulations, but to provide a sufficient and sustainable standard of living. Thirdly, it examines international growth in ‘Voluntary’ Living wage (VLW) initiatives and campaigns by civil society organisations like the UK Living Wage Foundation, and the ‘Fight for $15’ campaign in the USA by trade unions and other actors.
Part 1 The living wage in the UK – Sector studies
Part 1 examines the United Kingdom specifically and the emergence and development of the ‘Voluntary’ Living Wage (VLW) through campaigns by institutions such as Citizens UK/the Living Wage Foundation, community groups, and trade unions. Campaigners have campaigned for employers to pay wage rates above the national minimum wage to address widespread in-work poverty.
Estimates for the evidence on methodology to establish a minimum wage and address low pay in Britain have been developed using evidence-based research. A real challenge to address low pay are the methods that calculate exactly what level of pay and how many hours are required to earn a sustainable level of earnings (full-time) for a family or individual according to their needs. This method examines relative measures of low pay and how someone is classified as low paid if they earn less than a specified percentage of pay compared to an absolute measure and a specific amount (Cominetti and Slaughter, 2020).
Firstly, the relative measures include a ‘core’ full-time rate of the UK national median pay across all employees using the Organization of Economic Co-operation and Development (OECD) measure. This measure indicates that earning less than two-thirds of the national median across all employees is an insufficient sustainable level of earnings, even working full-time. This means calculating an average between full- and part-time workers per cent of the median and obviously a measure of the full-time median would be higher. This is calculated at a full-time pay rate of £8.81 pence per hour for a 38-hour week (OECD, 2020). This calculation is rarely used in the UK.
The second approach involves absolute measures, and a needs-based low pay definition set by the Living Wage Foundation (LWF) for a full-time worker at £9.50 per hour and a London rate of £10.85 per hour at 38 hours, as of 2020/2021 (Cominetti, 2020).
Finally, a statutory minimum wage for employees’ earnings was established by the National Minimum Wage (NMW), which sets an adult rate for those over 23 years of age of £8.91 per hour (38 hours) with effect from April 2021. It must be noted that the Low Pay Commission adult rate establishes a rate an employer can afford to pay considering the effect on setting the minima rate and its consequent effect on employment. The adult rate was increased to 25 years of age in 2016 from a previous calculation of the full adult paid for employees aged over 21 years. Recently, the LPC decided to return the calculation and payment of the adult category to 21+ years of age by 2024 (LPC, 2020). It must also be noted that the National Minimum Wage was retitled the ‘National Living Wage’ in 2016. Nonetheless, this still remains a calculation for a statutory wage floor rather than the OECD and Living Wage Foundation calculated rates based on cost of living.
Chapter 2 explains the Living Wage Foundation’s ‘Real Living Wage’ campaign. The Living Wage Foundation is an important new civil soc...
