‘Living wage’ increased to £7.45 an hour

Updated figures have been produced for the 'living wage' – the minimum level of pay needed to provide an adequate standard of living for an average household. The Centre for Research in Social Policy calculates the new rate outside London at £7.45 an hour – an increase of 25 pence over the previous rate of £7.20 an hour. This compares with the national minimum wage hourly rate for adults of £6.19.

 

The calculation establishes a minimum income standard, based on the cost of items chosen by the public as being essential for a decent standard of living. Amounts are then added for rent, council tax and childcare costs. The calculation is done for each of nine different household types, averaged, and finally converted into a minimum wage requirement - assuming all adult family members work full time.

From 2012 onwards, two kinds of limit are being put on the amount the living wage can rise in any one year. The first limits the increase in net income from the living wage (after taxes and benefits) relative to net income for someone on average earnings. The second limits the increase in the living wage itself (representing gross income) relative to the increase in average earnings. The rationale for these 'caps' is that if the living wage rises much faster than average earnings, it will be significantly harder to justify the increase to employers. Without these adjustments the living wage for 2012 would have been £8.80 an hour – 18 per cent above the final figure quoted.

In a separate announcement the Greater London Authority said the new rate for workers in London is £8.55, also an increase of 25 pence on the previous figure.

Sources: Donald Hirsch, Uprating the out of London Living Wage in 2012, Centre for Research in Social Policy | A Fairer London: The 2012 Living Wage in London, Greater London Authority
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