Potential benefit
Driving up wages for the lowest paid, For example, a real living wage set at 75% of median wages would currently represent an additional 39p p/hour for over 21s, £2.60 p/hour for those 18-21 and over £5 for under 18s. This cohort represents 1.9M workers, of whom almost 60% are women.
The combination of wage uplift and reliable hours would be a significant step in the right direction to a decent life for all where work pays and people can plan for the future.
Potential cost
An approximate additional wage burden on businesses of £1.8B.
There is a risk of removing the age bands, which is that employers will be disincentivised to hire young people as they are less skilled but cost the same.
Increased security may limit flexibility for workers who want it.
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Without fair pay, workers will continue to suffer at the sharp end of the cost of living crisis. Growth will only positively impact working people if they feel the benefits of it directly. Certain sectors like childcare, retail, hospitality, accommodation, and food services have especially high rates of low pay and in-work poverty. Introducing Fair Pay Agreements (FPAs) via collective bargaining in these sectors to set minimum pay and improve working conditions would drive up wages and working standards. This would act as a floor, not a ceiling, protecting workers from exploitation and guarantee a fair wage to cover rising costs. FPAs could include limits on excessive pay gaps by introducing maximum pay ratios between senior managers and junior staff, and they can be used to also address working hours and shift patterns, improving overall job quality and stability.
The minimum wage must reflect the costs working people bear, and must keep up with prices as they rise. Millions of people working full-time still live in poverty because their wages don’t cover basic needs. The government can ensure work pays by combining two key reforms: paying living wages and securing living hours.
We recommend keeping the living wage pegged at 75% of the UK’s median wage, to reflect the cost of essentials. Delivering this should also mean removing the discriminatory age bands in the minimum wage so that all workers can access it.
Pay alone isn’t enough. Workers must be protected from insecurity and instability, meaning that their contracts show exactly how much work they do, protect their future incomes by guaranteeing at least 4 weeks’ notice for shift changes and, if a shift is cancelled within that window, that they are still paid for lost hours.
