UK ‘living wage’ increase to be brought forward to September

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UK employers who commit to pay the voluntary “living wage” are being urged to bring forward a bumper pay rise to match soaring prices and utility bills, as inflation is expected to reach double digits in the autumn.

The Living Wage Foundation, a charity that campaigns for fair pay, said on Sunday it would bring forward its announcement of the 2022-23 living wage rate from November to September because prices were rising at a rate “unprecedented” in the campaign’s 20-year history.

It will encourage employers to pay the new rate as soon as possible.

“Rising prices are eating away at all of us, but nobody is feeling the pinch more than the 4.8mn low paid workers across the UK,” said Katherine Chapman, the foundation’s director. “It’s never been more important that employers who can afford it protect those who will be most affected by price rises.”

More than 10,000 employers, including large companies such as Google and more than half the FTSE 100, are now accredited with the foundation, meaning they have committed to pay all employees and contractors in their supply chain at an hourly rate that is higher than the statutory minimum, and recalculated each year to reflect everyday living costs.

The announcement could boost pay for a significant proportion of the UK’s workforce — helping to ease the squeeze on low income households, but adding to the difficulties the Bank of England faces as it battles to bring inflation under control.

The BoE has made it clear it thinks wages are already rising at an unsustainable pace­­; and now also has to determine whether the £15bn of government support for households announced last week, which is targeted on the most vulnerable, will add to inflationary pressures.

Research by Cardiff Business School has found that one in 13 employees now works for a living wage employer, with 300,000 benefiting directly. The living wage is also often used as a benchmark by large employers even if they do not seek formal accreditation.

The rate currently stands as £9.90 an hour across the UK, with a London rate of £11.05 to reflect the higher costs of living in the capital. The statutory minimum, which is set by government with advice from the independent Low Pay Commission, rose by 6.6 per cent to £9.50 in April.

The BoE said this month it expected inflation to reach 10 per cent in the autumn, but the new living wage rate will not necessarily match consumer price inflation, because it is based on a basket of goods and services chosen to represent a “minimum income standard”, and also factors in changes in the tax and benefits system.

Two-thirds of the £15bn support announced by chancellor Rishi Sunak last week will flow to the 8mn households in receipt of benefits.

The worry for the BoE is that companies say they are currently finding it easier than normal to pass on higher costs to their consumers — so that higher wages and government help for households could simply drive up prices again, leaving people no better off.

Reflecting ministers’ frustration with this dynamic, the Sunday Telegraph reported that Prime Minister Boris Johnson had ordered officials to draw up proposals to name and shame petrol stations that failed to pass on the 5p cut in fuel duty fully to customers.



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