George Osborne Just Introduced A Living Wage That's Not Really The Living Wage

The chancellor has co-opted the language of an established policy to promote his pay increase for low workers.

George Osborne has announced he will introduce a legal 'National Living Wage' from next year.

BBC

The policy will require all British companies to pay a new 'National Living Wage' of £7.20/hour to all employees over the age of 25. This rate will rise to £9/hour by 2020.

The new National Living Wage is higher than the existing minimum wage of £6.50/hour, meaning many of the UK's poorest workers are set to receive a pay rise over the coming years.

But what's confusing is that there's already a much-praised pay rate called the 'Living Wage' calculated by an independent organisation.

Living Wage Foundation

It's currently set by the Living Wage Foundation, a charity that campaigns for companies to voluntarily pay the higher wage. This version of the living wage is calculated as the minimum amount the charity believes is required to have a decent standard of life in the UK: at the moment it says this is £7.85/hour outside London, or £9.15/hour within the capital.

Many leading companies, ranging from the bank Goldman Sachs to ITV and Nestle, have voluntarily agreed to pay this rate. As a result, the living wage campaign has gained a high profile and a strong reputation.

Osborne's 'National Living Wage' is nothing to do with this existing 'Living Wage' rate.

The chancellor has taken the name of the existing scheme and applied it to a separate, legally-enforced rate of pay that he has created for over-25s. While this is still a salary increase for people on the lowest wages, it could give the impression that the government has secured a more generous rate for workers than they really have.

For example, a 25-year-old Londoner on Osborne's new, legally-required 'National Living Wage' would take home £1,152 a month from a full-time job. By comparison, the existing Living Wage would see a worker paid £1,464 a month – an extra £312 that could prove crucial.

In a statement the Living Wage Foundation questioned whether Osborne's new policy could really be called a true living wage and suggested it is merely a way of rebranding the minimum wage.

"Is this really a Living Wage? Without a change of remit for the Low Pay Commission [an independent group which advises the government on pay] this is effectively a higher National Minimum Wage and not a Living Wage."

"Secondly, what about London? These changes will not help the 586,000 people for whom even the 2020 rate announced today would not be enough to live on now."

"Thirdly, what about the two million under-25s who are not covered by this announcement? And, lastly, do the tax credit changes announced today mean that the Living Wage needs to be higher to make sure people have enough?"