Paying the Living Wage is good for business

The study: Twenty years of the Living Wage - The Employer Experience

Cardiff Business School conducted the study in 2021 and received 1532 responses.

Responses have been analysed to present a broad account of how accredited Living Wage Employers have been affected by their membership of the Living Wage network.

The main findings

Reasons for joining the network

For most employers, the decision to join the Living Wage network was a complex one, informed by multiple considerations. To the fore, however, are what we call ‘Expressive’ motives such as a desire to be a good employer, supporting the Living Wage campaign, and acting in accordance with organisational mission and values. Many employers referred to an intention to ‘do the right thing’. Instrumental motivation was also important, with many employers joining the scheme to improve aspects of HRM, such as recruitment and retention, or to secure contracts or investment.

Implementing the Living Wage

Most employers implementing the Living Wage had briefed their managers and workforce about the standard in advance and had raised the basic rate of pay, rather than introducing the Living Wage as a pay supplement. Very few reported that they had withdrawn other elements of remuneration to fund the scheme or that they had reduced hours of work or the size of the workforce. The survey uncovered virtually no evidence of ‘claw-back’ of employers reducing other terms and conditions to pay a higher basic rate.

Impact on employers

Virtually all employers responding to the survey reported that signing-up to the Living Wage had had a positive impact on their organisations. The main types of benefits identified were reputational gains, followed by HR benefits, with commercial gains, such as winning contracts or attracting customers coming third. While most employers reported positive effects flowing from accreditation, providing support for the ‘business case’ for good labour standards, it is important to enter a qualification. The scale of reported effects of the Living Wage on employing organisations was often rather modest, representing a benign rather than a transformational change.

Number of employees benefiting from the Living Wage

Since its inception, the Living Wage accreditation scheme has led to a substantial increase in hourly pay for about 400,000 UK employees. Cardiff Business School's cautious estimate of the total wage transfer since 2011 is approximately £3bn. A breakdown of the data reveals that the impact is concentrated in large organisations, in low-wage industries, such as retail and social care, and in London and Scottish-based employers, where take-up of the Living Wage has been greatest. The Living Wage has been particularly impactful in the public sector, with local authorities and NHS Trusts tending to report a large number of beneficiaries.

Types of employees benefiting from the Living Wage

Those receiving a Living Wage pay increase disproportionately work part-time. Part-time work is often poorly paid and undervalued and is largely performed by women. The scheme has also raised the pay of many thousands of contract workers. The survey also indicated that women employees form a majority of those benefiting from the scheme, amongst direct employees, in a majority of participating organisations. Young workers and black and minority ethnic workers rarely constitute a majority of benefiting employees, but they are reported to have gained directly from the Living Wage by a substantial minority of employers. A very broad set of low-wage occupations have gained from the Living Wage, with the most frequently reported occupations being clerical or administrative assistant, cleaner, receptionist, warehouse operative, and care worker.

Continuing support and additional standards

Nearly all employers responding to the survey (99%) reported that it was ‘likely’ or ‘very likely’ that they would continue with their support for the Living Wage.  Since the survey took place The Living Wage Foundation has launched additional standards in the form of the Living Hours and Living Pension schemes.  Survey responses revealed strong support for these new standards with more than half of employers saying that they would ‘definitely’ or ‘probably’ adopt the Living Hours accreditation.  Nearly 80 % of survey respondents stated that they would consider signing up to a voluntary pension standard for low-wage employees.

Impact of COVID-19

Most employers reported that their organisations had been negatively impacted by COVID-19. Despite these adverse effects, the vast majority of survey respondents denied that COVID had weakened their support for the Living Wage, and many reported taking additional steps to protect the incomes of low-wage employees. There was also very strong support amongst employers for policy to raise the incomes of ‘key workers’, who had kept working and supported the public during the pandemic.