How the U.K. Could Beat the U.S. to a Living Wage

British pounds

Photo by Peter Macdiarmid/Getty Images

Activists at the Living Wage Foundation in the U.K. have recently posted the new living wage standards for 2015. The Foundation currently reports that more than a thousand different British employers have been accredited by the organization as “living wage employers.” Among them are prominent international banks such as Barclays, ING, and J.P. Morgan, along with media companies such as ITV and many non-profit employers like Save the Children, Oxfam, and UNICEF.

According to the Living Wage Foundation, the national minimum wage currently stands at 6.50 pounds, while the living wage agreed upon for 2015 is almost 8 pounds an hour. The Foundation has also made exceptions for metropolitan London, where living costs are significantly higher. There, the living wage has been set at just over 9 pounds an hour.

The Foundation reports that the living wage in the U.K. saw a 2.3% increase over 2013, and stands at more than 21% the current government mandated minimum wage. The organization says that the newly posted living wages are “an independent calculation that reflects the real cost of living, rewarding a hard day’s work with a fair day’s pay.”

Rhys Moore, director of the organization, says that currently more than 5 million workers in the U.K. earn less than minimum wage, but he adds that he’s been pleased to see an impressive increase in the number of employers that are interested in getting on board. “The good news is that the number of accredited Living Wage employers has more than doubled this year — more than 1,000 employers across the U.K. have signed up. In the last 12 months the number of Living Wage employers in the FTSE 100 has risen from four to 18 including Canary Wharf Group and Standard Life.”

Moore says that he believes establishing a living wage for workers is both economical as well as ethical. “Low pay costs the taxpayers money — firms that pay the minimum wage are seeing their workers’ pay topped up through the benefits system. So it’s right that we recognize and celebrate those employers who are voluntarily signing up to the higher Living Wage, and saving the taxpayer money in the process.”

Further, and perhaps more importantly for employers, a living wage can boost workers’ morale, making them more productive and more loyal to the company, effectively helping to stymie issues of rapid turnover before it even starts. According to the Economist, Barclays found that its catering staff’s retention rate increased from 54% to 77% following the introduction of a livable wage. For its cleaning staff, the results were even more dramatic; the retention rate rose from just 35% to over 90%.

Source: Thinkstock

Source: Thinkstock

So, is the idea of a “living wage” being implemented in the U.S.? Well, not really, with the exception of everyone’s favorite Scandinavian furniture chain, Ikea, which announced in August that it will raise its wages beginning in 2015, at which point the company’s lowest wages will raise to $10.17 an hour.

Rob Olson, the current acting president for Ikea U.S., says that he believes the company has made the right decision. “We truly do see this as the right thing to do for taking care of our co-workers,” he told Marketplace. “An opportunity to increase coworker loyalty, decrease turnover, as well as being able to attract more qualified applicants.”

Ikea’s living wage is based on the MIT Living Wage Calculator, a tool developed by Amy Glasmeier, a professor of economic geography and regional planning. Glasmeier, who spoke with Marketplace, cautions that a living wage is just that, enough money to cover all the necessities: Bills, groceries, etc., without falling behind. Even raising the wage to a more “livable” standard still means that workers won’t be able to afford saving for retirement or education, let alone vacations.

Glasmeier heard about Ikea’s decision to utilize the Living Wage calculator, but warns that the calculator needs to be updated; if Ikea really wants to promote a living wage, in other words, they will need to raise wages as necessary from year to year. Glasmeier says that the next version will likely be published in September.

An update by Glasmeier on the Living Wage Calculator’s website notes, “the data on the remainder of this website reflects values through 2010,” nearly five years ago, now. Glasmeier’s more recent research has found that, as of 2013, “a typical family of four (two working adults, two children) needs to work more than 3 full-time minimum wage jobs (a 68-hour work week per working adult) to earn a living wage.” Further, Glasmeier and her team of grad students found that “across all family sizes, the living wage exceeds the poverty threshold, often used to identify need.”

As for Ikea, they have said that they still plan to use the older, lower calculations from 2010, but, refreshingly, the company plans to reevaluate wages on an annual basis, according to Marketplace.

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