London’s Poverty Profile shows that 1 in 5 Londoners working in the capital is paid below the London Living Wage of £8.80 per hour – an independently set rate people need to be paid to be able to afford the basics.
Another piece of research Trust for London commissioned from CESI found that once you get into low pay, moving out of it is difficult. One in seven London workers is stuck on low pay for over a year. Around one third of low paid workers see their wages increase by less than the national average.
It is no surprise then that the rate of in-work poverty is increasing and the majority of working-age adults and children in poverty in London are now from families in work .
With more and more candidates declaring their intentions to run for the most powerful political position in the capital, I want to offer three practical suggestions to tackle low pay that a Mayor could either implement or lobby for.
However, before I do, I want to acknowledge the two big structural issues of housing and transport affordability that must be addressed by any Mayor. I urge experts in these fields to offer their solutions on these pages.
I want to focus on low pay because it is a large part of problems of unfairness in the capital and the issue is one that comes up time again in the work that the Trust for London funds. My three suggestions for a Mayor are: encourage more employers to pay the Living Wage; add a London weighting to the legal Minimum Wage; and push to unlock existing budgets to train low paid workers.
Businesses in London must do their bit to help make our city fairer. Paying the voluntary Living Wage would add less than 1% to the wage bills of firms in sectors such as construction, food production and banking. The pioneering work of London Citizens and the Living Wage Campaign has added millions to the pay packets of those who are struggling financially but many more employers could be paying their staff a fair wage. As research by Queen Mary, University of London shows, these employers could then reap resulting business benefits such as increased morale and staff retention.
For those firms that cannot immediately make the move to paying a Living Wage there could be a stepping-stone. As Kitty Usher highlighted in her report for the Centre for London, a 7% London weighting style increase to the Minimum Wage would benefit 175,000 workers by up to £800 a year. This benefit would come without affecting jobs or competitiveness. Of course, any legal floor needs to be properly enforced – as Andy Hull’s report shows, employees being paid below the Minimum Wage is a particular problem in London.
My final suggestion is about improving skills. Low paid workers receiving training on the job see their pay increase by 13% on average – two thirds higher than those that don’t. Unlocking the £2 billion Adult Skills Budget – with eligibility for full funding for Level 2 training extended to those in work and identified as most at risk of low pay and poor progression, could help. Currently this funding cannot be spent on supporting low paid workers.
Those are just three ideas on tackling low pay. More details on each of them are available from IPPR, Resolution Foundation, London Citizens, CESI and Centre for London.
Bharat Mehta is Chief Executive of Trust For London, one of the largest charitable foundations tackling poverty and inequality in the capital. He is currently a member of the Home Group Board and until recently he was a Trustee of the Joseph Rowntree Foundation (JRF). In 2000 Bharat was appointed an OBE for services to the National Schizophrenia Fellowship and the voluntary sector.