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The national living wage needs to change: here’s why

Reports by the Resolution Foundation calls for further transparency in the methodology used by the government

The national living wage of £7.20 an hour still falls shy of the actual cost of living, which is calculated at £9.40 per hour for those living in London and £8.25 for the rest of the country.

Introduced in April 2016, the national living wage (NLW) seems to be out of step with the genuine cost of living and thousands of organisations have already signed up to the higher pay brackets voluntarily. Companies such as Aviva, which has been accredited with the Resolution Foundation since 2014, claim that adopting the higher rate has enabled them to achieve greater employee wellbeing, organisational output and stronger levels of trust.

Conor D’Arcy, co-author of the report, said in a panel discussion that the campaign should not be overshadowed by the national living wage itself. There is still a great deal of work to be done and it is vital to keep looking forward and implementing changes. The Living Wage Commission is expected to respond to the report in September.

The main aim of the report is for the national living wage calculations to provide further transparency to explain the vast discrepancy, with an end goal of bringing them into alignment.

Since the launch of the new national living wage, some companies have responded by increasing costs or decreasing profit. Detractors to the 50p an hour increase predicted mass job losses, which does not appear to have been the case. The report not only focuses on the benefit to the hard-working employee’s weekly income but also to that of the economy as a whole.

The outcome of this report will affect hiring companies and potential employees alike, as a sharp increase in the NLW may lead to a change in a business’s long-term strategy; however, this will even out over time as the economy adjusts. Trust and respect is a two-way street, as evidenced by companies such as Aviva.

The Making the Living Wage: The Resolution Foundation review of the living wage report makes a very strong case for serious reform and discussion on the topic going forward; however, we will all have to wait to see what the response is. Some confusion still surrounds the government minimum wage after it renamed it the living wage, with the Living Wage Foundation claiming it still falls short of the actual cost of living – a belief backed by its supporters.

Katherine Chapman, Living Wage Foundation director, said that the landscape has changed dramatically in the past five years and the organisation has grown since its formation in 2011. With sign-ups spiking and continuing even after the introduction of the government’s living wage, the Foundation will continue its campaign and champion the rights of the true working class.

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