How many workers earn less than the living wage?

5 November 2012

"As we start Living Wage Week, there are almost five million people in Britain who aren't earning the living wage."

Ed Miliband, Speech to Islington Town Hall, 5 November 2012

Today marks the beginning of 'Living Wage week' in the UK, when we can expect at least some of the news agenda to focus on the state of pay for the lowest earners in the country. To mark the occasion, the wage itself will rise: from £8.30 per hour to £8.55 in London and from £7.20 per hour to £7.45 nationally.

Labour leader Ed Miliband's speech on the subject this morning kept the issue firmly on the day's agenda. In it he reaffirmed his commitment to the campaign, stating that five million people in Britain still aren't earning the living wage.

The issue

The living wage is defined as:

"a wage that achieves an adequate level of warmth and shelter, a healthy palatable diet, social integration and avoidance of chronic stress for earners and their dependents"

Full Fact analysed the methods used to calculate the wage for London in April, when the London Living Wage Unit had conducted a similar analysis of the proportion of workers who actually received the wage. It found one in ten full-time and two in five part-time workers were paid less than the living wage of £8.30 an hour in London.

The source

The latest five million figure has been mentioned in nearly every major news article on the living wage today, although almost none cared to source it. Those that did cited accountancy firm KPMG, who earlier this year conducted a study into living wage trends with research group Markit.

Finding a figure of five million wasn't actually too complex. Markit analysed figures from the Annual Survey of Hours and Earnings (ASHE) published by the Office for National Statistics.

The survey provides data on the average earnings of different income groups mainly in deciles (groups of 10%) from the lowest to the highest earning 10%. Since the living wage - whether for London or the rest of the UK - is a precise hourly rate, the researchers had to estimate where within a 10% earning range the living wage itself would fall.

For example, if the bottom 10% of earners make £7 an hour and the second-bottom 10% make £7.50 an hour, the national living wage falls between the two. So between 10 and 20% of people in this example earn less than the living wage. If you assume people's earnings within the range will rise in a straight line, the actual estimate will be that about 14% earn below the old wage of £7.20 an hour.

Accepting these assumptions for now, Full Fact was able to replicate Markit's analysis using the most recent available data. This found - like Markit - that around 20 per cent of the working public earn less than the old living wage, amounting to around 4.7 million people out of 24.3 million workers (as of 2011).

Digging a little deeper into the numbers revealed some interesting trends. 11% of full-time workers earn less than the living wage nationally, compared to 39% of part-time workers. 14.5% of men earn less, compared to 24.5% of women.

It has to be borne in mind that these figures are all based on Markit's assumptions about the data, since the actual figures only show wage brakets rather than specific wage amounts. 

So, strictly speaking, the data tells us that between 3.8 million and 5.5 million people in the UK earn less than the living wage per hour (accounting for the higher rate in London). Since Markit's assumption is not unreasonable, we can still say that the true figure will likely fall at just under five million workers.

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