Mary lives alone in Hackney. She works as a care assistant on a zero-hour contract and supplements her income by waitressing. She is paid less than £10 per hour for the care work and doesn’t get paid for the time taken travelling to different locations. Recently, she had her wages docked for being seven minutes late for an appointment due to traffic congestion. Sometimes, Mary is offered just 10 hours of work a week, leaving her without enough money to pay her bills. She is on Universal Credit, which supplements some of her lost wages, but because of her fluctuating income, this only causes more problems.
Mary is not alone. Her circumstances are similar to millions of workers up and down the country. For them, work is not paying. It isn’t offering an escape from poverty or a springboard to prosperity. Instead, work is keeping these people poor.
The problem is particularly acute in London, which is perhaps unsurprising given that it is one of the most expensive places to live on Earth. Prices and private rents have outstripped wages for the lower-paid in the capital for more than a decade. For organisations like Peabody, concerned with supporting the most vulnerable in London, this is not right, fair, or sustainable.
In April, the National Living Wage will rise to £8.21 an hour for over-25s. That is good for the lowest paid outside London, but it does very little for people in it. For a living wage to enable a minimum standard of living, it has to reflect the true cost of living. If it doesn’t, then it clearly isn’t a living wage. And we know that it doesn’t in our capital city.
Increasingly, businesses in the capital are opting to pay the voluntary London Living Wage (LLW), which currently stands at £10.55 an hour. Partly, that is because it is the fair and responsible thing to do, but it is also because of the real benefits paying the LLW brings to their business – higher productivity and lower staff turnover, for example. Campaigners, businesses and the Mayor of London have done a lot to promote the LLW, and it’s a success story that there are now more than 1,500 businesses in the capital who are living wage accredited. But there is an awful lot more to do.
Peabody published research with the Social Market Foundation last week which suggests that less than half of working social renters earn the London Living Wage. Almost a third earn under £9 per hour. More than half of workers haven’t received a pay-rise in three years and nearly two-thirds haven’t had a promotion or “moved up” for five years. Thirteen per cent are on zero-hour contracts, like Mary, and six per cent have two jobs in order to try and make ends meet. These are stark and worrying figures.
How can we be in a situation where half of low-income workers in our capital city are not paid a living wage? How can we continue on a path where in-work poverty is the norm, while taxpayers subsidise the low-wage economy through the benefits system? Work is now entrenching poverty for many, many people in one of the richest cities in the world, but I don’t see any plan to reverse this trend.
Clearly, the voluntary approach to paying a living wage in London is not enough on its own. Maybe it is time for the capital to have its own, higher statutory minimum wage in London. Maybe there are other ways, such as devolution of powers to the Mayor, business rate incentives or other tax benefits for employers paying the living wage. In any event, we hope the report reignites the debate about low pay in the capital, because there is no doubt that more action is needed to keep working people out of poverty.
Brendan Sarsfield is the chief executive of Peabody.