National government should investigate requiring London employers to pay a legally-required London Living Wage set at a level higher than the National Living Wage applied to the rest of the country, according to a new report on low income levels in the capital.
Published by leading housing association Peabody, the report concludes that the measure would help working Londoners on low incomes cope better with the capital’s higher cost of living after nearly ten years of weak income growth and cuts to the benefit entitlements of working age households have left many households “living close to the breadline”.
The report, compiled in partnership with think tank the Social Market Foundation, draws on official data for London social housing tenants and a survey of 1,000 Peabody residents living in the capital to describe “a decade of stagnation” in the disposable incomes of low income Londoners, with minimal wage growth outweighed by the effects of inflation and private sector rent rises.
“Lower income households in London have not benefitted from increases to the National Living Wage [formerly the national minimum wage] to the same extent as elsewhere,” the report says. It states that the lowest paid full time employees “have seen their incomes increase by 15 per cent in ten years” but that consumer price inflation has run at 25 per cent over the same period, producing a “real terms” wages fall.
Employment rates among Peabody’s working tenants are described as high, but the survey results showed that half of them earn less than the current, voluntary London Living Wage of £10.55 an hour, and just over half said they have not received a pay rise in the last three years.
A 2103 report for think tank Centre For London by economist and former Labour Party politician Kitty Ussher found that the London economy could afford a seven percent increase to the statutory national minimum wage of the time – akin to a London weighting. Funded by Trust for London, Ussher’s study applied the same methodology used to set the national minimum wage to London’s economy, with its various, high living cost characteristics.
Peabody says there are “few prospects for progression” for most low paid Londoners, citing significant numbers of older people possibly “trapped” in poorly paid jobs, zero-hours contracts restricting the amount of work those bound by them can do and few opportunities for training or promotion.
The report stresses that the predicament of low paid households leaves them particularly vulnerable to an economic downturn, and, in the context of Brexit and its associated uncertainties, urges the government to “ensure that the social security system is functioning as a safety net. Policy decisions like the benefits freeze, a number of benefit cuts and the continued use of aggressive sanctions despite a lack of evidence put this key function in question”.
Read Peabody’s report on low pay in London here.