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BLOG | When is a Living Wage not a Living Wage, and should I be getting paid one?

Author - Rob Gowans, CAS Policy Officer

Today’s introduction of the ‘National Living Wage’ is a welcome increase to the national minimum wage for some of Scotland’s lowest paid workers. However despite the name, it’s important that it’s not confused with the existing voluntary Living Wage which continues to have an important part to play in tackling in-work poverty and encouraging decent work.

As welcome as today’s move is – and it will make a positive difference – this is far from ‘job done’ as far as tackling in-work poverty is concerned. Changes to tax credits and Universal Credit mean that support from the in-work benefits system will be reduced. And, as CABs across Scotland know from the problems they see, pay is just one of the factors that make for decent work

However, increasing people’s wages is one of the most straightforward ways of improving work and ensuring that they can pay the bills. And that’s why it’s important to be clear about which Living Wage does what. Unlike the new National Living Wage, which is a legal right, the existing Living Wage is a voluntary scheme – your employer isn’t required by law to pay it.

It’s also quite a bit more than the new ‘National Living Wage’ – the voluntary Scottish Living Wage is £8.25 per hour* (£15,015 per year for full-time work), compared with £7.20 per hour (£13,104 per year). Unlike the National Minimum Wage, which now has five different rates based on age, the voluntary Living Wage applies equally to everyone aged 18 or over.

Unlike the legal minimum wage, the voluntary Living Wage is worked out based on how much households need to achieve an acceptable minimum standard of living. This includes the costs of food, heat and rent, but also things like travel, clothing and things required to ‘fully participate in society’ – such as buying a birthday present for your mum, or being able to pay for your kids to go on the school trip.

The acceptable minimum standard is decided by what members of the public think it should be. It’s increased every year based on the increasing costs of living – our research has shown a ‘Poverty Premium’ exists, meaning people on the lowest incomes end up paying more for goods and services. And, unlike the National Minimum Wage, it takes into account tax and in-work benefits that households can claim, so if there are benefit changes, the Scottish Living Wage can help avoid workers losing out.

The voluntary Living Wage was originally started in London by campaigners when they heard from people who were working full-time at the National Minimum Wage, but were forced to take on a second job because they were struggling to pay for essentials. And with the most recent figures suggesting that in Scotland 48% of adults and 56% of children in poverty are living in households where at least one person works, it’s clear that simply being in work is far from a guarantee that people won’t be in poverty.

Encouragingly, it’s becoming increasingly common that employers in Scotland are choosing to pay their staff at least the voluntary Living Wage, and over 500 employers – including CAS and several of our member bureaux - have decided to become officially accredited as ‘Scottish Living Wage Employers’. If you work for one of them, this means that they’ve publicly committed to pay you at least £8.25 per hour, so if they don’t you can report them in confidence here.

As for the new scheme being called the same as the other one, when it’s a different rate? On one hand it could be seen as a tribute to the work of campaigners in building the profile of the Living Wage over many years. On the other it does add more confusion to what people should be paid, if you consider there are now no less than five different legal minimum wage rates plus two different things called a Living Wage, all set at different amounts.

This does have the potential to confuse workers about their entitlements. Fortunately help is at hand. We’ve put together this quick guide to what you should be paid and what you can do about it if you’re being short-changed. And if you’re not sure if you’re being paid less than the law says you should, you’re struggling to get by, or you’re having other problems at work then getting free, confidential, impartial advice at your local CAB is always a wise decision. You can find your nearest office by clicking here.

*Please note the Living Wage has been increased to £8.45 since the time of writing.

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