That living wage

One in five British workers and their families are likely to have inadequate standards of living because they are being paid less than the living wage, according to a study.

The research by the consultants KPMG found that 4.82 million workers have to survive on less than a living wage,currently £8.30 an hour in London and £7.20 in the rest of the country. The TUC described the findings as \”shocking\”.

The government has resisted campaigns to increase the current minimum wage of £6.19 to living wage levels, fearing that it would hit employment figures. It argues that it is a poorly targeted poverty measure.

The government did do something. It raised the personal allowance for tax. And the difference between the living wage and the minimum wage is, to within pennies per hour, the tax that is charged to low wages.

You want the poor to earn more? Then stop bloody taxing them so much!

And Ritchie says:

I have no reason to doubt the report; it only supports known earnings statistics. That said, until Conservatives (indeed, any politician) can explain how they will address this issue (and Labour has started with the ungainly predistribution policy) then they have no right to berate those claiming benefits whilst in work. It is simply not possible to live with any respect on these wages.

That leaves the more important question in need of an answer, which is how come we tolerate a society where this is not just permitted but is clearly acceptable?

Quite. Why are we charging income tax to someone working part time on the minimum wage?

38 thoughts on “That living wage”

  1. One reason to tax those part time on the minimum wage is that solidarity thing not being a one-way street. That we should all put something in.

    Not saying I necessarily agree with it – as a utilitarian it is stupid to tax people on income below that which covers your personal “needs” – but as an idealist I’d certainly want a state in which everyone does their bit, rather than the 51% voting themselves goodies at the expense of the 49% (plus the future 100%), which is what modern democracy is descending towards.

  2. If you do part-time work on the minimum wage, you won’t come within the income tax net until you’re working about 25 hours a week.

    Another factor is that many people earning the minimum wage are part of a household where someone else is earning more, so it’s marginal income and not something they’re wholly dependent on to live.

  3. If you want everyone to know they’re paying in, you could adopt an American-style system where sales taxes are listed seperately on receipts…

  4. I really don’t see the problem here. I earn below the “living wage”, and I am the only earner in the household, and I’m managing to put my child through private education and pay the mortgage on my income.

    The question really has to be, what are these essential “needs” that everyone is spending so much money on?

  5. Minimum wage is the bottom rung on the ladder. Not the shelf to stay on forever.
    When minimum wage came in a number of employers cut staffing – but didn’t cut total work that needed doing.
    I can think of a few employers who would in the event of large increase in wages bill change things so that staff still took home same as before – but did less hours.

    The one thing that tends to be missed when discussing minimum wage is that raising income for a few million people may be all well and good – but it doesn’t affect self employed, some company directors, the ill, the unemployed and the pensioners. Not to mention part time workers who can earn below full time minimum wage levels.
    If a company increases its prices to cope with increased costs, those who don’t benefit from an increase in income have to pay just as much as those who do.

  6. The use of an hourly metric for the living wage is rather odd IMHO.

    I earn a little over the suggested living wage an hour. If I did 25 such hours a week, I would be (IMHO) beastly poor. As it is, I work about 65 hours in an average week, and thus draw what I regard as quite a comfortable wage.

    IMHO money earned by those paid hourly, who have worked over 40 hours should be untaxed, but I would say that wouldn’t I…

  7. As a person who used to be an illegal immigrant (not in the UK, before you try and ship me off to the Horn of Africa), who had income off 8 months of poorly paid work in a calendar year, I laugh at the poverty figures and at lack of dignity on low income.

    Now I am comfortable, but I have cleaned toilets, actually I have built toilet blocks and installed the bloody things, ripped up my hands hand-tying packets of returned newspapers, done night shifts in the Post Office on a casual basis, pumped petrol, cleaned floors in Boots (and was bundled into a cupboard by one of the 30 year old cleaning ladies for a 16 year old’s nice time, better than Jimmy Saville) and was even exploited as a child, made to carry heavy bags of newspapers in the pouring rain and stuff them into ‘rich’ people’s letterboxes).

    I couldn’t live like I live now, even on the living wage, but I used to live on less than the minimum wage. I remember not going out for a single miserly drink with mates for weeks in a row ‘cos I didn’t have any money. Eating the same high carbohydrate low protein food 4 days running ‘cos you bought bulk, cooked bulk and made do. You do it and you try to move on. Some may never achieve it. For those, I want a safety net. Not more.

    I too would like more information on how we calculate dignity, what poverty is. I visit England regularly, (the aged father) and somehow 20% of the UK in poverty??? just doesn’t ring true.

    I want to know who defines ‘inadequate standards of living’ and what their definition actually is. Is it just the TUC and their lapdogs?

  8. Mario: do you mean that definitionally (ie “it will encourage employers to pay below the minimum wage”), or in the US sense of illegals (ie “it will encourage employers to hire undocumented immigrants”)?

    On the first front you’re obviously right. But on the second, being an island whose main sources of migration are a customs union with all its neighbours, plus legal family reunion from geographically remote former colonies, undocumented migration isn’t anything like as significant in the UK as it is in the US. There are some, but an order of magnitude less.

  9. john b: VAT is not routinely shown on receipts from UK retailers, particularly supermarkets. A VAT receipt would undoubtedly be available if asked for, but you don’t get a breakdown on the normal receipt. I’m looking at a Sainsbury’s receipt right now, with both vat and non-vat items on it, and there is no indication how much tax has been paid.

  10. One thing I find hard to accept – this notion of life being tough if you’re earning the minimum wage.

    Isn’t the issue that if your skills / contribution are so poor that minimum wage is the best you can aspire to, well isn’t that your problem not the state’s / the employers..

    FFS whatever happened to personal responsibility? Also do you think school standards might improve if a life of benefit subsidy wasn’t on offer?

  11. @john b
    In its broadest sense yes, the same goes for stifling regulations. It creates a risk-reward opportunity in doing something illegal.

  12. Jim: I’m surprised, but looking up some examples online you’re absolutely right. How extremely weird… it’s not like VAT-registered companies never buy supplies from the likes of Sainsbury’s. I’ve only ever put through receipts in the UK that either included VAT or that weren’t VAT-able, but then I guess supermarket stuff always came out of petty cash. In Aus, putting GST (=VAT) on all receipts is compulsory, as it should be.

  13. Morrisons receipt used to have VAT total on it at the bottom. Have purchased some of the stuff our company uses from Morrisons – cheaper than buying wholesale plus paying freight for some stuff.

    I think the question has to be asked regarding pay, what amount are we prepared to pay for unskilled work?
    I’ve worked in a car wash for 75p an hour, hand washing cars. Worked shifting scaffolding around for £1 an hour. Cleaned floors for £2 an hour. All just before minimum wage came in. Unskilled work but as a teenager I had no skills.
    Now if I went for a semi-skilled job its only slightly higher than unskilled work in terms of pay.

  14. john b (#17), there are different VAT regulations for retailers. Basically the customer is entitled to demand a proper VAT receipt, but the standard receipt doesn’t really show much.

    I’ve done it in the past when reclaiming expenses. You take the standard receipt to customer services and the girl there makes a cock-up of trying to do a proper VAT receipt. You help her as much as possible, so that you at least get something that shows a vaguely correct VAT figure.

  15. It’s no good. Wage levels can’t be increased to the ‘living wage’ There’s Guardian columnists whose second homes & children’s’ school fees depend on being able to write articles like this. What would they do?

  16. Wholesalers routinely put VAT figures on their receipts and petrol stations ask whether you want a VAT receipt as a matter of course. Nowhere else that isn’t issuing an invoice, at least that I can think of. However, even these don’t show the full tax take; no duties paid are broken out.

  17. SE, that it’s the JRF says it all. A quick glance shows that they expect someone on a living wage to be able to afford a £4500 car. Sorry, that is just stupid.

    I earn a pretty good wage, but no way would I ever pay that much. The most I ever paid for a car was when I was a self employed contractor and then it was £5K for an old BMW.

  18. SBML>

    I think you’ve misunderstood slightly what the JRF living wage is about – which isn’t surprising, because it’s usually misportrayed. It’s intended to be the level at which someone is _not_ poor. In that respect, I think they have it about right – you need to be earning at least a couple of hundred quid a week after tax and rent to enjoy a reasonable standard of living with a few choices about how you spend your money, and a bit over for savings.

    When it comes to an actual minimum acceptable income level, it’s not quite as high as the JRF’s living wage, but not a lot lower. It’s one thing to survive on next to nothing for a while, with the expectation that it’s only short(ish)-term, and another to live your whole life that way. Sure, you can choose not to have a TV/computer, phone, hell, electricity and hot water, and survive without them, but it shouldn’t be forced on people because those are basics of a modern lifestyle.

    Another part of life of what we should demand for anyone is something which gives their work some point. Cleaning toilets and washing cars whilst you travel around a country or some such is very different to doing it because it’s the only job you can get. Surviving with the bare essentials because you’re a surfer living on a beach in California is clearly not the same as doing so in the worst sink estate in Hull.

  19. The JRF study assumes that the individual or family is paying council tax and the wages surveyed by KPMG exclude Tax Credits. Who commissioned the KPMG survey? The TUC, of course. The KPMG study shows that a lot of childless couples are not earning enough to support themselves plus two children at the MIS level and that some couples have only one parent out of two earning more than half the level JRF recommends.
    The TUC and Grauniad do not feel the need to bother with the facts.
    @ SBML the family buys a second-hand five-year-old car and runs it for five years so the capital cost is only £13-16 a week for a Ford Focus. It is the Zafira you should be moaning about: that is a bigger capital cost and it drinks petrol.
    OTOH, they classify as *necessities* several things that my middle-class family did not have when I was a child – a car, a TV, a tumble-dryer, eating out regularly, regular trips to the cinema, paid childcare (PCs and mobile ‘phones did not exist but a landline and a mobile cannot *both* be necessities).

  20. As to the correct value for the l”living wage”- what wage does the average citizen of the world get? Any sensible figure must be less than that.

  21. “a landline and a mobile cannot *both* be necessities”

    They are, in a way. Home internet connections are typically bundled with a landline (with some kind of free call plan). Without a landline you pay only slightly less.

    For example, Virgin’s cheapest cable broadband package is £22.50 a month without a landline, and £28.50 a month with a landline and free weekend calls. Their fastest broadband is £35 or £39.50.

  22. Tumble dryer isn’t a necessity. We have a clothes horse.
    On nice days (or windy ones) we have a clothes line outside.

  23. @ Dave
    One ‘phone is deemed necessary for the elderly; a second ‘phone is a luxury unless you have a job that requires you to be accessible thereby when neither at home nor the office/factory/…
    In the rare latter case, the employer will either pay rather more than the “living wage” or provide one or both.

  24. John> The mobile phone is the necessary one, although it needn’t cost all that much. Line rental of a landline is pretty much forced on people if they want internet, but has little use.

  25. Landline is OK for making calls that are too expensive on a mobile. Or for those who top up, for when a mobile has no credit.

  26. A landline is not necessary at all. My mobile has unlimited internet and a small amount of phone and text. Unless you are texting 100s of times a day and chatting on the phone to your friends two doors away, or watching hours of YouTube such plans are adequate. All for £10/m. If it wasn’t for the fact that we have our TV on TalkTalk we would get rid of our landline and just use our mobiles.

  27. Dave, so we now have minimum wage, poverty levels, living wages. All doing the same thing, highlighting when people are not so well off and demanding that they are put into a better position by the state. Why should a living wage be defined? It’ll be different for everyone. So people live expensively, others are misers. Some live in London, others in Newcastle. They can’t all be told that they should have the same living wage.

    I accept that there is a difference between subsisting on very little and living comfortably, but it doesn’t need some jumped up fake charity or quango to tell us what that it is.

    And there isn’t any difference between a bum in California or a bum in Hull. Both have access to the sea, but they’ll both be poor. Just because the Californian has a bit more sun than the one in Hull doesn’t make their lives any better. It’s what you make of it that is the difference. Surfing might be freeish, but so can playing football with friends or just walking.

  28. Wholesalers routinely put VAT figures on their receipts and petrol stations ask whether you want a VAT receipt as a matter of course. Nowhere else that isn’t issuing an invoice, at least that I can think of.

    Restaurants and hotels, and if you buy consumer electronics (even for cash) then the receipt is an invoice.

    However, even these don’t show the full tax take; no duties paid are broken out.

    Retailers don’t pay duties, so that’d be a rather convoluted process to show, of course.

  29. SBML>

    I think the point is that the ‘living wage’ as defined by the JRF simply cannot be the same as the minimum wage.

    Of course what people decide to do with their money may vary, and some will want to inflict austerities on themselves so they can save, where others want to spend. Arguably, what differentiates the living wage from the minimum wage is that one has some elements of choice in how to spend one’s money. The actual minimum amount needed to live on is very small, but it’s unfair to expect anyone to live that way without some other compensation – for example that they spend all their money on a hobby whilst eating beans on toast every day.

  30. Why don’t JRF lobby the government to reverse New Labour’s decision to grant asylum seekers just half the standard rate of benefits while forbidding them to take any paid employment?
    Is it because they don’t really care? Because the TUC wants them to lobby for higher wages rather than less poverty? Or does the fact that some people are having to live on rather less than half their MIS show the “minimum” word to be nonsense?

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