Can Britain actually afford the real living wage?

Over half a million workers are set for a pay boost as the voluntary real living wage rises to £14.10 an hour.

Independently set by the Living Wage Foundation (LWF) based on the cost of essentials, it is different to the national living wage, the statutory minimum set by the government.

Employees on this wage will now receive £14.10 an hour across the UK (a 65p or 4.8% increase), and £15.45 an hour in London (a 65p or 4.4% increase).

If they work full time, they can expect to collect £2,700 more per year than someone on the government’s minimum wage, the LWF claims, and £5,300 more in London.

“There are still millions of workers trapped in in-work poverty and struggling every day to make ends meet,” said Emily Sawh, co-director of the Living Wage Foundation.

“They’re forced to skip meals, fall behind on bills and visit food banks. That’s why we urge employers to do the right thing by signing up to pay the real living wage and providing workers with the decent standard of living they need to thrive.”

Twenty-five years after its inception, more than 16,000 UK companies are signed up to the pay standard. One in seven UK employees works for a Living Wage Employer, a group that includes Ikea, Uniqlo and Lush.

But that still leaves millions of workers paid below the rate. Some 4.4 million jobs pay less than the real living wage. So what’s stopping more businesses from signing up?

The case for the real Living Wage

The case for the Living Wage is obvious. Life in Britain is expensive, and many low-waged people struggle to make ends meet: a record 6.8 million people in the UK live in “very deep poverty”. In 2025, food banks in the Trussell community distributed more than 2.6 million emergency food parcels across the UK.

The Joseph Rowntree Foundation’s Grassroots Poverty Action Group summarised the last 20 years of poverty data thus: “Nothing’s changed? Everything’s changed. It’s worse.”

Read more:

• Baby banks are the hidden emergency service Labour cannot afford to ignore
• More than 24 million Brits don’t earn enough for a ‘decent standard of living’, report finds
• ‘Poverty takes years off your life’: Men in Blackpool now have lowest life expectancy in Britain

Higher wages are one of the best ways to improve people’s living standards.

The real living wage campaign has been “phenomenally successful” in compelling many of the biggest businesses to adopt its rate, says Nye Cominetti from the Resolution Foundation, the think tank that determines the real living wage rate.

“The point of the campaign initially was that you had some very rich companies that were paying their staff like cleaners very little,” he adds. “The campaign said, ‘well, that’s not fair. You can pay more, so please do so’.”

Half the FTSE 100 are accredited living wage employers – big names like Aviva, Ikea and Lush. But smaller and medium-sized businesses are less likely to adopt the standard.

Part of the reason, says Cominetti, is that the legal minimum wage in Britain is now relatively high. That is partly a result of the real living wage campaign itself.

“What we have is a very high national minimum wage and a real living wage which is a bit higher still. But that’s quite a different situation from the early days of the campaign, where you had a very, very low national minimum wage and a living wage which was much higher,” he explains.

The gap between the two has “closed quite a bit,” Cominetti added “Largely because the campaign has been successful, and governments have responded by increasing minimum wage.”

When the real living wage campaign launched in East London in 2001, the government’s minimum was just £3.70 an hour. The campaign called on employers to pay a wage people could actually live on. The first UK-wide real living wage rate was set in 2011 at £7.20 an hour, compared with the legal minimum of £6.08. The London rate was £8.30.

The statutory minimum wage has more than tripled since the campaign began. That is a big improvement for low-paid workers, but it has also changed the calculation for employers deciding whether to pay more than the law requires.

“It does mean that the position for employers is now different, because you know some employers now will say, ‘Well, the minimum wage is already quite high. I’m not sure there’s much need for me to sort of go that way extra step and wage because that step isn’t as meaningful as it used to be’,” says Cominetti.

Nonetheless, the campaign’s influence extends beyond the businesses that sign up: “You can see the success of the campaign not just in the employers that are accredited, but in the two-ish million workers who are paid the legal minimum wage. The living wage campaign has pushed up pay for those workers as well.”

The squeeze on employers

The narrowing gap between the two rates is only part of it. Businesses also face wider pressures on their costs, making any decision to raise wages a tricky calculation.

Some business groups have opposed increases to the legal minimum wage, arguing that higher labour costs can contribute to job losses and threaten entry-level jobs and youth employment at a time when almost one million young people are not in employment, education or training (NEET).

Employer national insurance contributions also increased in April 2025, from 13.8% to 15%, while the threshold at which employers begin paying them fell from £9,100 to £5,000 a year. These changes added to the costs facing many employers.

But does that mean the legal minimum wage is now too high? No, says Cominetti.

“It’s absolutely true that if the minimum wages were so high that no one wanted to hire a low-paid worker, then that would be a bad thing, right? Those businesses aren’t making that up. Imagine a £200 minimum wage. We wouldn’t have any jobs.

“So absolutely, that is the correct way to sort of frame the question: How high should it go? And the answer is to look empirically at what’s going on in the labour market.

“The basic picture there is that for 20 years, if you took an average across all those kinds of studies, what you tended to find is that minimum wage increases didn’t have a negative impact on employment.”

A 2019 review of international research commissioned by the UK government found that minimum-wage increases had generally had a very limited effect on employment, while significantly increasing the earnings of low-paid workers.

But the real living wage is at a higher rate, and not every employer can easily afford to pay it. For smaller businesses, particularly those operating on tight margins, higher wages can be difficult to absorb alongside other rising costs.

“Wages are one of the biggest costs for the [hospitality] sector,” Allen Simpson, chief executive of UKHospitality, told Big Issue. “The challenge is ensuring employers have the right conditions and support they need to continue investing in their teams while also managing rising employment taxes, business rates, energy costs and food inflation.”

Some organisations that once signed up to the real living wage have subsequently dropped out. The Children’s Society, a major children’s charity, recently gave up its accreditation, citing affordability pressures.

Drop-outs are not well-received by employees – when beer giant BrewDog left the scheme, citing continuing losses, the backlash from employees was furious.

The Unite union claimed that the company wasn’t doing “the right thing by workers who have made them millions.”

A small business struggling to cover its bills is in a different position from a large company with more room to absorb higher wage costs. But signing up to the real living wage is voluntary, and remaining accredited is a choice too, so inevitably it will sometimes be seen as an expense to cut.

For Cominetti, the case for paying it still stands. Even if the legal minimum has risen, employers that can afford to go further may see benefits beyond the immediate pay rise.

“I still think if you are an employer and you can afford it, it’s a really great thing to do. It says to your workers that you care about pay, so it can bring benefits in terms of recruitment and retention. I think those things definitely do matter as well.”

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