Research reveals NMW accounts for just 70 per cent of required income
Single people on the national minimum wage (NMW) only earn 70 per cent of what the public believes is needed for a reasonable standard of living, according to research by the Joseph Rowntree Foundation (JRF).
JRF’s Minimum Income Standard (MIS), which the charity has calculated annually since 2008, is measured using the value of a weekly shop that is required “to achieve a socially acceptable standard of living”.
However, the research showed that single people must now earn at least £17,102 to achieve the minimum standard of living, up slightly from £17,072 in 2014. Somebody on NMW, which is presently £6.50 for workers aged 21 and over, would receive a salary of about £11,830 a year if they worked an average 35-hour week. This means their income falls short of the MIS by £53.64 a week.
A couple with two children need to earn £20,024 each to meet the MIS, the research suggested. If such a couple worked full-time on NMW, their earnings would miss the required earning level for a decent standard of living by £75.38 a week, JRF said.
Low inflation has kept living costs down this year, while average household budgets had changed little between 2014 and 2015 meaning people had more spending power.
However, this improvement could be short-lived, the charity warned, as prices are predicted to rise again later this year.
Katie Schmuecker, programme manager of the poverty team at JRF, said: “The research shows that, even when you’re working full-time on the minimum wage and in receipt of in-work support of tax credits and in-work housing benefit, families, particularly families with children, are still falling far short of what the public thinks everyone should be able to afford.”
The research comes ahead of the emergency budget this Wednesday (8 July), in which chancellor George Osborne is expected to reveal more details on how he will slash social security to save £12bn.
Rohan Silva, former senior adviser to the Prime Minister, called for all employers to pay the living wage, set by The Living Wage Foundation, in an article for The Observer. The living wage is calculated using MIS figures and currently stands at £9.15 per hour for workers in London and £7.85 per hour outside the capital.
In support of raising the NMW to the level of the living wage, research from professional services firm KPMG showed it would cost just 1.3 per cent of the national wage bill and would lift six million people out of poverty.
Marianne Fallon, head of corporate affairs at KPMG, said: “We firmly believe that voluntary adoption of a living wage policy by employers, over time, is one of the tools that will help improve social mobility in the UK as well as directly addressing in-work poverty.”