The month of April: a new tax year.
It’s that time of year again, and this year has seen the largest living and minimum wage increase in five years.
As per the Government website, the National Living and Minimum Wages as of April 2024 are as below:
Aged 21 and over: £11.44
Aged 18 – 20: £8.60
Under 18: £6.40
Apprentice: £6.40
The concept of a living wage is based on the minimum income necessary for workers to meet their basic needs. Albeit, the minimum income necessary doesn’t match that set out by the Government. According to the UK Living Wage Foundation, the UK living wage is currently £12.00 per hour (£13.15 in London) which is slightly higher than the minimum requirement businesses must pay their employees.
The US minimum wage laws are slightly more complicated to breakdown, but the federal minimum wage, which has not been altered since 2009, is $7.25 per hour. However, each state has their own minimum wage, which on average is approximately $11.42. This is lower than the Liveable wage, that ranges between $13.87 and $20.05, as per the World Population Review website.
So, the question is; how many companies are paying a liveable wage, rather than just the minimum?
We reviewed all UK and US companies in our Companies’ Portal, to find out how many companies have committed to paying a Living wage.
UK Companies Leading the Way
The analysis showed that UK companies are more likely to commit to paying a living wage, compared to their US counterparts. According to the data, 37% of UK companies have committed to paying a living wage, which is significantly higher than the 4% observed in US companies.
This is a significant difference, which could be credited to the impact of UK government policies advocating for the national living wage, or perhaps down to the cultural differences. For example, a survey carried out by You.Gov found that Americans are 77% more likely to tip waiters and servers, compared to 59% of Brits. In fact, in every sector, the USA were one of the top two countries, compared to Brits and the rest of Europe, to tip their servers.
The Role of the UK Living Wage Foundation
In the UK, the Living Wage Foundation plays a pivotal role. This independent organisation offers accreditation to companies that commit to paying the living wage. Surprisingly, although 37% of UK companies have made a living wage commitment, only 23% are accredited by the Living Wage Foundation. This discrepancy highlights a gap between commitment and verified action, suggesting that some companies may declare a living wage commitment without fully implementing the necessary wage structures.
Sector-Specific Insights
The commitment to paying a living wage varies between sectors, with the highest commitment of 50% in the Gas, Water and Multi-utilities sector. In stark contrast, commitment rates within sectors such as Equity Investment Instruments, Industrial Engineering, Real Estate Investment & Services, and Technology Hardware & Equipment are 5% or less.
Impact on FTSE Indices
An interesting topic of discussion, is the commitment to pay a living wage with FTSE 100 and FTSE 250 companies. The data shows that companies listed on the FTSE 100 index are more likely to have both living wage commitments and accreditation from the Living Wage Foundation compared to those on the FTSE 250 index.
This could be a result of the larger financial resources available to FTSE 100 companies and the greater pressure from stakeholders, including investors who increasingly focus on social responsibility in their investment criteria.
However, despite there being more companies in the UK committing to paying a liveable wage, in comparison to US companies, there is still a long way to go. The gap between commitments and accreditation by the Living Wage Foundation suggests a need for greater transparency and accountability. It is crucial for stakeholders, including investors and consumers, to advocate for not only the adoption of living wage policies but also their strict implementation.
Moreover, engagement with companies that have yet to make or verify their commitments could catalyse broader compliance and contribute to an overall improvement in the quality of life for workers across the UK and US, building a sustainable economic future. And remember to check out our latest Intelligence Report for more!