The London living wage and in-work poverty reduction: Impacts on employers and workers

Abstract

In the UK, a campaign for the living wage has emerged as a civil society initiative to reduce in-work poverty. This article reports empirical evidence from a study of employers adopting the London Living Wage and the benefits from this intervention, as reported by their workers. Implementation strategies to cover higher wage costs varied, from clients meeting full costs, to reduced employer profit, to reductions in hours and employment. There were strong substitution effects from low to higher qualified workers. The evidence suggests that while there were worker benefits from the living wage, they were not automatic, as higher wage rates did not necessarily translate into higher incomes due to variations in hours of work. Workers reported more in-work benefits, than family or financial benefits. In-work poverty reduction was limited by large concentrations of part-time living wage jobs with few hours, small income increases and the rising costs of living.