Jenny Stewart: What increasing the real Living Wage means for Scottish workers

Following the announcement made by the Living Wage Foundation that the real living wage in the UK and London has increased, Jenny Stewart, head of infrastructure, government and healthcare at KPMG discusses what increasing the real Living Wage means for Scottish workers.

Jenny Stewart

Today, the real Living Wage increased by 3.3% from £9.00 to £9.30, bringing a welcome pay rise for many workers across Scotland. The figure, which is calculated by independent charity, the Living Wage Foundation, isn’t mandatory, but research from KPMG reveals a growing number of companies in Scotland are accepting and embracing the link between higher wages and increased productivity and better staff wellbeing.

We have seen good progress over the last year – but there is still much more to do. Latest KPMG and IHS Markit data shows that 380,000 workers in Scotland still earn below the real Living Wage - 57,000 fewer than last year – and accounting for 17% of the workforce.

From the UK figures, we know that those workers are most likely to be in a few key occupations: sales and retail; kitchen and catering assistants; cleaners, care workers; or waiting staff.

The vast majority of those affected are women and those working part-time. In Scotland, some 62% of workers paid below the Living Wage are women and some two-thirds of those work part-time. Male part-time workers make up a further 20% of the total.

Geography is also a factor. Workers in Scotland are much less likely to earn below the Living Wage if they are employed in our three major cities. In Glasgow, 13% of workers earn below the living wage – well below the Scottish average of 17%; while in Edinburgh and Aberdeen the percentage is lower still at 12%. Over 70% of those earning below the living wage work outside our 3 major cities.

Sector also makes a difference. In Scotland, the figures show that 25% of private-sector workers earn below the Living Wage – broadly similar to UK level; falling to 15% in the not for profit sector and 2% for public sector workers.   

Workers in Scotland are in a better position than every other region in the UK, outside the South East – with the second-lowest percentage of the workforce affected. It’s certainly worth looking at a few possible reasons.

  • Productivity in Scotland overall tends to be strong when compared to UK average – usually coming in behind London and the South East. Structurally, Scotland has significant parts of the workforce in the highly productive sectors including Financial Services and Oil and Gas.
  • Organisations in Scotland are much more likely to be Living Wage employers. Of those accredited by the Living Wage Foundation, some 28% of private sector companies are in Scotland; 29% of not for profits and 28% of private sector companies; and 27% of public sector bodies. All credit to the work of the Poverty Alliance and the Living Wage Foundation for a targeted programme in Scotland, funded by Scottish Government.
  • A much lower percentage of public sector workers are paid below the Living Wage in Scotland – 2%, compared to 6% across the UK. In part, this may be down to care workers being more likely to be employed in the public sector in Scotland and that those workers are paid the real Living Wage – a commitment of Scottish Government and local authorities. More widely, there have been high profile local government equal pay claims, which may also be a factor.

Given that a higher percentage of the workforce are in the public sector in Scotland – 20.3% compared to 16.5% in the rest of the UK - will also therefore impact on overall totals.

Can private sector employers do more to build on the progress already made over the past year?  Whilst we recognise it is not easy for all companies to pay this higher wage, we also know that there are significant benefits to businesses in introducing the Living Wage - including improved productivity, staff retention and reduced training costs.  The Living Wage Foundation reports 93% of accredited Living Wage employers have seen real benefits.

Benefits can be realised for both large and small businesses. That is important in Scotland because latest figures show that 45% of the workforce work in large employers with over 250 staff; while 43% work in much smaller business with less than 50 staff – with only 12% in the 50 – 250 size.

To become accredited, employers need not only to pay their own staff the Living Wage, but also ensure it applies to onsite contractor staff eg caterers and cleaners. If more employers were to look at this - it could make a real difference for those occupations – some of the largest affected. The Living Wage Foundation can provide advice and guidance, and help share learning.

Meanwhile the debate on the national minimum wage goes on – and is already featuring prominently in the election campaign. With manifesto launches due, political leaders will be sharing their visions for pay and productivity. Brexit and wider economic uncertainty are creating even greater urgency to address the challenge. By working together, business, civic society and political leaders can unlock growth and create a sustainable economy that benefits us all.

Tags: KPMG

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