Method briefing: The public subsidy to low wage employers Citizens UK 1. Research team and Advisors This research has been developed by a Citizens UK research team. The principal authors are Stefan Baskerville, George Gabriel, Jesse Hancock, Sanjiv Lingayah and Henriette Neubert. The authors gratefully acknowledge the help of a number of advisors without whom this work would not have been possible: Chris Goulden (Head of Poverty Team, Joseph Rowntree Foundation); Donald Hirsch (Director, Centre for Research in Social Policy, Loughborough University); Christopher Howarth (Senior Policy Analyst, Open Europe); Spencer Thompson (Senior Economic Analyst, IPPR); Professor Jane Wills (Professor of Human Geography, Queen Mary, University of London). Responsibility for the calculations remains with Citizens UK.
2. The Living Wage and the Public Subsidy Citizens UK is a powerful alliance of local Community Organising groups in London, Birmingham, Cardiff, Milton Keynes and Nottingham bringing together churches, mosques and synagogues; schools, colleges and universities; unions, think-tanks and housing associations; GP surgeries, charities and migrant groups to work together for the common good. Citizens UK began the modern Living Wage campaign over 15 years ago, calling for working people to be paid enough to get by. The Living Wage is an hourly rate calculated independently and updated annually based on the amount an individual needs to earn to cover the basic costs of living in the UK – with a separate calculation for London. The current UK Living Wage is £7.85 an hour and the London Living Wage is £9.15 an hour compared to the current minimum wage of £6.50 per hour for workers aged 21 and above. An estimated 5.24 million people in the UK are employed on less than a Living Wage (Markit, 2013: 3), categorised for the purposes of this research as in receipt of “low wages”. Many low waged workers are in receipt of benefits and tax credits, policy tools used to top up their incomes. Recipients of benefits and tax credits are often criticised in popular, media and policy circles. The calculation of the public subsidy is a new way to think about low pay. In effect it is low paying employers who are subsidised by state payments to their employees without which they would be unable to meet their basic needs and continue working for low wages. This research documents substantial scale of these payments, at times dwarfing employers’ own tax contributions. The work of calculating public subsidy is complex and in order to make calculation feasible certain simplifying assumptions need to be made. In order to provide a robust and constructive basis for 1