Protected: Low pay in London boroughs

This page looks at the proportion of London workers who work part time and whose jobs were low paid in 2021. 

How low pay rates across London boroughs is measured

The data looked at how many part-time London workers were paid below the London Living Wage across London boroughs in 2021.

What’s the London Living Wage?

The Real Living Wage is set by the Living Wage Foundation. It is the hourly rate of pay that the Foundation thinks an employee needs to earn in order to meet their “everyday needs” when working full time hours. London has its own Real Living Wage called the London Living Wage, which is higher than the standard Real Living Wage to reflect the higher cost of living in London. In 2021 the London Living Wage was £11.05 per hour.

The Real Living Wage is a recommendation from the Living Wage Foundation and supported by many other groups. It should not be confused with the National Living Wage, which is the statutory minimum wage for people aged over 23 and is due to reach two-thirds of average (median) pay by 2023. The Real Living Wage and London Living Wage tend to be higher than the National Living Wage as the Living Wage Foundation calculates that an income high enough to meet everyday needs is higher than two-thirds average pay.

What was the geographical scope of this data? 

The data is restricted to jobs held by people who live in London (residence-based), but who may work outside of London. 

Why measure low pay? 

Low pay is an important measure of the health of the London economy, individuals and society. It affects…

…the economy

• Lower paid workers are unable to buy as many goods, so will spend less and consequently fewer goods will be produced for them to buy..
• The government has to borrow more money. More low paid workers means less tax revenue (the amount of money the government brings in through taxes) because people pay less income tax and also spend less. In addition, many low paid workers need to access government benefits to supplement their incomes, further adding to government costs. 
• Paying low wages is bad for business in a number of ways. For example, low paid workers means a less stable workforce, increases in staff turnover (in turn increasing recruitment and training costs) and demotivated employees (resulting in less productive employees).

…individuals and society

• Low pay can push households into debt and increase poverty rates, which can lead to social problems like increased rates of homelessness and mental health problems.

What low pay can’t tell us

Low pay rates don’t reveal the following problems in the work or ‘labour’ economy:

• Unemployment rates, which are higher in London than the UK average. 
• The quality or precarity of jobs. Ahead of the Covid pandemic, 3.6 million people were in insecure work- some one in nine workers. The Resolution Foundation defined insecure work as having a zero hours contract, involuntary working on a temporary contract, or working low hours and wanting more. To illustrate the problem of low quality work in London, two in five Londoners were dissatisfied with opportunities for progression in the twelve months up to April 2021. The same number of people had felt unwell due to work-related stress across the same period.
• Inequality. While low pay rates can tell us about the poorest paid in society, they don’t show us how much they earn compared to the richest workers. Such measures of inequality are important as they are strongly correlated to a range of social ills, eg. inequality is correlated to crime rates and poor health.

Why use ‘below London Living Wage’ as an indicator of low pay?

Low pay is sometimes considered to be anything less than two thirds of the average (median) pay. However, even people earning more than two-thirds average pay might struggle to ‘get by’ if average pay is low compared to the cost of living. Thus this indicator of low pay tends to underestimate the proportion of people in low pay. This is particularly problematic in the current context where average wages have not kept pace with cost of living increases over recent decades. In contrast, this ‘indicator’ for low pay in London is not related to average pay, but instead considers anyone who earns less than what’s needed to meet everyday needs to be in low pay. In London the income needed to meet everyday needs is called the London Living Wage, and this was £11.05 per hour for 2021. We think this is a more accurate picture of who’s really not earning enough. 

The limitations of ‘below London Living Wage’ as an indicator of low pay

• Those earning the London Living Wage or above but not working full time hours still may not earn enough to meet everyday needs. Measuring low weekly pay- looking at hours worked and not just hourly pay rates- would better convey whether people are in low pay over a given period.
• Neither does the data show how low pay for part time workers differs by demographic. For example research from the Living Wage Foundation in 2021 found those from racialised groups are more likely to be paid below the Real Living Wage than White workers (19.4% compared to 16.3%), but the data does not show how much more likely racialised groups are to earn below the London Living Wage across London’s boroughs.
• Living costs vary greatly across London- for example see ‘median price types for all house types’ on this page to see how housing costs differ across London boroughs. Despite this, the Living Wage Foundation set the London Living Wage the same across all London boroughs. Thus where boroughs may experience similar low pay rates, this does not take into account the varied costs of living.
• The Real and London Living Wages are calculated based on what people need to ‘meet everyday needs’. However, this is not the same as what people need to live a good life. Thus rates of low pay using this indicator tell us little about the proportion of people that are able to thrive.

Limitations of the methodology used 

Data from the Annual Survey of Hours and Earnings from the Office of National Statistics (ONS), was used to calculate low pay rates. Limitations of this data include:

• Many people work outside the ‘formal economy’ (i.e. they aren’t counted as ‘employed’ by the government or the ONS) and a large proportion of them are low paid. The proportion of low paid workers is therefore likely higher than shown by these calculations.
• The ONS data is based on a survey of 1% of workers in the UK. The calculations thus assume that trends in pay among this 1% of workers reflect trends across the rest of the workforce.