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The Cost of a Living Wage

The Cost of a Living Wage

The living wage is a worthy social aspiration. It looks at the cost of living and asks what wage a person needs in order to meet the basic assessed costs of living in the UK and in London. It is a moral choice and something that employers in the UK are encouraged to provide.

However – how realistic is it?

The services we supply to our clients is generally government funded, typically via local authorities or the DWP itself. We compete for contracts and our charges are limited by what the funding authorities can pay and how little other competitors are willing to charge. It’s a fine balance, we have costs such as training, rents, pension’s contributions, National Insurance, PAYE, travel costs … well it goes on. At this point it means our support workers are paid less than the proposed living wage.

The government has set the UK living wage target of £9 by 2020. Hand in hand with that Chancellor of the Exchequer George Osbourne has asked many government departments to model cuts of 25% and 40%. Thus we and other firms like us are caught between a significant rise in wages and a potentially significant reduction in the available wage pool.

There offsets planned in terms of corporation tax and national insurance contributions. These go some way but scale of benefit is quite small. UKHC press release on this data It’s a worrying situation and the outcome looks bleak. The Government is proposing something that it’s own departments seem unlikely to be able to deliver. Something has to give, where will the axe fall?

The irony is that the 2020 living wage proposal of £9 an hour does not even meet the 2015 calculated London living wage of £9.15 [livingwage.org.uk].The UK Homecare Association made a similar warning last month, saying services to care for people in their own homes would become “unviable”. The work we do is very similar and we share the UK Homecare Associations concerns. UKHCA Open letter to the Chancellor of the Exchequer

A government spokesman said: “The National Living Wage will benefit hundreds of thousands of care workers who will see their pay increase. The overall costs of providing social care will be considered as part of the spending review later this year and we are working with the care sector to understand how the changes will affect them.” as reported by the BBC

The UKHCA has calculated that £15.74 is required right now to adequately pay for social services. The UK average of £13.66 is not enough to even meet current minimum wage costs. UKHCA data and calculations

  • £15.74 per hour required to support the current minimum wage and others costs
  • £13.66 is nation average
  • £16.70 per hour required to support 2020 National Living Wage.
  • 50p is set aside as profit, months of profit can be wiped out by a redundancy, training, registration to CQC.
  • 25% to 40% of cuts to budgets are being modelled by government departments.

This tracks very well with our experiences at Appa.
uk homecare rates

In conclusion support work is unsustainable and the outlook is set to get worse. The work is vital so where will the burden fall? On the already reduced pensions of the elderly, on their families casting them in the role of a burden on their dependants? Or will the government revalue the human costs of its policies and seek changes that serve people first?

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