Low pay and in-work benefits

Key points

  • Between 5% and 10% of full-time and 30% - 40% of part-time employees in London are low paid – a lower proportion than in any other English region. This is true for full-time working men and women and part-time workers.
  • Within London, the boroughs with the highest proportion of low-paid residents are Brent, Barking & Dagenham, Newham and Waltham Forest. There is no pronounced Inner/Outer pattern.
  • By contrast, almost all of the boroughs with an above-average proportion of low-paid jobs are in Outer London, the highest being Bexley, Bromley, Waltham Forest and Harrow.
  • Although a higher proportion of jobs in Outer London are low paid, the number of low paid jobs in Inner London is similar to that in Outer London. In particular, about a quarter of all low-paid jobs are in the five Inner West boroughs of Westminster, Kensington & Chelsea, Hammersmith & Fulham, Wandsworth and Camden.
  • The proportion of households receiving in-work tax credits as a supplement to earned income is lower in London than in most other parts of England.
  • Within London, 60% of all tax credit recipients are in Outer London with most of the remainder living in the Inner East & South.

Find out more about Low pay and in-work benefits by visiting the indicators in this section, listed on the right.

Rising income poverty levels amongst working families mean low pay is a crucial factor behind household poverty in England. Low pay is defined in this section as employees who are paid less than £7.50 per hour.

In 2008 and 2009, median hourly pay of London residents rose roughly in line with the rate of inflation, at around 4% per year. The pay of the bottom quarter of employees living in London rose ahead of inflation. Median hourly pay in 2009 was £14.31, and pay at the bottom quartile was £9.45. Both figures are much higher than the national average. For part-time employees, whose average pay is in any case lower, hourly pay rose ahead of inflation in 2009 but barely rose at all in 2008. The combined effect over the two years, though, is still an above-inflation rise.

Since 2004, the Greater London Assembly has championed the 'London living wage', an hourly rate for working Londoners designed to ensure a decent standard of living, including access to other benefits including annual and sick leave. While not mandatory in the same way as the National Minimum Wage, the GLA insists that any company contracting for work with it must guarantee its employees this living wage. It is a campaign being led by the community organisation London Citizens and supported by a number of companies, trade unions, anti-poverty agencies, and Trust for London.

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Inner London:

Camden, Hackney, Hammersmith & Fulham, Haringey, Islington, Kensington & Chelsea, Lambeth, Lewisham, Newham, Southwark, Tower Hamlets, Wandsworth, Westminster

Outer London:

Barking & Dagenham, Barnet, Bromley, Bexley, Brent, Croydon, Ealing, Enfield, Greenwich, Harrow, Havering, Hillingdon, Hounslow, Kingston upon Thames, Merton, Redbridge, Richmond upon Thames, Sutton, Waltham Forest

In-work tax credits:

Child and Working Tax credits (CTC and WTC)

CTC is a means-tested payment for people with dependent children, whether in or out of work. However, this analysis only uses the part payable to families in-work.

WTC is a means-tested payment for working people on a low income

Adapted from http://www.taxcredits.inlandrevenue.gov.uk

Income poverty:

A household is considered to be in income poverty (or low income) if its income is less than 60% of median household income. This measure is used by the Government in its child poverty target and is in common usage across the European Union. In 2006/7, a single adult would be classed as in income poverty if his/her income was less than £112 a week (after housing costs)

Low pay:

The most commonly used threshold is 60% of median male full-time hourly earnings. This was £7.50 in 2008 and is the threshold used throughout this website.

London living wage:

Nearly 100 employers in the capital are now paying the London living wage, including Barclays, Westfield, the London School of Economics and Transport for London. It is based on a calculated 'poverty threshold wage', but with an additional 15% added to ensure a 'decent' standard of living for the recipient. In 2010, the London living wage was set at £7.85 by the Greater London Authority. More on the living wage campaign.

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