The Impact of the Real Living Wage in Higher Education

Edmund Heery, David Nash, Deborah Hann
Publication focus
Living Wage

One way in which universities can fulfil their civic mission is by adopting the Real Living Wage (RLW). The civic mission of universities is increasingly defined to include a commitment to redistribution; that universities will use their role as educators but also as investors, employers, and purchasers to reduce inequality in the communities in which they are based. Paying higher wages to those performing low wage jobs, who are more likely to be women, drawn from ethnic minorities, and to live locally to their place of work, is one way of advancing this redistributive mission.

The RLW is a voluntary labour standard, promoted by the Living Wage Foundation. The standard is based on research into the expenditure needs of different types of low-income families and takes the form of an hourly rate of pay, significantly higher than the statutory minimum. Currently the RLW is £11.95 in London and £10.90 in the rest of the UK (please note these have since risen to £13.15 in London, £12 in the rest of the UK). If employers adopt the RLW then this higher rate must be paid to all employees aged 18 and over, including those providing outsourced services such as cleaning, catering, and security. Providing these conditions are met, employers can be accredited by the Foundation as Living Wage Employers.

Our research at Cardiff Business School is focused on estimating the redistributive impact of the Living Wage, using returns that employers submit to the Foundation when they first sign up to the scheme. For higher education, it is possible to identify the number and types of low-paid employees who received a pay increase when their employer joined the scheme. Because employers are asked to provide the hourly rate of pay of these employees prior to accreditation, we can also estimate both the size of the increase in hourly pay received by benefiting employees and the cumulative money transfer from the point of accreditation to the present day. These data are not ideal - they are collected at a single point in time when the employer first becomes accredited - but they do provide a unique source for assessing the redistributive effect of the RLW.

Between the launch of the accreditation scheme in 2011 and the summer of 2023, 73 universities became accredited as Living Wage Employers, though two of these, the University of East Anglia and the Arts University Plymouth have subsequently dropped out of the scheme. In combination these universities make up nearly 40 per cent of the sector, a relatively high level of accreditation compared with other public service industries. We estimate that 28 per cent of local authorities have signed up to the Living Wage, while 17 per cent of NHS Trusts and Boards have done so. Indeed, if one excludes foreign universities with UK campuses from the calculation, then the proportion of accredited universities rises to 46 per cent.

These accredited universities reported that 25,767 employees had received a pay increase through the RLW, equivalent to about 9 per cent of total employment. The median percentage of employees receiving a pay increase across the 73 universities was 7.4 per cent. Universities are relatively high paying employers, with a high percentage of professional, managerial, and administrative employees amongst their workforces. Universities also employ many people in support roles, however, working as cleaners, in catering, security, portering, and grounds maintenance and it is this support workforce that has mainly benefited from the Living Wage.

A majority of these benefiting employees work part-time (57 per cent) and a substantial minority work for contractors (24 per cent), gaining from the stipulation in the RLW that the scheme be extended to the indirect workforce. One of the objectives of the RLW was to reverse some of the adverse effects of public service outsourcing on low-paid employees and the evidence from higher education indicates that it has been successful in this regard.

The median increase in the hourly rate of pay for benefiting workers reported by universities was just under 11 per cent. This is a substantial wage increase, which for many kicked in before the recent surge in inflation. The increase in pay was particularly high for contract workers (15 per cent) and those working in London who received the higher London Living Wage (35 per cent). Over time, this increase in pay has resulted in a substantial wage transfer to low-paid university employees. We estimate that the cumulative value of the RLW in higher education to be about £211m.

Our evidence indicates that supporting the RLW can and does further the civic mission of universities. Higher education is not a sector defined by low-pay, but nevertheless many low-paid employees work within it. Adopting the Living Wage has benefited a large number of these workers, producing a substantial pay increase and cumulative wage transfer. Part-time working women and those on outsourcing contracts have been notable beneficiaries, especially when they work in London. Many universities now include a specific commitment to social justice in their statements of civic purpose. Signing up to the RLW provides a tangible means to honour this commitment.