In-work poverty: Investors ramp up pressure on big firms to pay staff real living wage

Almost two-thirds of FTSE-100 listed companies are not accredited by the Living Wage Foundation to pay minimum amount workers need for basic costs

Retail, hospitality and construction are among sectors with a large number of staff on low pay or in insecure work (Getty)

Investment firms managing £180bn of assets are today bringing renewed pressure on the UK’s largest companies to pay workers enough for a basic standard of living.

Fifteen investors, including NEST, Strathclyde Pension Fund and Candriam, are writing to FTSE-listed companies to make the case for paying the real living wage of £10.55 per hour in London and £9 in the rest of the UK.

It comes just days after research found that almost 4 million British workers are living in poverty, an increase of 500,000 in five years. The number of children living in poverty rose more sharply last year than at any time in the last two decades, the Joseph Rowntree Foundation found.

Severn Trent, United Utilities and Vodafone are among companies that will be receiving letters, while the construction industry is under particular scrutiny after research highlighted problems with low pay in the sector.

Responsible investment charity ShareAction, which is co-ordinating the move, argues that paying a living wage reduces staff turnover and makes companies more successful in the long term.

The national living wage, set by the government, is £7.83 and is set to increase to £8.21 in April, but the Living Wage Foundation says this is not enough for a full-time worker to be able to cover essential costs.

The foundation sets its own voluntary rate, which is regularly reviewed. It has also accredited more than 4,700 living wage employers but many large listed companies are not yet among them.

Mara Lilley, senior campaigns officer at ShareAction, said pressure from shareholders about low pay has already had an impact.

When the group started engaging with FTSE 100 companies in 2010, only two were accredited by the Living Wage Foundation. That number now stands at 37.

“Companies are clearly listening to their shareholders,” Ms Lilley said.

“By engaging with companies on behalf of savers, these investors are showing that it’s entirely possible to focus on good returns as well as the interests of employees who may be struggling despite being in work.”

Diandra Soobiah, head of responsible investment at NEST, said there were “clear benefits” to companies paying the living wage, such as improved reputation, which can in turn boost profits.

“As a pension scheme with more than 7 million savers we need to achieve the best possible investment returns on their behalf.

“That’s why we’re calling on the companies we invest in to do the right thing and sign up to the real Living Wage.”

Median annual earnings are still £760 lower than they were a decade ago, according to the Institute for Fiscal Studies (IFS).

People in their 20s and 30s have been hit hardest, with drops of 4.6 per cent and 7.6 per cent on the same age groups in 2008.

While the UK’s official unemployment rate is at its lowest in more than four decades, many of the jobs created since the financial crisis have been low-paid and insecure.

According to the Joseph Rowntree foundation, one of the key drivers of rising poverty levels has been parents getting stuck in low-paid work, particularly in hospitality and retail,

Jackie Turpin, head of finance at Jospeph Rowntree Charitable Trust said: “We firmly believe that a workforce that feels valued and respected will outperform one that doesn’t.

“We welcome collaborative engagement to demonstrate that this belief is widely held and is rooted in many people’s experience.”