Economics
Student Videos
Minimum Wage and Living Wage
- Level:
- AS, A Level, IB
- Board:
- AQA, Edexcel, OCR, IB, Eduqas, WJEC
Last updated 31 Mar 2021
In this revision video we look at the difference between a minimum wage and a living wage drawing on UK labour market data.
What is meant by a minimum wage?
The minimum wage is a legally-enforced minimum hourly rate of pay for all adult workers. It is against the law for employers to pay workers less than the NMW.
How does a living wage differ from a minimum wage?
The ‘Real’ Living Wage is an hourly rate based on the basic cost of living in the UK. It is optional for businesses to choose to pay the living wage to their employees. The living wage is based on the hourly pay in work that people need to get by. Essential bills include housing rent, food, and utility bills.
As of November 2020: The Real Living Wage is £9.50 across the UK and £10.50 in London (reflecting higher costs of living in the capital)
Possible justifications for businesses deciding to pay the real living wage to employees?
- Improved employee retention – saves costs of hiring / training
- Reduction in staff absenteeism
- Stronger industrial relations – lower risk of strike action
- Efficiency wage theory -improved pay can lift productivity
- Corporate social responsibility – improved reputation
- It is also worth considering wider macroeconomic benefits including reductions in welfare claims and increased consumer spending
You might also like
20 Years of the UK National Minimum Wage
Study Notes
Amazon increases their US minimum wage to $15 an hour
5th October 2018
Osborne rebrands the Minimum Wage
9th July 2015
Measuring a minimum income standard
29th July 2014
Labour Market: Sainsbury's raises pay to £10 an hour
8th January 2022
A* Exam Technique: Evaluating impact of a higher minimum wage
Practice Exam Questions
Will the new National Living Wage cost jobs?
25th March 2016
Should there be a maximum wage?
29th July 2014
Recommended

Exam support for 2022
Online Grade Booster Courses for A-Level Exams in May & June 2022
Exam technique, advance information support, live revision and more from the tutor2u subject specialist teams