MOST people in Britain earn between £10 and £20 an hour, but this disguises large discrepancies between the top and bottom 20% (see chart 1). The mechanisms in place to negate the shortfall between pay and prices at the bottom, through benefits and tax reliefs, work up to a point and provide only a short-term solution. Living Wage Week is an annual event, hosted by the Living Wage Foundation, that sets the minimum hourly pay for the 1,000 companies that have signed up to its programme. The benefits of these higher rates are not immediately obvious as we explain in this week’s print edition. The foundation announced on November 3rd that hourly pay would rise to £9.15 ($14.50) in London and £7.85 outside the capital. The national minimum wage is still some way below this at £6.50. Although these pay benchmarks have increased annually, and the minimum wage has risen by an average 4% since its introduction in 1999, overall pay has fallen since the 2008 financial crisis as nominal increases have been outstripped by inflation. Real wages have dropped across the board.

It may be difficult to sympathise with a six-figure earner, cutting back on his luxury-coffee shop trips while those at the bottom of the pay-scale are turning to food banks, but the erosion of earnings is actually now affecting the top tier more than the bottom. In the two years from 2009-11 the poorest took the biggest hit to their pay, in percentage terms. But in the subsequent two years the highest earners have been hammered, as the erosion of pay at the lower end eased but remained pronounced at the top. The overall effect is that the total fall looks somewhat progressive (see chart 2). The government estimates only 1% of workers are paid below legal minimum wages, but the proportion of young people (aged 16-20) below these pay thresholds is higher now than at any time in the past decade, at over 5%. This will fuel the next generation of benefits dependency if left unresolved. Moreover, median hourly earnings in 2013 for those under 20 was less than half the national average of £13.03 and recently introduced caveats to the minimum wage levels, for example to boost apprenticeships, means that some now pick up as little £2.73 an hour. Just enough for that luxury cup of coffee.