Enterprise Minister Tim Johnston says a change in how the island calculates the living wage would bring it in line with the UK and other jurisdictions.
The government announced a review of the living wage calculations as it looks to up the minimum wage to align the two later this year.
Currently, the living wage is determined using a basket-of-goods methodology, but the government is reviewing a switch to a system tied to median earnings.
Mr Johnston told Manx.News: “The living wage is calculated on a basket-of-goods basis. It’s done by the Office of National Statistics and reviewed independently. However, we are now an outlier in the British Isles for that method of calculation.”
Median
Alternative approaches, such as calculating the living wage as a percentage of median earnings, are being considered. In England, for example, the living wage is set at 60% of median earnings, while in Jersey it is 66%.
“There’s an argument that using median earnings better reflects economic conditions over a longer period, whereas the basket-of-goods approach can sometimes cause extreme effects,” Mr Johnston added.
One of the big differences with the island is that in the UK, the national living wage is just the name for the minimum wage for over 21s, with the Living Wage Foundation, whose methodology the island currently follows, setting out what it calls the “real living wage”.
Unlike the national living wage, this is still calculated using the basket approach.
This led to us asking Mr Johnston whether the government was seeking to limit a potential living wage rise in order to prevent a further rise in minimum wage, while the two are not legally tied, it is a Tynwald policy that they should align.
The minister said the proposed revision is “certainly not” about looking at tools or methods to reduce the opportunity for wages to grow, but a way to find a more calculated and balanced approach for businesses, employees and government.
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