Nearly a decade ago, a group of funders met to discuss tackling in-work poverty in the charity sector. They were painfully aware that the charities they funded worked hard to tackle poverty, inequality, and injustice.

Yet some of these charities were not paying their staff enough to live on, thereby perpetuating the very problems they set out to fix. With one hand, they did wonderful work to alleviate disadvantage; to tackle racial and gender inequalities; to support people through financial hardship. With the other, they caused these problems through the low wages they paid.

Those foundations recognised that mere exhortation would not fix the problem. Charities, by and large, are led by values-driven people. It was not, generally, stinginess that meant that so many charity workers were struggling to cover their bills. Rather, the problem lay in the financial pressures and funding constraints charities were facing.

The Living Wage Funders scheme

There’s a happy ending to this story. Those funders (People’s Health Trust, Joseph Rowntree, Comic Relief, Trust for London and Barrow Cadbury) ended up setting up what would become the Living Wage Funders scheme. From small beginnings, the scheme now brings together over 80 Funders, ranging from small community foundations, to corporate and family foundations, to local authorities. What unites them is a commitment to three things: paying the real Living Wage to their own workers; ensuring that any posts they fund are paid at the real Living Wage, and supporting and enabling their grantees to become Living Wage employers. In essence, it’s a systemic approach, with foundations integrating their values into their grant-making processes – for example, by flagging in application guidance that they will cover grant-funded roles at the real Living Wage.

The real Living Wage is a voluntary scheme, for employers who choose to go above and beyond the government’s statutory ‘national living wage’. The real Living Wage is currently £12, and £13.15 in London. Unlike the national living wage, it’s calculated according the real costs of living.

Over the decade in which the Living Wage Funder scheme has been in operation, over 2,500 charities have joined the Living Wage network. These charities pledge to ensure that their staff and, over time, any third-party contractors like cleaners are paid a decent wage, over and above the statutory living wage set by the government. Beyond the charity sector, there are now over 15,000 employers in the Living Wage network. Collectively, they’ve put back over £3bn into the pockets of more than 460,000 workers.

Going global

The modern Living Wage movement started in east London, but it’s now going global, with Living Wage affiliates established in the US and New Zealand, and new movements growing in a range of other countries. There’s increasing recognition at the international and UN level that employers are key actors in the achievement of the 2030 Sustainable Development Goals (SDGs). In an interconnected world, it makes sense for civil society bodies, trade unions, foundations, and employers to work together to end in-work poverty.  

A reduction in low pay for charity workers – but still work to do

The good news? Since the launch of the Living Wage Funders scheme started, rates of low pay in the third sector have fallen, from 16.9 per cent in 2015 to 12 per cent in 2023. The net result is that thousands of charity workers have broken out of poverty. While rates of low pay in the charity sector are still higher than in the public sector, they’re considerably lower than in the private sector.

The bad news is that more than one in 10 charity employees are still paid less than the real Living Wage. The rates are even worse when one zooms in on rates of pay for women in the UK charity sector (16.6 per cent); Black workers in the sector (17.5 per cent) and for disabled workers in the sector (16.5 per cent). And people taking their first step into a career in the third sector are the worst-off of all: analysis by CharityJob earlier this year found than a staggering 46 per cent of entry-level charity jobs in London paid less than the London Living Wage; rising to two thirds (67 per cent) of entry-level charity jobs outside London.

The impact on these workers is very real: three out of 10 workers who are paid less than the real Living Wage had to use a foodbank in the last year, and two out of five found themselves skipping meals for financial reasons. When foundations committed to effective social change are funding grantees whose staff cannot make ends meet, then somewhere along the line, something has gone very wrong.

The imbalance of power between grantee and foundation can make it hard for a financially-stretched grantee to flag when grants are no longer covering a decent wage for all workers. Living Wage funders break this impasse, loudly and proudly declaring a commitment to reducing poverty not just as an outcome but structured into the way they operate.

Living Wage and a diverse workforce

Increasingly, and thanks to initiatives such as #CharitySoWhite and Future Foundations, foundations are facing up to the systemic inequalities in philanthropy. The charity sector has a problem with socio-economic diversity. Research from EY Foundation earlier this year found that the charity sector was less likely than both the public and private sectors to hire people from a working-class background. A massive part of this is down to low pay: when charities advertise entry-level jobs at less than the real Living Wage, it’s a massive ‘NO ENTRY’ sign for people from lower socio-economic backgrounds. Charities, and foundations, who are serious about improving the diversity of their workforce would do well to start by looking at their rates of low pay.

Lianna Etkind is a Partnerships and Campaigns Manager at the Living Wage Foundation, leading LWF’s work in the charity sector and in the creative and cultural sector.

Editor’s note: Alliance magazine is a Living Wage employer.