Five million workers excluded from recovery, says Living Wage Commission

Five million workers are set to be left out of the economic recovery, according to a new report published today.

The report, Working for Poverty, was authored by the Living Wage Commission and states that the economic recovery will have no effect for one in five workers unless employers pay a Living Wage.

It describes how a combination of rising living costs and stagnating wages has created a ‘double squeeze’ on low-paid workers which will not be relieved by the economic recovery, with the taxpayer picking up the bill.

In contrast to the government’s emphasis on the idea that poverty is caused by welfare dependency, the report claims that 6.7 million of the 13 million people in poverty in the UK are in a family where someone works – for the first time, this is more than half the total of those in poverty.

The report’s other findings include:

  • That real average wages have grown by only 13 per cent since 1999, whereas economic output has risen by four times this rate
  • That housing costs have tripled in the past 15 years (this is one and a half times the amount by which wages have risen)
  • That electricity, water and gas bills have risen by 88 per cent in the last five years

Crucial in this situation is the fact that too few workers are paid a Living Wage. The report found that 5.24 million workers in Britain (which represents 21 per cent of the workforce) are paid below a Living Wage – this is an increase of 420,000, or 9 per cent over the last 12 months.

The report found that low-paid workers were being hit hardest by the ‘double squeeze’ of rising prices and stagnating wages because they have the smallest budget elasticity.

It also found that wages became separated from economic output five years before the 2008 financial crisis, and that while economic output is increasing, so too are the number of people paid below a living wage. These employees, who represent 1 in 5 workers, will lose out on the economic recovery unless the squeeze on wages and prices is removed.

The Living Wage Commission is a 12 month independent inquiry into the future of the Living Wage, chaired by Archbishop of York John Sentamu. It will release its final report in June 2014.

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