The success of the living wage campaign benefits us all

Giving more people the living wage will have wider benefits for the economy.

To mark Living Wage Week, Left Foot Forward has invited writers to contribute to a series on wages and the cost of living

Giving more people the living wage will have benefits for the wider economy too

Paying the living wage is good for employees, families, businesses, the local economy and the public purse, so it’s great news that over one thousand employers have now committed to it.

The surge in businesses signing up to be living wage employers means that 60,000 workers have had their wages raised to a level calculated to cover the absolute minimum needed to live a decent life. The voluntary hourly rate has been raised to £9.15 an hour in London, and £7.85 across the rest of the UK.

Obviously a fair day’s work deserves a fair day’s pay, but paying the living wage has wider economic benefits too.

The living wage is now set at 21 per cent higher than the national minimum wage. For someone working 37 hours a week on the minimum wage this means a pay rise of £2597 a year if their employer signs up to the scheme.

Not only can this money help to raise families above the poverty line and reduce household debt and inequality, but every pound spent in the local community helps the local economy too.

Employers who have signed up to the scheme have reported that the well-being of their employees has risen,  leading to improvements in productivity and company loyalty.

Paying employees a fair wage means they are more likely to stay with their employer for longer, allowing businesses to profit from retaining experienced workers, and to reduce the costs of recruitment.

And every individual and business that benefits from the living wage saves the government money as well. A combination of higher income tax payments, national insurance contributions and lower spending on benefits and tax credits all improves HM Treasury’s revenue.

In fact, if all of London’s low paid workers were paid the London living wage it is estimated that the government would save £823 million a year, money that could be used to reduce the deficit or be invested back into local services.

The public sector has been leading the way, with 31 councils now accredited living wage employers. IPPR’s calculations show that for every £1 spent by the local authority to introduce a living wage, around 55p goes to the employee in higher net wages and pension contributions, while 45p goes back to the Treasury in income tax, national insurance contributions and reduced tax credit and benefit spending.

Low pay is currently endemic in Britain, affecting over 5 million workers. More than half of those in poverty are working – they just aren’t paid enough to secure a decent standard of living. The minimum wage does not provide an adequate income for the rising cost of living and the gap between rich and poor is getting wider and wider.

The living wage campaign is lifting hard workers out of low pay and benefiting businesses, at the same time as raising government revenue. Lots of people are due a pay rise – and a living wage seems like the best place to start.

Izzy Hatfield is a researcher at IPPR. Follow her on Twitter

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