THE BLOG

Paying the Living Wage: Good for Workers, Good for the Economy

03/11/2014 10:12 GMT | Updated 02/01/2015 10:59 GMT

Poverty pay is a sad feature of modern day Britain. Work should be the route to a better life, but try telling that to millions of workers stuck in low-paid jobs.

KPMG's annual living wage report, published today, shows that the number of people earning less than the living wage has increased throughout England and Wales. Clearly, it is getting harder and harder for workers to find better-paid jobs.

According to the Resolution Foundation, in 2004 just one in nine (11 per cent) people earning within 5p of the minimum wage remained on this rate for five years or more. However, in 2013 this had risen to nearly one in four (23 per cent).

The minimum wage has become the industry rate for too many jobs. This is bad for our society and our economy. According to the Office for Budget Responsibility the UK is facing an income tax shortfall despite rising employment levels. The OBR say this is due to the numbers of people going into low-paid work and the sharp growth in self-employment, much of which is poorly paid.

With less money coming in to the Treasury's coffers borrowing is going up, which is in turn increasing the size of the deficit. In short, Britain's living standards crisis is crippling the public finances.

So what can be done?

The simple truth is that many employers can afford to pay more. For large companies in sectors such as food production, banking, construction and software/computing - which employ over 1 million low- wage workers - paying all staff the living wage would mean an increase of less than 0.5 per cent of the total wage bill.

And it is worth noting that the growth in financial reserves for large companies increased from £394bn in 2007 to £477bn in 2013. As the big corporates start to invest again, they must not forget that decent pay is itself an important investment in their workforce.

We need an increased commitment to the living wage from employers in the public and private sector so that their own staff, as well as those in their supply chains, can have a decent standard of living.

That's why we need to find new ways for employers and unions to work together to set higher wages, agreed at a sector level by modern wages councils, so that workers and businesses can both get a fair deal. More collective bargaining can stop employers skimping on pay.

We also need the government to take the lead by ensuring that businesses who win public sector contracts are made to pay the living wage.

A low-wage recovery is in nobody's interest. People need more money in their pockets if they are to have a decent standard of living and if local economies are to thrive. This is why the TUC is supporting Living Wage Week and why Britain Needs a Pay Rise.