4m workers could be helped by ‘Living Wage cities’

4:48 pm - January 20th 2013

by Newswire    

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The government should help small and medium firms to pay their workers a living wage by committing public savings to cities which take the lead in tackling low pay, according to a major new study published today.

The report, from the Resolution Foundation and IPPR think tanks, calls for a series of “living wage city deals” where some of the dividend to the exchequer from cities paying a living wage in the public sector would be recycled back to the local area to support small and medium size businesses in moving away from low pay.

The report provides the most detailed analysis yet of the living wage and the policies that can help extend it into the private sector. It estimates a £2.2 billion annual saving for the Treasury if everyone received a living wage, as a result of higher tax revenue and lower benefit payments.

The living wage city deals would release some of this cash to cities or regions where local authorities take a lead on low pay and commit to partnerships with businesses to help them become living wage employers.

Companies could use the money to cushion the transition to a living wage, the level of pay deemed the minimum for a basic but acceptable standard of living and currently set at £7.45 outside London. The money could fund training to help employers to boost productivity and move to higher skilled enterprises.

Almost four million workers in the private sector are paid less than the living wage work, 84 per cent of all workers earning less than the living wage across the UK. The report says that people working in SMEs outside of London are the hardest to reach but that the ‘City Deals’ that the Government has signed with eight city-regions should be boosted to include the living wage. Those cities are:

· Greater Birmingham and Solihull
· Bristol and the West of England
· Greater Manchester
· Leeds City Region
· Liverpool City Region
· Nottingham
· Newcastle
· Sheffield City Region

The report says cities or regions would have to draw up a plan showing how the money from government would be used to encourage more small and medium enterprises to become living wage employers. This could include both straightforward financial support, the costs of staff training and expert advice on how to open up more profitable markets in higher-skill, higher-value industries.

Living wage cities could apply to renew their deal if they could show that a target number of companies had begun paying a living wage.

The proposal is just one of a series of policy recommendations in the new study, Beyond the Bottom Line, which also represents the most thorough analysis conducted of the economics of the living wage.

from a press release

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Reader comments

1. Northern Worker

The living wage seems to make a regular appearance here. Having seen all the arguments trotted out, the only one that makes sense to me is that people on minimum wage should not be paying tax and NIC. If that were the case, they would then take home the same money as someone earning a living wage and taxed as now. Does that sum it up? If yes, then why are we talking about a living wage? Shouldn’t we be discussing why someone on minimum wage is paying tax and NIC?

Northern Worker couldn’t have put it better myself!

@1 &2

Isn’t the problem with your suggestions the old one, that if you raise the threshold for taxes / NI it applies across the board so revenues from the well paid are lost too? That might negate the positive effects of better wages for the low paid.

These proposals do look like accountancy tricks, but if they help people live better then fine. However I’d rather see the money spent on social housing with affordable rents for low paid people.

@3. Cherub

That argument doesn’t hold and you know it. Tax rates and thresholds can be adjusted so that it makes no difference to the better off. It’s just an argument to continue to oppress the poor.

@4 I don’t know it. Pray explain!

I think a big part of the living wage idea is that the incomes of people who are paid minimum wage need to be topped up by benefits. In this way, the government is literally subsidizing the profits of companies who pay below minimum wage

“If you don’t really care that people can work hard and get paid enough to live, and aren’t bothered that companies can benefit from a more productive workforce, then you may still be interested that there is substantial tax-payer benefit to be had. When large companies like Aviva go Living Wage, to their great credit, this means thousands of low-paid workers take less tax credits. The Institute for Fiscal Studies estimates there are up to £6bn savings to be made where private sector companies choose to join the growing list of responsible Living Wage Employers.”

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