Wider adoption of the real Living Wage could provide an economic boost to UK cities worth over £1.1bn, according to new research by the Smith Institute.
In a new report commissioned by the Living Wage Foundation, The Local Living Wage Dividend, the Smith Institute found that if just a quarter of those on low incomes saw their pay raised to the real Living Wage based on what people need to get by, in ten of the UK’s major city regions, a subsequent increase in wages, productivity and spending could deliver a £1.1bn economic boost to major UK cities.
The report found that if a quarter of low paid workers were lifted onto a Living Wage of £10.20 in London, and £8.75 in the rest of the UK, in ten city regions:
- Over half a million workers would secure an average annual pay rise of over £1,700.
- UK city regions would benefit from a £560m boost; as well as a more inclusive local economy.
- The Treasury would benefit from £350m in increased tax receipts and benefit savings.
- If half of this £350m boost to the Treasury was returned by central government to city regions, the local economic benefit – a “Local Living Wage Dividend” – could increase to £1.1bn, when taking into account wider economic benefits such as increased local spending by low paid workers and government driving further economic activity.
The report highlights the role that leading local public and private sector employers such as universities, hospitals, football clubs and city airports can play in providing leadership on the Living Wage. It calls on metro mayors and local authorities to work with these key ‘anchor institutions’ to drive Living Wage take up in their towns, cities and regions, and to integrate the Living Wage into their economic development strategies. It recommends that they:
- Become accredited Living Wage employers
- Set clear targets for Living Wage take up in their cities and regions, and develop a plan with other key local ‘anchor institutions’ for how these will be met
- Use their powers of planning and public procurement to encourage more local employers to commit to ensure their staff earn a real Living Wage
- Make support for business development and investment in skills contingent on firms paying a wage their staff can live on.
- Investigate the potential to create new real Living Wage buildings, zones and hubs in key public spaces.
Tess Lanning, Director of the Living Wage Foundation, said:
“By championing the real Living Wage based on what people need to get by, leading mayors and local authorities can build successful, dynamic local economies – and most importantly ensure that the proceeds from growth are fairly shared. With over 5.5 million people still paid too little to live on, the real Living Wage is a key plank of any strategy seeking to tackle the UK’s problems of in-work poverty, regional inequality, and weak productivity.
Paul Hunter, Deputy Director of the Smith Institute, said:
“Big employers often like to talk about the positive role they play in their local community. One way that they can go beyond the warm words is to pay their staff the Living Wage and demand their suppliers do the same. This is not just about good corporate citizenship. Evidence shows workers paid fairly are more productive. And, as our research shows, the Living Wage can also provide a boost for the local economy on which established employers are dependent.”