Wider adoption of the real Living Wage could provide an economic boost to the UK economy worth over £1.5bn, according to new research by the Smith Institute.

Wider adoption of the real Living Wage could provide an economic boost to the UK economy worth over £1.5bn, according to new research by the Smith Institute.

If just a quarter of those on low incomes saw their pay raised to the real Living Wage based on everyday needs, a subsequent increase in wages, productivity and spending could deliver a £1.5bn economic boost to the UK economy, and support a more equitable recovery from Covid, according to a new report published by the Living Wage Foundation and the Smith Institute.

The report also found that an increase in Living Wage jobs could provide significant benefits to local economies, with 11 city regions, including London, Greater Manchester, Liverpool, Cardiff and Glasgow, benefitting from a combined economic boost of almost £700m.

The report found that if a quarter of low paid workers were lifted onto a Living Wage of £10.85 in London, and £9.50 in the rest of the UK, over 1.5 million people would benefit, with uplifted workers securing an average annual pay rise of £520 outside London and £950 within London.

Despite the impact of the Covid crisis, employers have continued to commit to pay the real Living Wage over the past 18 months, with over 2,900 more employers paying the real Living Wage since March 2020. A number of cities, towns and localities have also committed to become Living Wage Places, developing coalitions of private and public sector employers to drive an increase in Living Wage jobs. Areas with Living Wage Places action groups now include Dundee, Cardiff, Salford and Islington, amongst others.

However, despite the continued growth of the Living Wage movement, over 5 million people are still employed in jobs paying less than the real Living Wage.

“All of us have been affected during this crisis, but the real Living Wage offer a clear way to now recover and rebuild with stronger foundations. Workers and families need jobs that meet their everyday needs and allow them to thrive. Businesses need healthy and motivated workers unburdened by the stress of low pay. Cities and towns need local consumers with sufficient wages to stimulate economic growth. The Living Wage provides all of this and more and must now be a priority for all those looking to build dynamic and equitable local and national economies.”

Graham Griffiths, Director of Living Wage Foundation

“The Living Wage not only transforms the lives of low paid workers and improves business performance, but also provides a growth dividend for local economies. As we exit the worst of the pandemic, increased Living Wage coverage can boost spending and support a wage-led recovery in our towns and cities.”

Paul Hunter, Deputy Director of the Smith Institute

We call on mayors and local authorities in Wales looking to recover from the Covid crisis to develop action groups to drive Living Wage take up in their towns, cities and regions, and to integrate the Living Wage into their economic development strategies. Recommending 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 employers 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
RegionLiving Wage Premium (annual benefit to individual)Local Living Wage Dividend (annual economic benefit to the area)No. of jobs on below Real Living Wage
Cardiff Capital Region£520£29,507,000129,400

Read about other regions and download the full report.

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