By Richard Johnstone | 24 June 2014
Low pay costs the public purse between £3.6bn and £6bn every year in tax credits to boost wages and the government should encourage employers to pay the Living Wage to reduce this subsidy, a report has said.
The Living Wage Commission, which was established to examine the future of the pay rate, today published a report examining the extent of low pay across the UK. It found that around 5.2 million workers in Britain – equal to 21% of the workforce – are paid below a Living Wage, a number that has increased by 420,000 over the last 12 months.
In addition, 6.7 million of the 13 million people in poverty were in families where someone works – over half the total for the first time.
The Working for poverty report highlighted that Institute for Fiscal Studies calculations had found the Treasury could save as much as £6bn a year if every private sector employer paid the Living Wage – currently set at £7.65 across the country, rising to £8.80 in London, compared to the National Minimum Wage of £6.31.
The group also called on the government to ensure no public sector workers were paid below the Living Wage.
Dr John Sentamu, the Archbishop of York and chair of the commission, said millions of people find themselves in a downward social spiral.
‘They are often in two or three jobs just to make ends meet. Meanwhile the UK taxpayer picks up the bill in tax credits, in-work benefits and decreased demand in the economy,’ he said.
‘With the economy showing signs of recovery, employers that can pay a Living Wage must do so. They should choose between continuing to make gains on the back of poverty wages, or doing the right thing and paying a fair wage for a hard day’s work.’
The commission, which was formed last July, will now examine how the Living Wage could be implemented in different part of the economy, and any barriers to paying it faced by businesses.
