Real Living Wage could boost UK economy by £1.7billion

If just a quarter of the UK’s low-paid workers were given a pay rise to the real Living Wage, as set by the Living Wage Foundation, it could put an extra £1.7bn back into the UK economy
Regions across the UK would see a significant economic boost if a quarter of low-paid workers were uplifted to the real Living Wage. London would see the biggest boost (£208m). Followed by South-East (£197m), North-West (£191m), Yorkshire and the Humber (£165m) and West Midlands (£148m)
The real Living Wage, set by the Living Wage Foundation, is currently £10.90 across the UK and £11.95 in London. It is the only wage rate calculated based on the cost of living
Today’s research comes on the first day of Living Wage Week, the Living Wage Foundation’s annual celebration of the Living Wage movement. There are now over 11,000 Living Wage Employers.
Wider adoption of the real Living Wage could provide a vital economic boost to the UK economy, research shows.

Wider adoption of the real Living Wage could provide a vital economic boost to the UK economy, research shows.

Region	Economic Growth
London	£208,328,000
South East	£197,318,000
North West	£190,883,000
Yorkshire and The Humber	£165,033,000
West MIdlands	£147,531,000
East	£144,258,000
South West	£137,019,000
East MIdlands	£125,785,000
Scotland	£114,081,000
Northern Ireland	£84,375,000
Wales	£75,443,000
North East	£74,667,000

Research commissioned by the Living Wage Foundation and conducted by the Smith Institute, the Local Living Wage Dividend, found that if just a quarter of those earning below the Living Wage saw their pay rise to the real Living Wage, the increase in wages, productivity and spending would deliver £1.7 billion pounds back into the UK economy.

With households across the UK facing a cost-of-living crisis, and economic growth stagnant, today’s research shows how a real Living Wage could tackle both, and support a high-growth, high-wage economy. 

Regions and city regions across the UK would receive an economic boost if a quarter of the low-paid workers were lifted onto the real Living Wage:

Today’s research comes as the Living Wage Foundation celebrates its annual ‘Living Wage Week’ and celebrates new accreditations, including care provider Anchor, Royal Marsden NHS Trust, and Newcastle City Council.

There are over 11,000 Living Wage Employers across the UK, including Everton FC, Burberry, Linklaters, KPMG, Aviva, as well as thousands of small-to-medium-sized businesses. Living Wage employers commit to voluntarily go above and beyond the government’s National Living Wage and pay all their staff – including contracted workers - the higher wage rate.

The real Living Wage is currently £10.90 across the UK and a higher rate of £11.95 for workers in London. For a full-time worker, that represents £2,730 more than someone earning the government’s National Living Wage. A worker on the London Living Wage would be almost £5,000 better off than someone on the National Living Wage.

Katherine Chapman, Director of the Living Wage Foundation, said:

“Paying the real Living Wage isn’t just the right thing to do for workers, it’s good for business and the wider local economy too.

In these volatile and tough economic times, paying the real Living Wage helps tackle in-work poverty and provides a vital economic boost to the UK economy. Through increased spending and productivity gains, the real Living Wage supports a high wage, high growth economy that we all want to see.

With the cost of living rising, it’s never been more important for employers who can, to step up and provide a wage based on the cost of living, joining over 11,000 Living Wage Employers across the UK. In doing so they’ll not just provide security and stability for their workforce, but they will boost the local economy too.”

Paul Hunter, Head of Research at the Smith Institute, said:

“The Living Wage can help deliver a double dividend for local communities. Decent wages not only help local families avoid financial hardship, but they can also support local growth through productivity gains and by putting extra wages in the pockets of local consumers. With the country facing a cost-of-living crisis, employees and local employers can both gain from paying the Living Wage”.

Danny Harmer, Chief People Officer, Aviva, said:

“If ever there was a time for organisations to pay people a fair and steady wage, with the rising cost of living creating financial worry for so many, it's now.”

Anna Purchas, senior partner for KPMG’s London office said:

“In the current jobs market where recruiting and retaining talent is crucial to the growth agenda of so many businesses, being able to offer a real living wage is certainly an important recruitment tool, but also the right thing to do. We know that CEOs are increasingly putting ESG at the heart of their long-term growth strategies to deliver a sustainable recovery, and make decisions that benefit wider society and address societal challenges — from gender and race, to equity and social mobility. Paying the real Living Wage makes a huge difference to people’s lives affecting overall health, mental health, family and social life, performance at work and the ability to participate fully in society.”

Stephen Cottrell, Archbishop of York, said:

“A real Living Wage and its promise of 'a fair day’s pay for a hard day’s work' enshrines compassion, dignity and justice in the contract of employment. This research shows that Living Wage Employers are not only putting those values into action, but are also helping to stimulate demand in the local economy. It’s a virtuous circle.

“Inflation of the kind we are experiencing now has not been seen in decades and the winter ahead is likely to be grim for workers and families across the country. When so many across the country are buckling under the weight of rising prices, the commitment of Living Wage Employers to the welfare of their staff is to praised in the highest terms.”

Gabriella Codastefano, Museum Operations Coordinator at The Brunel Museum said:

“As a parent, living and working in London has its challenges and earning a fair Living Wage helps a lot in bringing stability and reassurance to the family.”

Clare Kearney, Director of People Engagement at Everton FC, said:

“The Living Wage is an example of how civil society, businesses and organisations can work together to tackle in-work poverty.

“We firmly believe that paying all our staff a wage that covers the true cost of living is more than simply the right thing to do.

“Today’s report shows that the real Living Wage is not only key to tackling in-work poverty, but it’s good for business and the wider local economy too by generating positive outcomes for employees, local communities and wider society. With living costs rising more than ever, paying the living wage has never been more important.”

Kat Hannible, Retail Director at LUSH said:

“Paying the Living Wage means our staff always earn enough to live a dignified life. Not just enough to cover household bills, but the little things many of us take for granted, like a gym membership, occasional social with friends, or buying a bath bomb to relax with. When employees can make these choices, there is a double benefit: money filters into local economies and working people are better off in more ways than one.”

Kate Smith, Executive Director of Business Services at Anchor, said:

“We’re very proud to become an accredited real Living Wage employer by the Living Wage Foundation, which enshrines our commitment to ensuring that people working in the housing and social care sector are appropriately rewarded for their hard work. We also hope it will attract more people to join the sector to ensure we continue to deliver high quality services for residents.”

“Last year, we believe we became the first large provider of care and housing to pay all our colleagues, whatever their age, at or above the Living Wage Foundation’s real Living Wage rate. We are committed to providing competitive rates of pay, an excellent range of benefits and outstanding opportunities to develop careers in a hugely fulfilling sector. We’re proudly not-for-profit which means every penny we make can be reinvested for the benefit of our colleagues and the older people who live in our locations.”

Find out what the economic benefit would be in your region using our interactive map. We also have a London borough breakdown.

Media Contact

Emily Roe emily.roe@livingwage.org.uk 07581430557

John Hood john.hood@livingwage.org.uk 07507 173649

Maisie Caro maisie.caro@livingwage.org.uk 07950 66 68 82

Matt Ford matt.ford@livingwage.org.uk 07507478967

Notes to editors

Additional data for city regions and interviews available on request

Smith Institute 

The Smith Institute is an independent think tank which provides a high-level forum for thought leadership and debate on public policy and politics. It seeks to engage politicians, senior decision makers, practitioners, academia, opinion formers and commentators on promoting policies for a fairer society. For more information visit:  www.smith-institute.org.uk  

How are the figures calculated?

Figures in this press release come from a study by the Smith Institute on the impact of increased payment of the real Living Wage across local authorities, city-regions, regions and the UK as a whole. The study first looked at the scale of below Living Wage pay across the UK (both as a whole and per smaller geographies), using the Annual Survey of Hours and Earnings (ASHE). The study then identified how this would be paid for, using the findings from research on Minimum Wages. It is assumed that this will be paid for by higher productivity, slight reduction in profits for firms, and a sight fall in working hours. A ‘multiplier’ figure is then calculated per individual worker. The multiplier figure for individuals describes the amount that is injected into the economy per individual wage uplift (measured in Gross Value Added). This is informed by the higher ‘propensity to consume’ among lower income workers. Also factored in is the reduction in government spending on means tested benefits, and higher tax returns, and the levels of demand in the economy. The study also adjusts figures to account for ‘leakages’, where money is earned in one geography and spent in another, as not all workers work where they live (and spend), the majority of their earnings.