Living Wage Week from November 3rd to the 11th is a UK-wide celebration of the Living Wage and Living Wage Employers. The new UK and London Living Wage rates for 2014-15 were announced on Monday: the UK living wage has now been set at £7.85 per hour and the rate in London is now £9.15.
The Living Wage campaign is about employers, employees, campaigners and communities coming together to build a stronger, fairer economy from the bottom up. Employers have found that paying the Living Wage can make good business sense, generating savings by boosting productivity and morale. But under this Tory-led government the number of people paid less than the Living Wage has risen from 3.4 million to 4.9 million over the past four years. This doesn’t only impact on low paid workers, their families and communities – it also piles up costs for the country as more people in work have to rely on the social security system to make ends meet.
Labour councils have led the way in paying their workers a Living Wage even within tight budget constraints, and getting more workers in the private sector paid a living wage by using their procurement powers and encouraging the creation of local “Living Wage zones”.
The next Labour Government will incentivise more businesses to pay the Living Wage with Make Work Pay contracts, where we share with employers the savings that arise when they pay their workers a Living Wage, to help them shift to higher productivity business models.
Along with our plan to raise the National Minimum Wage to £8 an hour before the end of the next parliament, this will be a key step towards our national goal of halving in-work poverty by 2025, and building an economy that works for all working families.
Low pay has got worse under the Tories and is fuelling the cost of living crisis. It is also one of the long term drivers of rising social security bills:
Average real wages have fallen by more than £1,600 in real terms since David Cameron took office in 2010
In 2013 there were 4.9 million workers in the UK who were paid less than the prevailing living wage rate in their area, two-thirds of which were women. This is an increase of 1.5 million people since 2010.
People used to be poor because they couldn’t find work – but half of working age people living below the poverty line are now in working households, and two-thirds of all children living in poverty live in working families. The proportion of UK workers who are low paid is one of the worst in the developed world – 19th out of a league table of 25 OECD countries.
The Government’s own social mobility tsar, Alan Milburn, has pointed to earnings as a key driver of child poverty and shown that weekly earnings are now lower than in 1997. The cost to the exchequer of workers paid less than a Living Wage was estimated last year at £3.23 billion in social security spending and lower tax receipts.
The next Labour Government will tackle low pay that is fuelling the cost of living crisis by supporting the Living Wage campaign. On entering office, the next Labour government will launch a national campaign to agree Make Work Pay Contracts with British businesses.
These contracts will mean that, in return for becoming accredited Living Wage employers within the first year of a Labour government, businesses will receive back 12-months’ worth of the resulting increased tax and National Insurance revenues received by the Government.
If the Government introduced this now, firms could receive a 12-month tax rebate of up to £1,000 – and an average of £445 – for every low paid worker who is moved onto a living wage.
For every extra pound employers pay to raise workers from the Minimum Wage to the Living Wage, the Treasury saves on average 49p in the form of lower social security payments and higher tax revenues. Labour’s Make Work Pay contracts would mean that employers could claim back the entire increase in tax revenue – an average of 32p in the pound - for the first year.
Although the bulk of the money in the first year would be paid back to employers, the Government would still see a net saving through lower social security and tax credit payments, and increased tax revenues in future years.
Labour councils have been leading the way in supporting and promoting the living wage to the benefit of local economies and communities.
To date, 28 Labour-led councils have become accredited Living Wage employers – paying their in-house and sub-contracted staff a Living Wage – and dozens more are paying the living wage or committed to moving towards doing so.
Local authorities in York and Islington have organised Living Wage Zones – where stakeholders come together to plan strategies to support local private sector employers in the area to move towards a Living Wage – and others are using procurement to extend the living wage in the private sector.