Living Wage Costs & Benefits Report

New analysis by funded by Trust for London shows that there has been a 100,000 increase in the number of London jobs paying below the London Living Wage (LLW) - taking the total to 580,000. This means that 1 in 5 Londoners working in the capital are now paid poverty wages.

This is despite a new piece of research by Queen Mary, University of London, showing that paying the Living Wage has big benefits for business, workers and the Treasury.

The research is the first to provide data showing the Living Wage increases the happiness of workers; it shows:

  • Over half of employees (54%) felt more positive about their workplace once the LW was introduced and 52% felt more loyal
  • Staff leaving rates fell by 25%
  • Almost a third (32%) of workers felt it benefitted their family life by allowing them to do things like spend more time with family
  • Almost 4 in 10 (38%) workers reported financial benefits such as being able to buy more goods and save more

In addition companies interviewed said the reputational benefits of paying the LW helped them attract new business and customers. Employers also reported HR benefits at all levels with high caliber graduates at one employer citing paying the living wage as one of the top 3 reasons for applying as it demonstrates corporate social responsibility.

The research shows that government and workers also benefit. Paying the LW can help struggling families and improve Treasury finances at a time of economic difficulty:

  • Government could save almost £1bn a year because of the increase in the tax base and reduced welfare spending just from firms in London paying the Living Wage
  • A two person household could get up to an extra £5000 a year

There are wage costs associated with paying the LW and the research shows that for those companies surveyed:

Wage cost increases due to its introduction were 6% of the contract cost. This is despite low-paid staff receiving much higher increases in their hourly rate of pay (an average of 26%)

This is because introducing the LW leads companies to adjust their ways of working by doing things such as increasing efficiency of working practices.

Bharat Mehta, chief executive of anti-poverty charity Trust for London, said:

"This piece of research conclusively shows that paying the Living Wage benefits employers, workers and government.

"Government can save nearly £1 billion a year in London if companies in the capital pay the Living Wage; workers receive thousands more in wages and employers can reap HR, reputational and efficiency benefits. This means there is no reason for large numbers of companies to pay poverty wages in the capital.

"Paying the Living Wage gives people fair reward for the work they do and helps to tackle poverty and inequality in one of the most unequal cities in the developed world."

Sandy Aird, Managing Director of Enhance Office Cleaning, which introduced the LLW for staff in 2010 said:

"We decided to become a Living Wage employer because we believed it was morally right; taking the decision was not easy as many of our competitors only offer rates around the National Minimum Wage.

"We were fortunate that all of our clients agreed it was the right thing to do and most of them paid the extra cost associated with achieving this.

"Our relationship with some of our existing clients has become closer because they can see that we really care about our staff and our experience is that employees who leave us (for whatever reason) quite often want to come back. Taking a moral stand on paying our employees above the poverty level makes us feel good, and means we have lower staff turnover."

You can view the full report and the summary by Prof Jane Wills of Queen Mary, University of London here