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Government urged to back living wage city deals

Small and medium-sized businesses should receive Government funding to pay employees a living wage, according to a new report from the Resolution Foundation and Labour leaning think tank, IPPR.

The report, “Beyond the Bottom Line” urges the Government to package a series of “living wage city deals” to enable businesses to increase their workers’ wages.

The living wage, which is £8.55 for London and £7.45 for the rest of the UK, is the hourly rate needed to have a good quality of life in Britain today.

Boris Johnson, Mayor of London, and Labour leader Ed Miliband have previously backed the living wage initiative, saying it is important and morally right to give workers enough pay to cover the cost of living.

Up to 4 million private sector workers with low pay, or 84% of the working population earning under the living wage, could be helped by such an initiative, which would be supplied by taking some of the dividend paid to the exchequer from cities paying a living wage in the public sector.

IPPR and the Resolution Foundation said both employees and the Government would benefit from an estimated a £2.2bn annual saving, if a living wage scheme went ahead, as a result of higher tax revenue and lower benefit payments.

Money provided through a living wage deal could be used by businesses to “cushion” the change over from minimum wage to a higher pay bracket, or could be put towards training to boost productivity and skills.

The report identified eight key areas that should benefit from a deal with the Government, including Greater Birmingham and Solihull, Bristol and the West Country, Manchester, Leeds, Liverpool Nottingham, Newcastle and Sheffield.

Recommendations from IPPR and Resolution Foundation to the city regions said plans should be drawn up to show how Government money could be spent to boost earnings for SME employees, including how financial support and growth advice could be beneficial.

Nick Pearce, IPPR director, said: “The risk is that the living wage gets trapped in public sector ghettoes, when the vast majority of those who would benefit from it work in the private sector.

“The Treasury should support SMEs to improve productivity and pay higher wages by committing future tax dividends from a living wage to skills training and business support.

“Including SMEs in City Deals is the best way to do this, creating ‘living wage cities’ across the country. Political parties in Westminster and in town halls across Britain should take this opportunity to tackle low pay.”

Resolution Foundation’s chief executive, Gavin Kelley, added: “We need to encourage employers in every city, in the private as well as public sector, and large and small to adopt a living wage.

“Using some of the dividend received by the exchequer is an innovative way of supporting this – sharing the proceeds of fairness to help cities take the initiative in securing decent pay for more people.

“Given plummeting wages and escalating levels of working poverty it is crucial that across the political spectrum there is a will to tackle this issue.”

This was posted in Bdaily's Members' News section by Miranda Dobson .