We are in the middle of Fair Pay fortnight – 24 March to 6 April.

We’re taking the opportunity to republish a piece which appeared on the TUC website last November.

It makes clear the huge boost to the public finances we would receive if people were paid a living wage.
We are ALL losing because of poverty wages.
But the poor are losing most of all.

‘Big savings – £3.2bn – could be made by the public purse if the UK’s 4.8 million low-paid workers received a pay rise and were paid the living wage, according to research published by the TUC on Friday to mark the end of Living Wage Week.

Economic modelling carried out for the TUC by Howard Reed of Landman Economics suggests that the Treasury would receive an extra £2.1bn from the increased tax and national insurance contributions (NIC) resulting from a UK-wide living wage boost.

Similarly, if low earners across the UK were to see their wages rise to living wage rates – currently £8.55 an hour in London and £7.45 elsewhere in the UK – the research says that the Treasury would pay out £1.1bn less in means-tested benefits and tax credits.

The research also includes estimates on how much the UK Treasury could save based on tax and benefits figures for the UK’s four nations, as well as England’s nine regions.

In Yorkshire and the Humber, for example, it’s estimated that 456,000 – that’s 22% of thw workforce – are paid less than the living wage. Lifting these people out of poverty pay would see an extra £184,800,000 in tax and National Insurance Contributions paid into the Exchequer. And £115,500,000 would be saved in means tested benefits and tax credts. That’s a whopping £300, 300,000 benefit to the public purse.

Increasing coverage of the living wage across the North East would see low-paid workers paying an additional £92.4m in taxes. Here, where 213,000 workers (22 per cent of the region’s workforce) currently earn less than the living wage, there would be a £46m benefit and tax credits saving – giving a total net saving of £139m across the North East.

Over the country as a whole, the gains would be over £2 billion in tax and National Insurance Contributions, and over £1 billion in benefits saved. The overall contribution to the public finances is estimated to be well in excess of £3 billion!

Commenting on the research, TUC General Secretary Frances O’Grady said: “Almost five million workers across the UK are being paid less than the living wage, and with in-work poverty growing, it’s not hard to see why so many families are struggling to make household budgets stretch to cover the cost of everyday essentials.
“The UK is in the midst of a living standards crisis, and while the economy is slowly starting to recover, ordinary people are a long way from feeling any benefit. Money is so tight that any unforeseen expenses – like a winter coat for the children or repairing a broken cooker – are forcing families to borrow just to keep their heads above water.
“Of course not every employer can afford to pay their staff the living wage, but many more can. Increasing the number of people across the UK who are paid at least the living wage would mean huge savings for the public purse in extra taxes paid and fewer benefits claimed.
“Britain is crying out for a pay rise – and there are real benefits that would come from a nationwide pay boost for the UK’s lowest paid workers.”

We agree. These are the sort of economic measures which would benefit ALL our people.

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[The figures have been calculated using existing living wage rates – £8.55 an hour in London and £7.45 elsewhere in the UK. The living wage is to increase to £8.80 and £7.65 in April 2014.
– The figures for the number of UK workers paid below the living wage are from a Resolution Foundation study published earlier this year.]


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