Big business can afford to pay living wage

Paying a living wage is affordable for big companies in UK banking, construction, computing and food production sectors, according to a new report jointly published by the think tanks Resolution Foundation and IPPR. The new analysis shows that the average increase in the wage bill for listed companies in these sectors would be about 1 per cent or less and argues that there is no business case for ignoring living wage campaigners.

The living wage is currently set at £8.30 an hour in London and £7.20 outside London. More than 6 million people earn less than the Living Wage – around one in four UK workers.

The new analysis challenges big firms in banking, finance, insurance & real estate, construction, computing, and food production to pay workers a living wage, or explain why they are unable to shoulder more of the responsibility of ensuring a basic standard of living for those in work. More than 600,000 people currently work for less than the living wage in banking, finance, insurance & real estate, another 600,000 in manufacturing, 260,000 in transport & computing and 180,000 in construction.

The report argues that for listed companies in some of the major low wage sectors it is possible that the challenge of paying a living wage will be greater. For bars, restaurants and retailers, wage bills would rise between 5 and 6% but the report argues that progress can still be made. In these sectors if employers had difficulties in paying a living wage they could move towards it more gradually, for example, by initially paying at least 90 per cent of the living wage, which would mean an increase of between 2 and 2.6% on wage bills. These companies could then agree to implement a full living wage at a fixed date in the future – giving them time to find ways of absorbing the additional cost. More than 2.5 million people work for less than the living wage in hotels, restaurants & retail. 

The report argues potential benefits to companies of paying workers a living wage include productivity increases, lower staff turnover, reduced absenteeism and enhanced reputation. These new cost estimates should provide further impetus for large employers to pay workers a living wage.

Gavin Kelly, Resolution Foundation Chief Executive, said:

“Living wage campaigns have already delivered improvements in pay for thousands of low-paid workers. Yet there are still relatively few employers that have made the commitment to pay a living wage. The wage bill costs estimated in this report challenge large companies in some key sectors to commit to a living wage or make clear why they are unable to help ensure their employees have a decent standard of living.”

Nick Pearce, IPPR Director, said:

“There is no obvious business case for paying less than a living wage in banking, construction, computing and food production. Paying staff at least £7.20 an hour, or £8.30 in London, is both affordable and ethical.”

Notes to Editors

More women than men earn less than the Living wage: 4 million women (33 per cent of working women) and 2.6 million men (20 per cent of working men). More than half (51 per cent) of part-time employees earn below the living wage compared to just 17 per cent of full-time workers.

Proportion of workers earning less than a living wage in certain sectors:

• Distribution, Hotels & Restaurants: 55% of workers (2,576,000 people)
• Manufacturing: 21% of workers (612,000 people)
• Transport & Communications: 19% of workers (292,000 people)
• Banking, Finance, Insurance & Real Estate: 16% of workers (646,000 people)
• Construction: 15% of workers (180,000 people)

Workers earning less than a living wage across the country:

• 32% in the North East (375,000 people)
• 31% in Yorkshire and Humber (714,000 people)
• 31% in Wales (344,000 people)
• 30% in the West Midlands (617,000 people)
• 28% in the East Midlands (552,000 people)
• 27% in Scotland (623,000 people)
• 27% in the South West (583,000 people)
• 25% in the North West (683,000 people)
• 24% in the East of England (593,000 people)
• 23% in the South East (843,000 people)
• 20% in London (581,000 people)

(Source: Resolution Foundation analysis of pooled four quarter Labour Force Survey data 2010)