Living Wage could create 58,000 jobs, says leading economist

An estimated 58,000 new jobs could be created through the introduction of a Living Wage, according to leading economist, Howard Reed. The Living Wage is currently set at £7.45 an hour and £8.55 an hour in London, and is due to be increased today.  It is considered to be the amount needed for an individual to be able to live decently without relying on benefits.

In a detailed analysis of the impact of a Living Wage on the economy, Mr Reed, director of Landman Economics, calculates that the economy would gain tens of thousands of jobs rather than lose the 160,000 that the Government claims.
In the study, commissioned by UNISON, Mr Reed used figures from the International Monetary Fund, rather than UK Government statistics, to conclude a positive boost to the economy through the Living Wage.
The findings support UNISON’s long-held view that a pay rise for low paid workers creates a virtuous cycle of economic growth.  More people have more money to spend in local shops thus bolstering local employment.  The Treasury wins as less people will have to rely on in-work benefits and the tax take is higher.    If the savings were used to re-invest through tax cuts or public spending increases, this would create a “multiplier” effect, argues the author.
This “multiplier” effect would boost the UK’s Gross Domestic Product considerably.  The IMF calculates that it could increase GDP by between £5.6 billion and £10.7 billion resulting in the creation of up to 58,000 more jobs.
UNISON General Secretary, Dave Prentis, said:

“With 4.8 million people earning less than the Living Wage, we need a solution that fits the size of the problem. UNISON won the battle for a national minimum wage despite opponents claiming it would cost thousands of jobs, and we are keeping up the pressure for a new Living Wage.

“Paying the Living Wage is the right thing to do and is a win-win scenario, stimulating the economy through increased consumer spending and saving taxpayers’ money by cutting benefits. It would also help to close the gender pay gap that still remains stubbornly high. Why should taxpayers be subsiding Scrooge employers who paypoverty wages and rely on the state to make up the difference?
“Poverty wages put stress and misery on families. All too often parents do not get to spend time withtheir children because they are working two jobs.  
“Low paid workers worry every day about how they are going to put food ion the table and keep warm in winter. A Living Wage would put a stop to people falling into the hands of unscrupulous payday lenders, struggling to pay off exorbitant interest rates.”
Howard Reed said:

“This research report shows that using reasonable assumptions about the structure of the labour market and the current scope for economic stimulus in the UK economy, it is quite plausible that adopting the Living Wage on a statutory basis could actually increase overall employment in the UK. Aggregate job gains are the most likely outcome of a statutory living wage.”
Recent rises in the cost of living have eroded the value of the statutory national minimum wage leaving millions of people working for poverty pay, struggling to make ends meet.  UNISON believes that introducing a Living Wage would help lift people out of poverty.  There are currently 4.8 million workers, almost 20% of the workforce, including 502,000 local government workers, who are paid less than the Living Wage.  
UNISON has had a degree of success in negotiating living wage agreements with a growing number of employers. Loughborough University is the latest to sign up. The new pay rate will see a significant increase to the hourly rate for the lowest paid staff and deliver help for hard-pressed families.

One such family is that of Sam Cooke who looks after student accommodation. She said:”This will make a huge difference to my family. I have four young children and so every penny has to count. UNISON has already helped me negotiate flexible working in half-term holidays so I can keep my job while still looking after my children. Now this new rate of pay means I will be able to manage my budget and give them a better life.”


Notes to Editors:

Copies of the report are available from the UNISON press office.

The Living Wage rate will increase by 20p an hour to £7.65 outside London and £8.80 for London