A living wage increases economic productivity and reduces poverty

Finding a way out of the current cost of living crisis can be difficult. Prices continue to rise and there are fears that if nothing changes, many families will face serious financial difficulties.

The effects will be devastating. Poverty causes premature death, bad nutrition, sickness, and exhaustion. In the face of such bleak prospects, there is an urgent need for effective leadership to bring about change, but not just from governments. Businesses can also play a crucial role.

One of the most important things a business can do to reduce poverty is to pay its employees a living wage. Our new report shows in detail how a living wage not only benefits employees and workers, but also employers and society as a whole.

Receiving a living wage helps break cycles of poverty by ensuring that the wage is sufficient to cover basic household needs as well as occasional emergencies or unforeseen expenses.

Our surveyed experts indicated that being paid a living wage can reduce stress levels and the excessive hours of work sometimes needed to make ends meet. This in turn means fewer sick days and overall greater employee well-being.

From a business perspective, this can mean decrease in staff turnover, reducing recruitment and training costs. Productivity may rise, and there are even early signs that rising entry wages may be linked to increase in income.

We also discovered that as living wage commitments become more common, the benefits reach further into society. Wage increases stimulate spending in the local economy while reducing poverty and inequality can greater social cohesion.

In short, our report (by Businesses fight povertythe Cambridge Institute for Sustainability Leadership, and Change) supports the growing body of evidence that living wages provide multiple benefits– beyond those experienced by individual workers alone.

This should give businesses the confidence to view wages not just as a net cost, but as a positive investment, also. After all, a company can only be as resilient as the workers it employs.

The wider impact on society is also clear. We have found that living wages have the potential not only to help fight poverty, but also to meet many UN goals Sustainable Development Goals. For example, one of the goals includes “decent work for all,“and fair incomes are an essential component of decent work. Fighting poverty can also improve access to housing, food and better health.

Fortunately, being a living wage employer is becoming a new marker of corporate leadership, which is valued by investors and consumers look alike.

In the UK, for example, Ikea, Everton Football Club and the Nationwide Building Society are just three of over 10,000 employers. who committed to pay what the Living Wage Foundation describes as a “true living wage”. In practice, this means paying workers a minimum of £9.90, or around $12.33 an hour (£11.05 in London). Similar campaigns exist in other countries, including New Zealand and Canada.

Raising the bar

Some companies go even further, extending living wage commitments to their suppliers. In 2021, Unilever announced plans working towards a living wage for people who provide goods and services to the company in areas such as logistics and packaging. To achieve this, Unilever partners with suppliers to commit to paying their workers at least a living wage and to be accountable for their commitment.

Our report, which combines an in-depth analysis of previous research with numerous interviews, suggests that others should join.

Annabel Beales, co-author of the report with us, said: “Given the scale of the rise in poverty, there is an urgent need to move to an economy based on living wages, and we need more companies play their part. The decision to pay living wages offers companies a lot in return for their investment in terms of performance, resilience and stability. »

To get things done, investors and CEOs now need to be convinced that paying a living wage is a sensible business decision. Meanwhile, governments can raise statutory minimum wages to living wage levels.

Consumers can also drive progress through the power of their spending decisions and the businesses they support. Because businesses, big and small, have an important role to play in tackling the drivers of poverty and can thus be more economically successful.


Anna Barford is a Prince of Wales Global Sustainability Fellow, University of Cambridge; and Jane Nelson is Director of the Corporate Responsibility Initiative, Harvard-Kennedy School.

This article is republished from The conversation under Creative Commons license. Read it original article.

Michael A. Bynum