Real living wage could boost UK economy by £1.7tn

  • If just one quarter of low-paid workers in the UK received a real living wage pay rise, as defined by the Living Wage Foundation, it ccould pump another £1.7bn back into the UK economy
  • Regions across the UK would see a significant economic boost if a quarter of low-wage workers were raised to real living wages. London would see the biggest boost (£208million). This is followed by the South East (£197m), the North West (£191m), Yorkshire and the Humber (£165m) and the West Midlands (£148m).
  • The actual living wage, set by the Living Wage Foundation, is currently £10.90 in the UK and £11.95 in London. This is the only salary rate calculated on the basis of the cost of living
  • Today’s research comes on the first day of Living Wage Week, the annual celebration of the Living Wage Foundation’s Living Wage movement. There is now more than 11,000 employers offering a living wage.

Wider adoption of the real living wage could provide a vital economic boost to the UK economy, research shows.

A study commissioned by the Living Wage Foundation and conducted by the Smith Institute, The Local Living Wage Dividend, found that if only a quarter of those earning below the living wage saw their wages increase to the actual living wage, the increased wages, productivity and spending would add £1.7 billion to the UK economy.

As households across the UK face a cost of living crisis and economic growth stalls, today’s research shows how a genuine living wage could solve both and support a high-growth economy and at high salaries.

Regions and urban areas in the UK would receive an economic boost if a quarter of low-wage workers were raised to real living wages:


Economic growth



South East


North West


Yorkshire and the Humber


West Midlands




South West


East Midlands




North Ireland






Today’s research comes as the Living Wage Foundation celebrates its annual ‘living wage week’ and celebrates new accreditations including care provider Anchor, Royal Marsden NHS Trust and Newcastle City Council.

There are over 11,000 living wage employers in the UK, including Everton FC, Burberry, Linklaters, KPMG, Aviva, plus thousands of small and medium-sized businesses. Living Wage employers pledge to voluntarily go above and beyond the government’s National Living Wage and pay all their staff – including contract workers – the higher wage rate.

The actual living wage is currently £10.90 in the UK and a higher rate of £11.95 for workers in London. For a full-time worker, that’s £2,730 more than someone earning the government’s national living wage. A worker collecting the London Living Wage would earn almost £5,000 better than someone collecting the National Living Wage.

Katherine Chapman, director of the Living Wage Foundation, said:

“Paying the real living wage is not only the right thing to do for workers, it’s also good for business and for the wider local economy.

In these unstable and difficult economic times, paying the real living wage helps tackle in-work poverty and provides a vital economic boost to the UK economy. Through increased spending and productivity gains, the real living wage supports the high-wage, high-growth economy we all want to see.

With the cost of living rising, it’s never been more important for employers who can, to step in and provide cost-of-living pay, joining over 11,000 living wage employers across the UK. By doing so, they will not only provide security and stability to their workforce, but they will also boost the local economy.

Paul Hunter, head of research at the Smith Institute, said: “The Living Wage can help deliver a double dividend to local communities. Living wages not only help local families avoid financial hardship, but they can also support local growth through productivity gains and by putting extra wages in the pockets of local consumers. As the country faces a cost of living crisis, local employees and employers can both benefit from paying living wages.”

Danny Harmer, chief human resources officer at Aviva, said:

“If ever there was a time when organizations had to pay people a fair and steady salary, with the rising cost of living creating financial worries for so many, it’s now.

Anna Purchas, Senior Partner in KPMG’s London office, said:

“In today’s job market where recruiting and retaining talent is crucial to the growth agenda of so many companies, being able to offer a truly living wage is certainly an important recruiting tool, but also the right thing to do. We know that CEOs are increasingly placing ESG at the heart of their long-term growth strategies to ensure a sustainable recovery, make decisions that benefit society at large, and address societal challenges – of gender and race to equity and social mobility. Paying the real living wage makes a huge difference in people’s lives, affecting overall health, mental health, family and social life, work performance, and the ability to fully participate in society.

Stephen Cottrell, Archbishop of York, said:

“A True Living Wage and its promise of ‘fair pay for a hard day’s work’ enshrines compassion, dignity and justice in the employment contract. This research shows that Living Wage employers not only put these values ​​into action, but also help drive demand in the local economy. It’s a virtuous circle.

“The inflation we are currently experiencing has not been seen in decades and the coming winter will likely be bleak for workers and families across the country. As so many people across the country buckle under the weight of rising prices, the commitment of living wage employers to the well-being of their staff is to be commended in the highest terms.

Gabriella Codastefano, Museum Operations Coordinator at the Brunel Museum, said:

“As a parent, living and working in London has its challenges and earning a living wage goes a long way in bringing stability and comfort to the family.”

Clare Kearney, Director of People Engagement at Everton FC, said:

“The Living Wage is an example of how civil society, business and organizations can work together to tackle working poverty.

“We firmly believe that paying all of our staff a salary that covers the true cost of living is more than just the right thing to do.

“Today’s report shows that Real Living Wages are not only key to tackling in-work poverty, but are also good for businesses and the wider local economy by driving results. positive for employees, local communities and society at large With the cost of living rising more than ever, paying a living wage has never been more important.

Kat Hannible, Director of Retail at LUSH, said:

“Paying the living wage means that our staff always earn enough to live a dignified life. Not just enough to cover household bills, but the little things that many of us take for granted, like a gym membership, the occasional get-together with friends, or buying a bath bomb to relax. When employees can make these choices, there is a double benefit: money filters into local economies and workers are better off in more ways than one. »

Kate Smith, Executive Director of Business Services at Anchor, said:

“We are very proud to become a true Living Wage Foundation Accredited Employer, confirming our commitment to ensuring that those working in the housing and welfare sector are properly rewarded for their hard work. We also hope that this will encourage more people to join the sector to ensure that we continue to provide high quality services to residents. »

“Last year, we believe we became the first major care and housing provider to pay all of our colleagues, regardless of age, at the Living Wage Foundation’s actual living wage rate or above. We are committed to providing competitive rates of pay, an excellent benefits package and exceptional career development opportunities in an extremely fulfilling industry. We are proud to be a non-profit organization, which means that every penny we earn can be reinvested to benefit our colleagues and the seniors who live on our premises. »

Media contacts

Emily Roe 07581430557

John Hood 07507 173649

Maisie Caro 07950 66 68 82

Matt Ford 07507478967

Additional data for city-regions and interviews available upon request

Smith Institute

The Smith Institute is an independent think tank that provides a high-level forum for thought leadership and debate on public policy and politics. It seeks to engage politicians, high-level decision makers, practitioners, academics, opinion makers and commentators on the promotion of policies for a more just society.

How are the numbers calculated?

The figures in this press release come from a Smith Institute study of the impact of increasing real living wage payments on local authorities, city regions, regions and the UK as a whole. The study first looked at the extent of below-living-wage wages in the UK (both as a whole and by smaller geographies), using the Annual Hours and Work Survey. earnings (ASHE). The study then identified how this would be paid for, using research findings on minimum wages. It is assumed that this will be paid for by higher productivity, a slight reduction in profits for companies and a visible drop in working hours. A ‘multiplier’ figure is then calculated per individual worker. The multiplier figure for individuals describes the amount that is injected into the economy per individual wage increase (measured in gross value added). This is explained by the higher “propensity to consume” among low-income workers. Reduced public spending on means-tested benefits, rising tax filings and levels of demand in the economy are also taken into account. The study also adjusts the figures to account for “leakage”, where money is earned in one geography and spent in another, as not all workers work where they live (and spend), the majority of their income.

Michael A. Bynum