Friday, 8 November 2013

Paying the living wage would mean a £254 million boost to public finances from the West Midlands


Big savings – £254m – could be made by the public purse if the West Midlands’ 473,000 low-paid workers received a pay rise and were paid the living wage, according to research published by the Midlands TUC today (Friday) to mark the end of Living Wage Week.

Economic modelling carried out for the national TUC by Howard Reed of Landman Economics suggests that the Treasury would receive an extra £169m from the increased tax and national insurance contributions (NIC) that would result from a West Midlands-wide living wage boost.

Similarly, if low earners across the West Midlands were to see their wages rise to current living wage rates – currently £7.45 outside of London – the research says that the Treasury would pay out £85m less in means-tested benefits and tax credits across the region.

Commenting on the research, Midlands TUC Regional Secretary Rob Johnston said: “Some 473,000 workers across the West Midlands 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 West Midlands 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.”

Lifting workers across the UK out of poverty pay and onto the living wage would see £2.1bn raised through extra taxes and national insurance contributions, and £1.1bn less paid out in benefits and tax credits. This would see a net benefit to the Treasury of £3.2bn.


Exchequer benefits of increasing coverage of the living wage
Regions and nations
Tax and NICs (millions)
Means-tested benefits and tax credits (millions)
Total
(millions)
North East
92.4
46.2
138.6
North West
223.3
123.2
346.5
Yorkshire & the Humber
184.8
115.5
300.3
East Midlands
169.4
92.4
261.8
West Midlands
169.4
84.7
254.1
East of England
177.1
84.7
261.8
London
408.1
200.2
608.3
South West
184.8
100.1
284.9
South East
207.9
100.1
308.0
England
1817.1
947.1
2764.2
Wales
100.1
53.9
154.0
Scotland
161.7
84.7
246.4
Northern Ireland
53.9
30,8
84.7
UK
2132.8
1116.5
3249.3

Proportion of workers paid below the living wage by region
Regions and nations
Number of workers paid less than the living wage
% of the workforce paid less than the living wage
Wales
252,000
23
East Midlands
388,000
22
Yorkshire & the Humber
456,000
22
West Midlands
473,000
22
North East
213,000
22
North West
571,000
21
South West
452,000
21
East of England
466,000
20
Scotland
416,000
19
South East
530,000
16
London
572,000
16

- The figures have been calculated using existing living wage rates – £8.55 an hour in London and £7.45 elsewhere in the UK. It was announced this week that 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.
- Living Wage Week is promoted by the Living Wage Foundation and runs from 3-9 November www.livingwage.org.uk/living-wage-week-2013
- The analysis uses the Landman Economics/IPPR tax benefit model to calculate the changes in income tax and national insurance contributions, and the amount saved in tax credits and means-tested benefits if everybody paid below the living wage were moved onto it.
Because the dataset used for the analysis (the UK Family Resources Survey) overestimates the number of people in the UK, the results were adjusted so that the number of people affected by the introduction of a living wage corresponds to existing estimates of the number of people on low wages from Resolution Foundation research.




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