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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