The Living Wage: an economic impact assessment

The Living Wage: an economic impact assessment

KPMG has analysed the economic impact of raising the Minimum Wage to the Living Wage and concludes it would take just 1.3 percent of the national wage bill, lifting six million people out of poverty.

Also on KPMG.com

The Living Wage is a voluntary rate of pay based on the recognition that the national minimum wage (currently £6.50) does not pay enough for people to meet a basic but decent quality of life. The Living Wage rate is now £9.15 in London and £7.85 nationally. 

Around 6 million people in the UK currently earn less than the Living Wage. From our experience the Living Wage improves morale, productivity, recruitment and retention. Businesses that have implemented it, have seen a rise in service standards and a fall in sickness costs. 

KPMG has calculated, for the first time, the impact of the universal adoption of the Living Wage in the UK.

Key highlights:

  • Universal voluntary adoption of the Living Wage would cost companies some £11.1bn in the first instance, which represents around 1.3 percent of the average wage bill. 
  • The average gain to the public finances across the different scenarios is just over £4 ½bn of additional revenue from taxes and reduced benefit payments. However, with universal adoption the government would face an extra £3bn of direct wage costs plus higher procurement costs, leaving a net benefit of just over £1½ bn.

This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.

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