Paying a ‘living wage’ is affordable for big companies in some sectors, including banking, construction, computing and food production, according to a new think-tank report. It calculates the average increase in the wage bill for listed companies in these sectors would be only about 1 per cent or less.

According to the report, the living wage in 2011 was £8.30 an hour in London, and £7.20 outside London. These figures are based on the cost of a basket of goods and services that different kinds of family need to reach a minimum acceptable standard of living. More than 6 million people earn less than those levels – around 1 in 4 workers. The report suggests that:

• The low cost of implementing a living wage in certain sectors makes a strong case for listed firms to do so, absorbing the additional costs through a variety of mechanisms.
• For firms in the major low-wage sectors – general retail, food and drug retail, and bars and restaurants – implementing a living wage is likely to be more challenging but not impossible. Listed firms in these sectors could commit to phasing in a full living wage over time.
• There is emerging international evidence that, when backed up with a specific set of operating practices, investing in employees can boost customer experience and decrease costs while maintaining competitive prices.

Source: Matthew Pennycook, What Price a Living Wage? Understanding the Impact of a Living Wage on Firm-level Wage Bills, Resolution Foundation and Institute for Public Policy Research

Links: Report | IPPR press release | Guardian report