Stop paying staff peanuts, for the good of the economy, says KPMG


Raising the minimum wage to the ‘Living Wage’ would result in a net economic benefit for employers and the economy as a whole, according to KPMG, which today published the results of the first ever assessment into the impact universal adoption of the wage could bring.

According to its calculations, the average gain to the public purse would be just over £1.5 billion, after taking into account the £4.5 billion of additional revenue from taxes and reduced benefit payments, minus around £3 billion in direct wage costs and increased procurement costs.

Better still, it argues if all companies paid the Living Wage, it would bring nearly six million workers out of poverty – at a cost of just a 1.3% rise in the national wage bill.

Marianne Fallon, head of corporate affairs at KPMG says: “We firmly believe the adoption of a Living Wage is one of the tools that will help improve social mobility as well as directly address the problem of in–work poverty [working, but in receipt of state benefits].”

KPMG has paid all its staff the Living Wage since 2006 – a wage that is calculated according to the basic cost in living in the UK by the Living Wage Foundation.

Currently, the Living Wage is £7.85 per hour outside London and £9.15 per hour in London. At the moment, the minimum wage is significantly lower than this, at just £6.50 (rising to £6.70 in October). Only 22% of firms pay the Living Wage.

According to the Foundation, 87% of people questioned said firms who can afford to pay the Living Wage should,. Moreover, 58% said they’d be more likely to buy from companies they know pay the Living Wage.

Not only will poverty be reduced, but according to KPMG, the benefit to employers paying a living wage would be £6.6 billion in productivity gains too.

Separately, a report also published today by the Joseph Rowntree Foundation found a single people earning the minimum wage would only earn 70% of what most people think is needed for a reasonable standard of living. Someone on the minimum wage, working for 35 hours a week would earn just £11,830 per year. 

It is rumoured the government might introduce incentives for firms to pay the Living Wage in this week's Budget.