The cost of living crisis has hit 2022 particularly hard, with prices for many essential items rising considerably, resulting in very real fears of extreme financial hardship for many. A new report from the University of Cambridge, Business Fights Poverty, and Shift suggests that the best way out of this situation is via a living wage.

“Living wages are long overdue. Is it absolutely urgent and necessary for employers to switch from poverty wages to living wages. The most important benefit is people earning enough for themselves and their families to afford a decent standard of living,” the researchers explain. “Living wages also offer considerable business benefits, within core operations, value chains and the wider operating environment. Conversely, not paying living wages comes with many costs.”

A living wage

The researchers reveal that around 266 working people around the world earn below the minimum wage. The living wage goes beyond the statutory minimum wage and creates a wage floor established according to the minimum standard of living in a region. The authors argue that companies are far better placed to deliver on their human rights obligations when they ensure that all staff is paid at least the living wage.

What’s more, the authors also believe that living wages can mitigate some of the risks across both core operations and across the wider value chain.

“Paying a living wage is an opportunity for companies to have positive social impact at scale, in a way that benefits their business as well as their employees, people in their supply chains, and the communities in which they operate,” they say. “Living wages are a clear and measurable indicator of companies putting values and social purpose at the heart of their business practice.”

Breaking the cycle

The authors believe that by paying a living wage, it’s possible to break the cycle of poverty and significantly reduce the stress levels and often excessively long working hours people have to endure to try and make ends meet. This often then results in fewer sick days being taken and even higher employee wellbeing.

These lower staff turnover costs can benefit businesses as they don’t need to invest so much in recruitment, onboarding, and training. What’s more, the benefits appear to reach out into society as the wage increases appear to stimulate spending in the local economy and greater social cohesion.

In other words, paying a living wage should not be viewed as a net cost but rather a positive investment in both the workforce and the local community. Indeed, the authors highlight that being a living wage employer is increasingly being seen as a baseline marker of being a good employer that is valued by investors, consumers, and employees.

They hope that the report will go some way towards convincing business owners that paying the living wage is not just an altruistic choice but a sound business decision.

“The decision to pay living wages offers businesses a lot in return for their investment in terms of performance, resilience and stability,” they conclude.