The introduction of the minimum wage back in 1999 is seen as a hugely successful policy. However, many people believe that it does not do enough. The campaign for a real Living Wage argues that nobody working in a full-time job should be earning less than the basic cost of living. Following are three economic reasons why business should support the introduction of a National Living Wage.

Increasing pay has been shown to increase productivity. It is well known that the UK is currently struggling with productivity, so any policy that looks to address this problem should be taken seriously. A 2009 study by GLA Economics found that the productivity of workers on the living wage increased in the form of “higher effort, lower staff turnover, reduced absenteeism, increased stability of workforce, and improved worker morale, motivation and commitment.” It should not come as much of a surprise that when an employee does not have to worry about being able to pay their latest electricity bill, or managing to put food on the table for their children, their focus and commitment at work will increase.

Raising the wages of those on lower incomes is a good way of stimulating the economy. These people are more likely to actually spend any extra income within their community, supporting local businesses. This is opposed to the actions of large firms and wealthier individuals who might put additional income into savings, or invest in expensive assets, instead of recycling it back into the economy by spending it on goods and services at a more local level.

Before the minimum wage was introduced in 1999, one of the most common arguments against it was that businesses would be unable to afford the new expense, and would therefore have to lay off workers, leading to a rise in unemployment. This did not happen. In a 2006 paper by Professor David Metcalf, he summarised: “The conclusions are clear-cut – the minimum wage has not had an adverse impact on jobs.”

The living wage is not just about being fair. It is not just about doing what is right. It is a policy that can help bring thousands of people out of poverty, reduce inequality, and provide equal opportunities to those earning the least. It is a policy that is good for local communities, and small businesses, and one that can help the economic recovery.