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Recent research shows a living wage creates healthier employees, less pressure on government subsidies and a skilled workforce.

It's a living, just: an NHS worker marching for a pay rise, July 2020. Yui Mok/PA Wire/PA Images

Work should lift people out of poverty - but, increasingly, those in low-paid jobs are suffering as much as the unemployed. The Living Wage offers a solution. It is a wage sufficient to live a decent standard of life, independent of welfare and other public subsidies. While some have previously argued that living wages distort labour markets and increase organisational costs, our review offers an alternative perspective.

The results show that poor-quality work has a more detrimental impact on health than unemployment. According to research, the COVID-19 pandemic has had a disproportionate accumulative impact among low-paid workers, in both health and precarious work. In light of this, a living wage is even more vital.

Until now, the study of living wages has been the preserve of economists. But work psychologists, sociologists and management scholars are now examining the subject from a different perspective which focuses on the individual. Precarious work removes the responsibility from employers and forces significant costs on to individuals – and society, which has to make up for the shortfall out of government subsidies. Low-paid, poor-quality, depleting work needs to be recognised for what it is: unsustainable, deeply damaging and costly for any society.

Our review, an assessment of 115 papers of interdisciplinary living wage research, reveals three important reasons to support the normalisation of a living wage.

1. Healthier employees

Living wages stop working people from having to choose between heating and food. They help make workforces sustainable, providing more money to make feeding and supporting a family more viable.

Working a reasonable amount, without juggling multiple jobs or too many hours, allows people to recover more fully from their toil, reducing their fatigue, boosting their immune systems and improving their general health. As a result they take less time off work, making them more viable employees with longer life expectancy. More leisure time and increased means created by decent wages also promote improved family relations, reducing levels of aggression in the family home.

We believe more time for activities such as bedtime stories with children has enormous benefits for a child educationally and in terms of their relationship with their parent, as shown by research from the Literacy Trust.

It allows workers to have even a small amount of savings to buffer against surprise essential spending: new school shoes, a car or boiler repair. It allows families to make healthier choices, as research shows that, given the means, people choose healthy food over cheap food - even as food poverty rises.

Less sick leave is not the only cost reduced by the living wage. Employers who pay it are better able to retain their workers, reducing recruitment and selection costs, and overtime paid to cover absent workers. Living wages help to increase the number and quality of new applicant pools. Reduced turnover of staff frees up management from the time and costs associated with training.

2. A more skilled workforce

Capability is the second notable benefit from living wages. These workers have the means and time to invest in themselves. The possibility of returning to education and gaining qualifications creates choices for the future, or they may simply have time for a hobby. They can build careers, but also engage with lifelong learning, developing viable futures. They can start pensions, reducing their reliance on the state. These workers feel respected and better treated, which – together with the improvement to their health and well-being – further improves their quality of life, and with it their job and life satisfaction.

Investment can be made to up-skill the retained workforce. Productivity improves among these more expensive workers in a number of important ways. They can work harder because they aren’t physically or emotionally exhausted; they are less cognitively depleted; and they are less distracted by the worries and anxieties that accompany poverty. Productivity is also boosted indirectly through job satisfaction, and improved attention to work, which reduces how often people make mistakes.

As well as improved production, these businesses see inventory and waste management costs decline. More alert workers notice problems concerning their work and have greater mental resources to come up with solutions, boosting the creativity and innovation of a workforce. They deliver a better-quality service and product, which enhances customer satisfaction levels. These workers feel more respected, so are more engaged to speak up and voice their concerns.

3. Less reliance on state subsidies

The state not only covers subsidised housing and welfare to offset shortfalls in these employers’ pay packets. There are additional social, psychological and health consequences that arise from low wages. The cost of depression and other diminishing mental health afflictions are raised by poorly paid work, along with further health issues from elevated levels of heart disease, diabetes and cancer among these workers.

The consequences of non-living wage workers’ dwindling health casts shadows for years on their lives and those of their families, with the resulting complex caring responsibilities of these increasingly chronic conditions affecting other family member’s work and economic viability. Those in low-paid work can expect to lose decades of their lives compared to their better-paid peers.

All of these health factors add further strains on already resource-impoverished families, fuelling tensions in their relationships. Poverty has also been shown to lead to neglect, as parent ends up too exhausted from work or just not around. This adds further strain to remedial educational provisions, welfare and social care costs, and in extreme cases, additional policing and criminal justice bills.

And it’s important not to forget the psychological consequences of being part of a stigmatised group such as low-paid or precarious workers – the sense of shame and loss of identity experienced when a person feels like they do not contribute enough to society.

Living wages enable sustainable livelihoods for workers and their families. Beyond that, they provide the capability to shift out of poverty. In doing so they remove reliance on state subsidy, toward self-sufficiency and thriving.

Condoning any employers’ decision to forgo paying a living wage is not without costs: their chosen business model is predicated on a high but hidden subsidy, paid for by taxpayers and the state, and through the diminished lives of these workers.

Amid growing wealth disparity, COVID-19 has highlighted the consequences of low pay. There are choices to be made. Living wages are a bedrock to building sustainable and capable societies. When times are tough, why would you settle for anything less?

The Conversation

Rosalind Searle is affiliated with European Association of Work and Organizational Psychology (EAWOP).

Ishbel McWha-Hermann does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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