Labour-led councils have been urged to adopt the living wage as research reveals it could give the regional economy a £139m boost.
Local authorities must act as “economic shepherds” and introduce the £7.65 an hour rate and “set the tone” in other sectors, a TUC summit in South Shields heard yesterday.
Around 213,000 people in the region - 22% of the workforce - are today being paid less than the living wage, which is designed to absorb rising costs and give workers a decent standard of living.
Experts at Landman Economics calculate the Treasury would pay out £46.2m less in means-tested benefits and be handed an extra £92.4m from extra tax and National Insurance contributions if a North East-wide living wage was introduced.
No North East local authority is currently paying the full rate, despite Ed Miliband announcing that it is Labour policy.
The living wage is £1.34 an hour higher than the minimum wage (£6.31 an hour) and set annually by the Centre for Research in Social Policy.
Rachel Reeves, Shadow Secretary of State for Work and Pensions, said she wants councils to tackle low wages, despite the economic climate.
She said: “I think that councils are really struggling with the cuts in local authority grants and it makes it hard, especially here in the North East of England, which has been suffering some of the biggest cuts.
“But I would like to see employers, both councils and the private sector, go further and I hope that more progress can be made.”
Neil Foster TUC Policy and Campaigns Officer for the Northern region, said councils must take the lead. He said: “Councils are right to be investing in improving physical architecture and regenerating business space, but they have also got to bear in mind by giving people a better wage they will spend locally and regenerate the economy.
“Labour councils in the North East need to think of the ripple effect supporting the living wage can have and, as economic leaders in the region with some of the most important contracts, they can set an example.”
Newcastle City Council, the first council in the region to introduce the living wage in 2012, is paying staff £7.20 an hour but has now fallen behind as the rate has been reviewed to match the cost of living.
Meanwhile, councils in Gateshead, Northumberland, North Tyneside and South Tyneside all have working groups set up but have not made policies.
North Tyneside Council passed a motion in July 2012 to “investigate the implications of any national agreement to pay council employees the living wage as a minimum.”
South Tyneside Councillor Joan Atkinson said: “We have set up our own independently-chaired Living Wage Commission to explore what we can do as an employer to lift more people out of low pay. There are few issues more important for our residents.”
A spokesman for Northumberland County Council said: “The council has currently set up a working group to look at the issue of Living Wage and will be exploring all the options for Northumberland as part of this.”
A spokesman for Gateshead Council said: “Gateshead Council passed a motion earlier this year to explore the viability and benefits of Gateshead Council becoming a living wage employer. We are currently looking at the impact introducing a living wage would have for the council.”
Don McLure, Durham County Council’s director of resources, said: “We are aware of developments both nationally and locally regarding the living wage.
“The council has set up a working party to review what the impact would be on employees, as well as the options and costs on the council.
“This work is on-going and the working party will be reporting back to full council in due course.”