Ed Miliband’s new plan to encourage employers to pay workers a ‘living wage’ has been welcomed by the region’s union bosses.
But business leaders have warned the plans must not put economic growth at risk.
The North East has the highest proportion of people paid below the living wage, with 32% of the region’s workers paid less than the amount needed to cover basic costs.
The Labour leader is proposing to offer companies a 12-month tax break worth up to £1,000 for each worker if they sign up to paying staff the living wage, which is more than £2 an hour higher than the legal minimum wage.
Beth Farhat, regional secretary of the Northern TUC, says the cost of living crisis affects the squeezed middle just as much as the lowest paid.
She said: “We know the North East has the lowest wages in the UK which is bad for individuals and their families but it’s bad for the economy too because there’s less to spend on the high streets.
“The TUC wants to see a living wage and fairer pay wherever possible because so many working people are struggling to get by as wages are being squeezed hard and living costs are going up.
“I’m delighted that Ed Miliband is backing a living wage and that so many MPs in our region are signed up to it too.
“His proposal is a really creative idea, but there’s nothing to stop more employers backing a living wage right now.
“I’m speaking with businesses in the region this week to emphasise the benefits a living wage brings and on Thursday we’re hosting a living wage summit in South Shields which should build understanding and momentum behind this important policy.”
However, the region’s largest business member organisation wants an assurance that the progress made by companies will not be jeopardised by any new legislation.
North East Chamber of Commerce chief executive James Ramsbotham said: “While we must strive to increase prosperity across the region, this must not be achieved at the expense of the slow, but steady economic growth we have seen across the private sector over the last 18 months.
“It is vital that the needs of business, which have been forced to take some incredibly tough decisions in the current economic climate, are not compromised with the introduction of new legislation so it is important that a full and thorough assessment is carried out into its potential impact.
“Consumer confidence and general slow growth has impacted upon wages across business, but responsible companies in the North East are working hard to ensure their low wage earners are looked after, with a number of members reporting wage rises for lower earners within their companies.”
Official figures show the average full-time worker in the North East is paid £455 per week compared to the UK average of £506 per week.
The analysis showed that if minimum wage increased to £6.88, half way between its current level and the living wage, it would return £800m a year to the public finances.
According to the End Child Poverty coalition, 32% of children in the North East are living in poverty. Other research shows that more than half of children in poverty have at least one adult in work within the household.
Asked whether David Cameron thought companies should pay the living wage, a spokesman for the Prime Minister said: “His view is that he supports those businesses that choose to pay the living wage, where they can afford to do so.
“The point is around employers taking decisions that are right for them.
“In terms of policy, we have the minimum wage and one of the things the Government is doing is it has asked the Low Pay Commission to look at further increases in the national minimum wage.”
Guy Opperman calls on Tories to support policy
David Cameron is being urged by Conservative MP Guy Opperman to support the living wage.
A ‘Tories for the Living Wage Group’, led by the Hexham MP, is meeting this week to discuss how to put pressure on the leadership to do more on the cost of living.
A growing number of Tory backbenchers fear that if the party digs in against the living wage, they could lose votes at the 2015
Although Mr Opperman called plans to give companies tax breaks if they pay their staff the living wage “a short term gimmick” he agreed with the principles behind Labour’s living wage policy.
He said: “I welcome that we are talking about pay - whether it is a discussion of the minimum wage, the raising of the income tax threshold, or the need for better skills to empower more people into better paying jobs
“We can address these problems with employer take up of the living wage.
“But I do not believe Ed has the right policy tweak. We need companies to be publishing numbers of people not earning the living wage, and I will be doing all I can to ensure more companies in the North East sign up.”
The living wage has been raised to £7.65 an hour, and £8.80 in London.
The minimum wage is just £6.31 an hour.