At present, the UK living wage has been set at GBP7.85 (US$12.21) per hour across the UK

At present, the UK living wage has been set at GBP7.85 (US$12.21) per hour across the UK

Pressure is mounting on the UK government ahead of the Budget this week to incentivise businesses to pay the living wage, as a new report suggests doing so could lift 6m people out of poverty.

The KPMG report: 'The Living Wage: an economic impact assessment', reveals that raising the minimum wage to the living wage would take just 1.3% of the national wage bill.

At present, the UK living wage has been set at GBP7.85 (US$12.21) per hour across the UK, and GBP9.15 in London, by the Living Wage Foundation. This compares to the national minimum wage of GBP6.50 per hour.

The research comes ahead of the budget on Wednesday (8 July), with speculation the Chancellor George Osborne may look to incentivise companies into paying higher wages for lower paid workers. The UK Government has been under pressure to do more to help the working poor, and is expected to announce plans to cut tax credits for working families, and reduce the housing benefit cap in his Budget. He may look to balance these welfare cuts with measures to increase wages, including an incentive for those employers who pay the living wage.

According to the KMPG report, early adopters have reported a clear benefit to their businesses.

"As a firm who has paid the living wage since 2006, we have seen the benefits of lower absence and a more engaged workforce," said Marianne Fallon, head of corporate affairs at KPMG. "We understand that this is a complex issue for employers and policymakers, but our research shows that there is more to be gained by employers adopting a living wage strategy integrated within their broader business strategy."

The report also suggests productivity could rise as higher pay tends to motivate staff and helps with key costs, such as childcare. Authors noted that current living wage employers have seen a boost to productivity, with much attributed to "first-mover" advantage, as employees really value the premium of being paid a higher than minimum wage.

With regard to public finances, the average gain is just over GBP4.5bn of additional revenue from taxes and reduced benefit payments.