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Two respected think tanks, the Resolution Foundation and IPPR, have come out claiming that by introducing the living wage to council workers or those employed by government bodies through England and Wales, the UK benefits bill could be cut by as much as £2billion a year without significantly affecting the wages that the government has to pay out.

By moving workers up to the living wage of £7.45 an hour (£8.55 in London), state agencies would reduce the need for workers to claim benefits in addition to their wages, meaning that the benefit bill would fall. It would also mean that pressure was put on other businesses to subscribe to the living wage scheme, paying their workers enough to actually live on, rather than simply giving them the £6.19 minimum wage.

Kayte Lawton, a member if the IPPR think tank, explains the logic behind these arguments: “at a time when typical wages have flatlined but prices have continued rising, concerted action to drive up levels of pay for low earners is an essential component in the improvement of living standards. As a first step, making sure that all council staff in London are paid at least the living wage wouldn’t cost very much but would be an important symbol of political leadership.”

Glasgow and Newcastle councils have already demonstrated that paying the living wage whilst maintaining a reasonable wage bill is perfectly possible. They have also demonstrated that doing so reduces their employees’ reliance on benefit payouts.

Meanwhile, the Resolution Foundation’s Matthew Pennycook spelt out the reasons for their think tank’s support of the argument: “there are significant overall public savings to be made from paying a living wage, on top of the beneficial effects it would have on reducing working poverty. Public sector employers are well placed to expand the living wage and to set an example which the private sector can follow.”

The general secretary of the TUC, Frances O’Grady, welcomed the research, as you might expect from one of the country’s more powerful trade unions: “this report shows that fairer wages and decent in-work benefits are both vital means to boost living standards for millions of workers in low-pay Britain. Becoming a living wage employer helps staff, improves a company’s reputation, and in many sectors is easily affordable. In some cases introducing the living wage leads to overall wage bills rising by less than one per cent.”

If the living wage becomes more widespread, it could make a real difference for workers within Britain, increasing their income and reducing their reliance on all manner of support, from credit or debt taken on from loans or credit cards right through to the benefits system.