The Living Wage Commission has urged the Government to increase the number workers on the Living Wage to end the “national scandal” of poverty in the UK.
The commission said extending the Living Wage depended on the Government increasing the voluntary take up of the higher rate to at least a million more workers by 2020, otherwise families will continue to rely on food banks and "unsustainable debt".
Its chairman, the Archbishop of York, Dr John Sentamu, said: "Working and still living in poverty is a national scandal. For the first time, the majority of people in poverty in the UK are now in working households.
"The campaign for a Living Wage has been a beacon of hope for the millions of workers on low wages struggling to make ends meet. If the Government now commits to making this hope a reality, we can take a major step towards ending the strain on all of our consciences. Low wages equals living in poverty."
The commission said increasing the pay of half a million public sector workers to the Living Wage could be more than met by higher tax revenues and reduced in-work benefits from a similar number of employees in private firms.
Professional service firms such as accountancy, banks and construction companies could boost the pay of 375,000 workers if they agreed to pay the Living Wage, currently set at £8.80 an hour in London and £7.65 elsewhere, compared to the national minimum wage of £6.31, according to the report.
Dr Adam Marshall, director of policy and external affairs at the British Chambers of Commerce, said businesses should be encouraged to pay a Living Wage as the economy improves, but warned that some employers cannot pay a higher "just yet".
Meanwhile, Business Secretary Vince Cable insisted that raising salaries can have a negative effect on workers, adding that, unlike the minimum wage, the Living Wage rate does not "take into account the effect rises in wages might have on the job opportunities of the lowest paid".
"To increase living standards, the Government has cut taxes making the average person £800 better off and taking 3.2million people out of tax all together, and from this October, those on the national minimum wage will see the first real increase in take home pay since 2008," he added.
But, speaking on Good Morning Britain, Dr Sentamu insisted that the Government is capable of raising the minimum wage, adding it is "one of the biggest employers so if they really want to do it, for example in the care industry, the Government could...increase the kind of budgets, then it is quite possible people could be paid a living wage."