The penny finally drops. Pay people properly and you will get better results

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A decade of hard graft by Living Wage campaigners has forced employers to recognise that higher salaries boost productivity

A £100m bonus has been paid to some of the country's lowest-paid workers over the past decade by employers who have signed up to paying above the statutory minimum wage. Ten years of work by the Living Wage campaign has yielded £96m in topped-up wages for thousands of workers, according to new research. The campaign, spearheaded by Citizen UK, calls for every worker to earn enough to provide their family with the essentials of life, which it says are not met by the national minimum wage. Now, some of the country's most prestigious employers are expected to boost that figure dramatically as firms buy into the idea that paying staff more increases productivity.

The study, by Queen Mary College, University of London, reveals that more than £33m extra has been paid to workers on the so-called "living wage" – an hourly rate set independently each year, calculated to allow workers to pay for essentials – since 2010. Firms including Bank of America, Goldman Sachs, L'Oréal and the retailer Lush have committed to paying £8.30 an hour rather than the national minimum wage of £6.08 for staff in London who are over 21.

One in five workers across the UK – and one in six in the capital – is paid less than the living wage. But more than 130 London employers have signed up to the campaign, a threefold increase since 2008, and it is now being rolled out nationally. Campaigners believe that this year politicians across the country will give support by boosting pay rates in the public sector.

London's Mayor, Boris Johnson, said: "More and more organisations recognise that it suits them as well as their staff" to pay the rate. He added that the policy was a "win-win for employers", fostering a "loyal and motivated workforce" and helping to "boost the capital's economy". Richard Reid, London chairman for KPMG, said that since the company had introduced it, staff turnover had fallen and productivity increased.

The Scottish Executive – which pays its directly employed staff the living wage – is considering making the wage a requirement of all its government-awarded contracts, pending EU legislative inquiries. KPMG and PricewaterhouseCoopers have become the first firms to pay the living wage nationwide and campaigns are running in Brighton, Preston, Milton Keynes, Newcastle and Wales, where the regional rate is set at £7.20.

Rhys Moore, director of the Living Wage Foundation, said: "2012 brings the first ever Living Wage Olympic Games and we are hoping to make progress in sectors where low pay is the norm, such as retail."

Launched by a collective of church leaders and trade unions in 2001, the idea has stern critics. The Greater London Assembly insists an hourly wage rate of 22 per cent above the national minimum wage is needed just to take wage-earners in London out of poverty, but senior industry figures believe a widespread living wage policy in an economic downturn would be irresponsible. Neil Carberry, the director of employment at the CBI, warned that it "puts up barriers for the labour market". Some academics fear higher wages for some low-paid workers could shift the emphasis away from government support.

Despite the reservations – and just one retailer signing up so far – some of the biggest names in the financial sector have adopted the policy, including Barclays and HSBC, accumulating more than £20m for low-paid workers, in particular those employed via agencies. The GLA and related bodies, including Transport for London, now pay all staff the living wage, despite mixed views at Westminster.

Ed Miliband, the Labour leader, pledged his party would offer tax breaks to companies paying the living wage in his manifesto last year, and the Prime Minister said it was an "idea whose time has come".

In the public sector, the Department for Children, Families and Schools has adopted the policy, along with councils in Islington, Hackney and Lewisham, but the Department of Work & Pensions and the Foreign and Commonwealth Office (FCO) have not, saying it is up to their contractors to decide what wage to pay their employees.

Joseph, a 41-year-old cleaner, is leading the campaign for a living wage inside the FCO with a petition signed by 50 cleaners. At one time he earned £40,000 a year as an IT engineer, but he was made redundant two years ago and now earns £6.15 an hour working as a subcontracted cleaner for the Government. "People I work with have to do loads of hours just to survive; some are on 14-hour days," he said. "If they are going to pay our colleagues in Lewisham the living wage, we deserve the same treatment."

Jane Wills, professor of Human Geography at Queen Mary, who carried out the research, said those who have benefited from the campaign represent a "drop in the ocean". Citizens UK is in talks with its biggest retailer yet, Tesco, but Mr Moore said: "There is still a lot to be done."

Looking up

Mwawa Latib, 32, North London

Works as a part-time cleaning supervisor at Islington council. He fits 20 hours of work a week around studying for a financial management MSc at Middlesex University. His wages have increased from £7.30 to £8.39 an hour.

"Before, I was struggling to pay my rent of £350 a month. I even had to ask for money to be sent from my home in Malawi. My wage increase has given me an extra £280 a year. It means I don't have to work more hours and I can carry on studying."

Alec Stevenson, 48, East London

Works 37.5 hours a week as a kitchen porter for KPMG, earning £8.35 an hour. He has been in catering for more than 15 years and remembers working 17-hour days to make ends meet.

"When I started working, I was paid £5.50 an hour and used to work from 7am until midnight. Having more than £2 extra an hour has motivated me and allowed me to rent a bigger room in a safer area."

Struggling to cope

Barbara Pokryszka, 34

Room attendant in London's Hilton Metropole hotel. She works 37.5 hours a week and is paid £6.21 an hour, which she says does not leave her enough for food some days.

"If I pay my rent, £100 a week plus bills, and transport, £32.25 a week, I have little money left over for life; sometimes it's £30 for two weeks. I can't afford clothes or books and sometimes I can't afford dinner. I was sick for six months with depression. All my problems stem from a lack of money."

Gifty, 40

Has seven children, aged between three and 23 years old. She juggles childcare with 15 hours a week cleaning at the Department for Work and Pensions, where she earns £6.08 an hour.

"By the time my money comes into my bank, it has all gone already. I pay £23 a week for my house, more than £20 a week on transport and £185 on bills three times a year. I can't afford new shoes and clothes for my kids. And if the weekly food finishes early, I have to work more hours."

Key dates in the fight for fair pay

1909 Winston Churchill establishes "wages councils" to set minimum wage rates in a number of different industries.

1997 Labour sets out National Minimum Wage (NMW) policy. The Low Pay Commission is set up to recommend wage level.

1999 The NMW is set at £3.60 per hour. The CBI fears job losses and Bank of England is worried about the effect on inflation.

2001 Unison commissions the Family Budget Union to fix the living wage for London. The East London Communities Organisation publishes Low Pay in East London, charting how low-paid workers are caught between minimum and living wage.

2005 The Living Wage Unit (Greater London Authority) publishes A Fairer London and announces a poverty threshold wage of £5.80 an hour and a living wage of £6.70 in the capital. Mayor Ken Livingstone agrees to roll out the living wage to GLA and TfL employees.

2008 Mayor Boris Johnson announces new living wage figure of £7.45.

2010 The Centre for Research in Social Policy calculates a single living wage rate for the regions, of £7.14 per hour.

2011 The Living Wage Foundation is set up. The London living wage is set at £8.30, the regional rate at £7.20 and the NMW is calculated at £6.08.

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