The National Minimum Wage (NMW) for all it was necessary, has come to mean a moral, as well as legal, threshold; many even believe it is a wage sufficient to live on.

But it isn't, and never was; it takes little account of the costs of living. This is especially true of London, where some 400,000 people – cleaners, porters, security guards – are paid the NMW, despite the cost of living in the capital being at least 20 per cent higher than in the rest of the country. Those higher costs are why people's salaries in the capital usually include a "London weighting" – except those on NMW, who need it most. They are left to work two minimum-wage jobs to feed their families and pay the rent.

Since it was introduced by London Citizens in 2001, the London Living Wage (LLW) has lifted some 5,000 families out of working poverty. Announced each year by City Hall since the Mayor (then Ken Livingstone) converted to the idea in 2004, the LLW is currently set at £7.60 an hour, compared with the NMW of £5.80. Unlike the NMW, it is not statutory, but the current Mayor, Boris Johnson, is evangelical about its benefits. "It not only helps to knit the loyalty of your staff and thereby to save on your employment costs; it is, of course, the compassionate thing to do", he said at an assembly last year.

Employers who have converted to the idea have discovered that it costs, in practice, little to implement, and brings great gains. The Greater London Authority (GLA) pays the LLW or more to its staff, as do Barclays, KPMG, PwC and Linklaters among hundreds of other employers. "Working and travelling in London is expensive, and if you're on a low wage it's proportionately more expensive", Oonagh Harpur of the law firm Linklaters, says. "This is the right thing to do".

Time and again, it has been shown that improvements in productivity and staff turnover more than offset the increased wage bill. Queen Mary, part of the University of London, introduced the LLW in 2007. "When looked at over a two-year period the expected budget for 2008-09 is almost identical to the expenditure spent on contract cleaners in 2006-07," says Professor Jane Wills. "It's a win-win for all concerned."

Austen Ivereigh is director of press at London Citizens www.londoncitizens.org.uk