Paying the living wage would increase the total cost of public care services by £1.4bn but half of this would be returned to the government through higher tax bills and lower benefit payments, a thinktank has claimed.
The Resolution Foundation said it wanted to inject some “realism” into the debate of paying care workers the living wage.
One of the report’s researchers, Laura Gardiner said the living wage was too often treated as a “costless aspiration”.
She said: “Our report aims to provide the kind of figures needed to start thinking seriously about how to tackle pervasive low pay in a sector that for too long been overlooked by policy-makers.”
The report, co-authored by King’s College London research fellow Dr Shereen Hussein, estimated two-thirds of the 930,000 frontline care workers in the UK are currently paid below the living wage.
‘Pervasive low pay’
Eradicating frontline employers’ non-compliance with the minimum wage alone would have cost £142m in the year 2013-14.
The researchers primarily used the National Minimum Dataset for Social Care, provided by Skills for Care, to make this analysis.
Other benefits to paying the living wage might include higher quality social care services and a more satisfied and stable workforce. The principal benefit for care providers would be savings associated with lower staff turnover and less money spent dealing with staff absence, the report said.
A better quality of care could lead to savings in wider health and care budgets as insufficient or inadequate care services can cause delays to hospital discharges and increased emergency hospital admissions, the report said.
The report suggested money may also be saved as a better quality care system will ultimately relieve pressure on informal carers.
“Research comparing the value of informal care work to the value of what these individuals contribute when engaged in ‘market’ work demonstrates that considerable economic losses may result.”
Although the authors recommended less reliance on pro-active reporting and higher penalties to tackle non-compliance with the minimum wage, they stated:
“We make no attempt in this report to identify where the money [to pay the living wage] might come from. Nor do we underestimate the size of the challenge.”
However, their report made it clear that since most savings made by paying social care workers a higher wage will accrue to national government, one approach could be national government redirecting the tax and benefit savings resulting from a living wage into publicly-funded care services.
The current living wage is £7.85 an hour, and £9.15 in London.