Local economies are suffering at the hands of councils’ poverty pay, public service union Unison has warned.

Councils across England and Wales are paying workers an hourly rate which is just above the statutory minimum wage and well below the living wage demanded by campaigners.

The wages of over 21,000 mainly women workers in occupations such as cleaning and catering will now be just above the national minimum wage when the rate goes up to £6.31 an hour on October 1, Unison said.

Over 500,000 local government workers earn below the living wage, which is £7.45 an hour outside London.

Unison said that if council workers had received pay rises in line with RPI inflation through 2010-13 — instead of a pay freeze and squeeze — their pay would be 18 per cent higher and would have reached the living wage rate.

“It is shameful that poverty pay is so endemic in local councils, dragging down the workforce and undermining local economies — and thereby the UK economy,” said Unison head of local government Heather Wakefield said.

“We need more councils to take a long, hard look at their workforce and try to imagine families surviving on £6.45 an hour.”

With pay rates set so low, council workers cannot afford to go out and spend in their local high street and this is leading to shops closing, councils losing rates and a vicious circle of decline.

“We need a living wage now,” she said.

Ms Wakefield will speak at a TUC fringe meeting on the living wage on Monday.