Under the plans companies who set their rates of pay at a minimum of £7.60 an hour would pay lower rates of corporation tax compared to companies who were only prepared to abide by the national minimum wage level of £5.83 an hour.
The policy would make a substantial difference in the construction industry where many construction workers, especially labourers, employed via employment agencies are forced to work far below living wage rates.
UCATT has also found that agencies paying very low rates of pay are also far more likely to exploit workers by other means: including excessive charges for accommodation, transport and protective clothing or failure to pay money owed to the worker at the end of a contract.
Research by the Institute of Fiscal Studies, undertaken for the Ed Miliband campaign, found that companies paying below the living wage, cost the taxpayer between £5.9 billion -£6.3 billion a year, as low paid employees are able to claim tax credits and benefits to boost their earnings. If companies adopted the proposals it could result in a saving of up to £4.1 billion per annum, as a result of lower benefit costs and increased tax revenues.
Alan Ritchie, General Secretary of UCATT, said: "This initiative demonstrates that Ed Miliband fully understands that workers need stability and fairness in their working lives. The battle to end the scourge of low paid work and job instability in the workplace must be championed by the Labour Party if they are going to regain the trust and confidence of crucial sections of the electorate."