Businesses that sign up to paying the living wage will be given a 12 month tax break worth up to £1,000 per worker under plans unveiled by Ed Miliband.
The Labour leader has pledged to introduce the contracts to raise wages for millions of low-paid workers if he takes the keys to No 10 at the general election.
At a speech next week Mr Miliband will warn that Britain risks "an era of growth without prosperity" as wages stagnate while household costs continue to rise.
"Ordinary families are doing much worse than the averages would suggest because people at the top continue to enjoy faster wage rises than everyone else," he will say.
"For ordinary families to keep up, we don't need average wages to just creep higher than prices. That will still leave millions of people worse off.
"We need the kind of strong increases in wages that will genuinely make people all across Britain better off. Wages for millions of families have been stagnant or in decline for far too long now.
"Low wages aren't just bad for working people and their families. They are driving up the social security bill too, as the country has to subsidise more and more low paid jobs with tax credits and benefits.
"So to those who say we can't afford to do anything about wages in our country today: I say we can't afford not to. The Tories are indifferent to millions of families being locked into a permanent cycle of low wages and poverty."
Mr Miliband will declare that any extra savings in lower tax credits and benefit payments, along with increased tax revenues in future years, would be used to cut social security bills and help pay down the deficit.
The living wage is £8.55 per hour in London and £7.45 in the rest of the UK although that will be uprated tomorrow.
Last year there were 4.8 million people who earned less than the living wage, up 1.4 million in just the last four years.