Union leaders want tens of thousands of workers in Devon and Cornwall to receive a higher hourly rate to bridge the gap between rich and poor and kick-start the economy.
TUC chiefs carried out their own calculations based on government statistics of earnings and believe a total of 175,000 employees should receive £7.20 an hour as a living wage.
The rate is the lowest level campaigners believe supports a decent standard of living outside London.
Currently the minimum wage varies according to age – for those aged 21 and over the rate is £6.19 an hour, for 18 to 20-year-olds £4.98, under-18s £3.68 and apprentices £2.65.
The TUC said 118,000 people in Devon and 57,000 in Cornwall would benefit from the increase. Their figures show 32% (15,558) of workers in Torbay, 28% (27,273) in Plymouth and 28% (75,239) in the rest of Devon earn less than £7.20 an hour.
And in Cornwall research showed 32% earn less than £7.20 an hour.
Kit Leary, pay campaigner for the union, said society as a whole would benefit from the increase.
He said: "Paying the living wage is good for business, good for the individual and good for society.
"It would close the gap between luxury pay at one end of the scale and poverty pay at the other.
"The local economy needs a boost and encouraging consumer spending, particularly among low-paid workers, is a good way to do it."
The South West TUC is urging local authorities across the region to pay their staff the improved rate, as well as the private sector.
Mr Leary said: "Employers in the South West have the chance to take thousands of families out of poverty and help boost fragile local economies in cities that have adopted living-wage policies.
"Government ministers, public authorities, businesses and the City have seen the moral and practical benefits of paying a living wage.
"This is not a luxury in a time of economic downturn, but the key to building a fair, equitable and sustainable recovery."
However, Westcountry business leaders said they "highly doubted" the living wage would deliver union expectations.
Tim Jones, chairman of Devon and Cornwall Business Council said it would deter people from starting businesses.
He said: "A lot of new business is being generated by new-start companies with fewer than ten employees.
"If this living wage were brought in we would find ourselves going rapidly backwards.
"This sort of wage could only really be afforded by the very large companies – smaller firms would struggle."
Stephen Rushworth, Cornwall Council's portfolio holder for economy and regeneration, said: "We have recognised this issue for some time and have been focusing our economic strategy and funding on dealing with the factors relating to a low-wage economy in Cornwall.
"We are investing in business growth to ensure business can provide full-time quality employment.
"Also we are supporting increased productivity in the tourism and food-related sectors to ensure a year-round offer."
