BBC News reports:
Outlining proposed restrictions on tax credits and child benefits, Mr Cameron said a migrant in work with two children was getting £700 a month on average in support from the state, twice the amount paid in Germany and three times as much as in France.
Let’s forget about migrants for a moment. Britain’s “generous” in-work benefits are payable to all. Should we be proud of our “generosity”?
I think we should reframe the way we look at in-work benefits and tax concessions for low earners. They should not be seen as state support for the deserving poor. They should be seen as state support for the undeserving sweat-shop employer.
Labour promoted “generous” in-work benefits and tax credits. Because low-paid workers can survive with the help of in-work benefits, employers have been able to drive down wages without actually starving their employees. Government would not, of course, dream of offering tax breaks or sponsorship to encourage employers to cut wage rates. Yet paying the money to the employee has very much the same effect. Perhaps Government should boast its generosity with a “Sweat Shop of the Month” award!
“Generous” housing benefit supports landlords who seek to raise rents. The poverty lobby can then be relied upon to demand higher benefits. This in turn helps landlords to increase rentals, in a vicious upward spiral. Ultimately, landlords win and the taxpayer loses.
The Coalition has moved away from benefits and toward raising the tax threshold, on the largely false premise that this incentivises work. To encourage paying low wages, by providing an income tax break, is just as much a hidden subsidy to the employer as is an in-work benefit. The idea that this is a fundamental reform favouring work over welfare is a chimera.
Armies of programmers labour to bring in Universal Credit, which will spend even more on in-work benefits, “ensuring” that work pays better than unemployment. They are trying to push a bucket uphill with a string. As fast as in-work state support rises, employer payments will fall. That’s what happens when the state chucks perverse incentives into the free market, without thinking about how the market will react.
How do we break free from this nightmare?
We should recognise that the only way to reach our political Holy Grail – a big cut in the benefits bill – is to insist that employers bear their rightful share of the burden. British workers are a highly valuable resource. Exploiting them on the cheap is criminal behaviour. Our minimum wage must become a living wage and be strictly enforced.
State benefits can then be properly restricted to support for those who really need it. Those who are too old to work, too young, too sick, disabled, or incapable, or with caring responsibilities, all deserve state support – as do those who just can’t get a job. Employers, backed by business wealth, should be ready to support everyone else.
We should also abandon this silly obsession with the income tax threshold. Its only real rationale is administrative – that when someone works only occasionally, it may not be worth the effort to collect a minimal amount of tax. Raising the threshold above this minimal level is a hidden subsidy preferentially targeted toward low wage employers. Yes, of course the minimum wage must be raised to compensate if the tax threshold is brought back to a sane level. Making the employer shoulder his due burden is precisely the point!
Oh and by the way – not that this is really that important, but – replacing in-work benefits with higher wages will also remove a perverse incentive for EU migration into Britain. Just imagine, Mr Cameron, being able to tell Europe that Britain desperately needs to reform its own tax, benefits and wages legislation, and that reducing migration from the EU would be an unavoidable knock-on result!
* David Allen is a member of the Rushcliffe Local Party and has been a member of the Lib Dems or its (SDP) predecessor since 1981
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28 Comments
If you go into most supermarkets you will see that they are replacing checkout assistants with machines – it is cheaper for them. To argue for increasing the minimum wage without even mentioning the effect on employment is absurd – many employers can substitute capital spending for labour -and the higher the price of labour the more they will do so.
It may be that as a society we are happy with higher wages and lower employment – fine , but it needs to be an informed decision, not on the basis of rhetorical nonsense like ” British workers are a highly valuable resource.” Many of them are, many alas, lack the skills needed and are a low productivity resource.
“replacing in-work benefits with higher wages will also remove a perverse incentive for EU migration into Britain”.
Back in the real world increasing wages would attract more workers from the rest of the EU, not less.
It’s a fine argument, that tax credits subsidise “low wage” employers. But, like attempts at coming up with a decent Universal Income scheme, it founders on real numbers.
A couple, with one partner working 30 hours a week and no childcare costs, is currently entitled to Working Tax Credit if the working partner earns up to about £345 a week (considerably more than even the London “living wage” of £9.15 per hour). (That’s just Working Tax Credit – they’d still get over £60 a week in Family Tax Credit.)
Should all employers be required to pay over £11.50 an hour so that we can abolish the “subsidy”? (Who on earth would employ an 18-year-old with below-average qualifications and no demonstrable skills or experience at that rate?) Or do we plan to slash the incomes of the poorest on the altar of principle?
A good article by David Allen. I do not agree with everything he says but he is right to pin-point some of the problems.
I do not agree with David that our Holy Grail should a big cut in benefits; there are lots of items of government expenditure that I would like to see cut before one single benefit is touched.
However, pretending that this has got something to do with machines in supermarkets or some sort of ‘act of God’ is a lasses faire excuse for doing nothing about poverty wages that should have been dead and buried in the nineteenth century.
The idea that higher wages automatically links to fewer jobs has been an excuse of right wing Conservatives since the days of slavery. No doubt those who make this case today would argue that there would be more jobs in Jamaican sugar production if we just stopped paying people and started owning them and forcing them to
Iive in huts on plantations.
Back in the real world of 2014 in the UK wages have been going down relative to prices for the lowest paid 25%.
Back in the real world 13 million people in the UK live in poverty.
In the real world more than a million people in the UK are in part-time jobs because they cannot get full-time jobs.
There is no simple solution to this.
A large number of private sector jobs in this Country are in services procured by the public sector usually through competitive tender. As they often use a 75% bias in favour of cost, many employers, including my own company, are forced to bring our costs down to levels too low to provide the wages we would wish. The alternative is to see the jobs lost, in our case that would mean the loss of jobs from an already economically depressed area.
So what is the rightful share of the burden David asks business to bear?
Is it a percentage of profit distributed to staff each year (which is incidentally how we calculate the amount we can allocate to wage rises). If so what is that percentage ? Our business is privately owned but should others need investment would this make that harder to achieve ? VC’s tend to want share’s or profit shares to open their wallets.
Some tenders insist on the living wage being paid to staff allocated to the contract. Without changing the money that comes into a company this tends to change the distribution of wages at the lower end rather than lead to real increases across the board. Why the lower end? Well because in my industry, which employs a high number of professional staff, the wages at the higher end are fairly level across the industry and are driven up by a lack of suitably qualified applicants. Reduce wages to these staff and another supplier or the public sector will be waiting to offer them a position.
There is no simple answer, but trying to inflate wages whilst also trying to continue a downward trend on supplier costs (in cash terms costs in our industry are lower than 2008) is counterproductive. Every year the proportionate amount of net profit, and therefore the amount that can be allocated to wages, reduces.
Would a variable minimum wage, dependant on size of business, square the circle?
The company with just ten employees get the wages subsidised by the state, the firm with 100 staff gets less support and the big firms have to pay the full cost of their staff.
There really us no good argument as to why the tax payer should subsidise the wages paid by Tesco or Starbucks but a case can be made for the SMEs.
Thanks to all for the comments.
Simon McGrath argues that if we withdrew state subsidies to low wage employers, fewer people would be employed on low wages. That is no doubt true. Osborne’s apologists are currently protesting that the reason why the deficit has not fallen is because economic growth has been concentrated toward increased employment at low wages. Since that employment is artificially subsidised by our misguided tax and benefits system, it fails to generate tax revenues for the government, and so the deficit has not fallen.
If we withdrew the state subsidies to low wage employers, we would of course generate considerable new tax revenue. This would give us various options. We could use the money to cut the deficit, if we still believed that this was our priority. Or we could instead make a compensating cut in taxes, such as the basic rate of income tax, or corporation tax. These latter two alternatives would be an incentive towards higher levels of employment at all wage rates. So we might very well see an increased overall level of employment, rather than a decrease. But it would support employment across the board, rather than specifically targeting support for employment at very low wages.
What’s not to like? How can we defend a system which preferentially favours employers who want to pay starvation wages?
There is a key problem that most ‘wealthy’ nations face: the wealth paradox that the richer a country becomes, the more expensive the cost of living becomes.
Now, where a country’s raises in wealth shared out equality in a loving and a natural way (aka, without any state or third party inference), this would not be a problem because the growing wealth of the nation would mitigate the raising costs. However, as we all know, wealth accumulates and clusters in small sets of society, meaning that whilst the cost of living goes up a roughly the same rate for everyone (variations for regional discrepancies and items being bought, taken into account), household incomes go up at very differing rates. This means that people’s ability to cope with such raises varies greatly. Obviously, those on low incomes will be hit hardest.
Now, Governments and society in general have several levers they can use to try and free up the cluster capital needed to raise household incomes to such a level as to enable people to cope with the raises in the cost of living. One lever is a minimum wage (which I support): the problem with raising the minimum wage is highlighted by Steve Way, the industries which normally pay the minimum wage are industries which themselves lack the capital to pay their low-skilled, labour intensive workforces high wages because they sub-contractors for other industries which are given incentive them to depreciate costs. Now, you could argue that if businesses had to all pay a higher wage by law, then they would not be able to use low wages to depreciate costs. Yes, but they would still need to depreciate costs, so they would sadly do this by cutting staff numbers and forcing the remaining staff members to pick up the slack: more pay, more work – zero sums game. I am not saying that I like that businesses do this, but I do accept that they do it, and also accept that the levers governments have available to them may not be sufficient to prevent it.
However, what the state can do is tax these businesses using financial incentives to depreciate the wages of sub-contractors, and then use that same tax to subsidise the workers wages. It is more of an administrative headache, but it does achieve the desired outcome by the backdoor. This is what Labour did to rather positive effect. Sadly, this government seems to be less savy – they have the depreciating wages bit down, just not the tax part.
I run a business that pays every staff member more than the living wage, some of our competitors have staff on zero hours contracts or at minimum wage. And yet I don’t support a substantial increase in the minimum wage. Our business model supports higher wages, we get the advantages associated with a better motivated and more stable workforce. We get the best staff. If our customers value that, and many do, our business model will work, and it does. But that does not work for every business. Some businesses are cost leaders and cannot afford higher salaries. If the minimum wage is increased they will go out of business or relocate to another country. The net result will be higher unemployment. In effect the government will be preventing employers offering jobs to workers who are willing to take them. This is something liberals should argue against.
Almost every kind of direct government interventionin the labour market is doomed to be ineffective at best, and at worst will increase unemployment, or distort markets by feeding some vested interest. Government can help by encouraging high quality education, improving infrastructure, and encouraging free international free trade. It should concentrate on doing that job well, and leave business to the private sector.
@ David “Simon McGrath argues that if we withdrew state subsidies to low wage employers, fewer people would be employed on low wages. That is no doubt true”
Glad you accept that – how much increase in unemployment would you think is acceptable ?
@John – since you have frequently shown here that you dont accept the most basic law of supply and demand there seems little point in debating with you. But I wonder why you do think supermarkets are replacing checkout staff with machines ?
Simon McGrath,
“Glad you accept that”.
You misrepresent what I said, as I suspect you are quite aware.
What I actually “accept” is that the change in policy I advocate would lead to a shift in employment from low-wage to normal-wage jobs. At the moment, low-wage jobs are preferentially subsidised by a market-distorting state policy.
What kind of sweat shop economy do you “think is acceptable” then, and why?
Malcolm Todd said:
“Should all employers be required to pay over £11.50 an hour so that we can abolish the “subsidy”? Who on earth would employ an 18-year-old with below-average qualifications and no demonstrable skills or experience at that rate?”
That’s a serious argument (nice change from the last one!), but on the whole, I don’t agree with it.
What we have seen over the last few years is a rapid increase in low-wage employment, favoured by state subsidy. All too often the job gainers have been capable immigrants rather than less capable indigenous “18 year olds with below-average qualifications”, who have been left on the scrapheap.
What would have happened had the subsidy been removed? Well, those employers who really needed the staff would have had to pay a proper economic cost for them, and fund the extra tax payments, while leaving their employees with the same take-home pay as before. At the margin, some employers who did not really need the staff, or who could not sell their products without the hidden state subsidy to their prices, would have decided not to employ low-wage staff. However, if the extra tax had been used e.g. to reduce the basic rate, then it might well be that this would be more than compensated by other businesses becoming able to expand higher-wage employment.
Quite what would happen is thus hard to predict, and depnds on what we chose to do with the extra tax revenue gained. It is possible, as Malcolm implies, that whilst we would upgrade quite a lot of employment from low-wage to normal-wage, we might also have some net loss of employment.
Coalition policy has been to gradually hike the sweat shop subsidy over the course of one parliament. We can now see the adverse results this has created. If we now see sense and reverse this, we should do that gradually, too. Then we can avoid the risk of making the opposite mistake. If we do find that too many jobs at poverty wages are being lost, and if we decide that we want to preserve our sweat shops, we can slow down this reversal of policy. If.
John Tilley,
“I do not agree with David that our Holy Grail should be a big cut in benefits”
My argument is that if, instead of paying a state in-work benefit, we can legislate to ensure that the employer pays the employee that money, then we can validly remove that benefit without harm to the employee.
This will then cut the benefits bill, which is what a lot of people – and not entirely wrongly – would cheer to the rooftops.
Steve Way,
“A large number of private sector jobs in this Country are in services procured by the public sector usually through competitive tender. As they often use a 75% bias in favour of cost, many employers, including my own company, are forced to bring our costs down to levels too low to provide the wages we would wish. The alternative is to see the jobs lost, in our case that would mean the loss of jobs from an already economically depressed area.”
Yes, but the removal of the low-wage subsidy would drive up your competitors’ costs as well as your own, so you would not lose out to other areas of Britain.
International competitiveness might be a different story, but, that raises difficult issues. The revenues raised by removing the low-wage subsidy could be used to cut corporation tax and improve competition internationally – if, that is, we feel impelled to join that race to the bottom!
CarlN
“There is really us no good argument as to why the tax payer should subsidise the wages paid by Tesco or Starbucks but a case can be made for the SMEs.”
I agree – SMEs deserve help to grow, and it is good for all of us if they succeed. But why choose specifically to subsidise low wages? Wouldn’t a more general form of subsidy, such as VAT relief, be preferable?
Stephen Donnelly,
“Almost every kind of direct government intervention in the labour market is doomed to be ineffective at best, and at worst will increase unemployment, or distort markets by feeding some vested interest.”
What we have now is massive direct government intervention in the labour market. The sweat shop subsidy, via in-work benefits and via removal of taxation from low wages, is a government intervention. I am arguing for the removal of that form of intervention.
@David Allen
What would actually happen is that the industry would be concentrated into a small number of large companies, typically divisions of multi national service companies. These would then move non professional jobs offshore, just look at what happened to the UK call centre industry. 118 had two large call centres in the UK but now answers most calls overseas. The majority of our admin roles could theoretically take place anywhere in the EEA without breaching DPA 98 requirements, but unlike large multinationals we want to provide employment in our city.
We do not pay sweat shop wages by any means and would like to pay more to staff at the lower end of the wage distribution, but this is not possible. We have a highly motivated team and we treat them with respect.
The responses to this article have been dominated by employers, who would like to keep their subsidies to low-wage employment, and have therefore uttered seemingly authoritative statements to the effect that the sky would fall in if these subsidies were withdrawn. We should treat their comments with caution.
Any tax rise or in-work benefit cut will, in itself, act as a disincentive to employment. However, it will also provide Government more money, and whatever Government does with that (other than cutting the deficit!) will act as an incentive to employment. Labour’s traditional model would be to spend the extra Government revenue on creating more public sector employment. The Tories’ traditional model would be to take the opportunity to make business-friendly tax cuts with the aim of (making businessmen rich and) creating more private sector employment. Both of these ideological approaches work to a certain extent, though only blinkered ideologists think they always know which works better.
So – We can reverse the Subsidised Sweat Shop Britain policy, if we want to. In place of a policy which artificially boosts low-wage employment while penalising higher-wage employment, we can have a policy which is uniformly attractive to all forms of employment. We may, as Steve Way suggests, see more low-wage jobs move overseas. We may equally see fewer medium-wage or high-wage jobs move overseas, and more such jobs move in the the UK. What’s not to like?
@David – can you explain why you think the demand for labour will not respond to an increase in the cost of labour? Why to take my examples supermarkets would not make more use of automation ?
David Allen 3rd Dec ’14 – 11:29pm
Yes, apologies from me. Reading back you did actually write a “big cut in the benefits bill” rather than a cut in benefits.
@David
“The responses to this article have been dominated by employers, who would like to keep their subsidies to low-wage employment”
I think this is more than a little unfair. I have actually refused to employ people on an apprenticeship as it was virtual slave labour wages and paid them more and provided the same training. That is the only subsidy the government have offered me. To infer that as an employer we somehow benefit is to show a remarkable ignorance of the reality most businesses operate in.
I employ people with wages ranging from just above the minimum wage (cleaning staff / junior administrators) to well over 100K per year. Some may receive in work benefits, and I certainly never asked for the government to change the tax threshold. Changes through tax thresholds to peoples take home pay is not part of our thinking when deciding pay settlements nor will it ever be.
Perhaps you could provide a figure you feel should be paid as a minimum?
Will you link this to the price of living, if so how does that equate to the ability to pay?
If fuel bills rise hugely in a year does the company have to pay more irrespective of the contractual positions they are in with their clients?
Should there be a legal requirement for all contracts to rise by the same rate as the living wage? If so tell the government because they tend to demand fixed prices for 2 years at least…
I asked a question relating to whether you feel a percentage of profits should be assigned to wage increases, what percentage should it be?
Some employees are part time, but may get benefits is that their employers fault?
There are some unscrupulous employers around wishing to take high profits and provide low pay, but to make your argument work you would need to decide what is too high a profit?
A single parent working as an administrator may qualify for substantial in work benefits whilst their equally paid peer will not, is that the employers fault, should the mother be paid more?
Is it actually the cost of essentials such as housing rather than the wage level that makes wage levels too low? If so wouldn’t rent control to reduce in work benefit be a better option?
If you push non-professional jobs out of the UK who will retrain those staff for new roles? What about those who are not capable of retraining, what happens to them?
You feel employers want to keep a subsidy, you want to blame employers for the cost of living. The government have announced more huge cutbacks to the public sector, the knock on effect to the supply chain will be devastating. You have a view of employers as the bad guys in this, it is simplistic and wrong.
I value my staff highly, I consider many to be friends and I and my fellow Directors have ensured that their jobs are protected through incredibly hard times. Our retention rates are excellent and we have a very high re-employment rate where people have left. The only people who have gone without wages in our company are the owners, the only people who have had above inflation pay rises are those at the lower end of the pay distribution. I know many other businesses that are run in the same way.
Your argument is based upon too many assumptions and not enough facts. I believe that employers should share the benefits of prosperity with their employees and seek to shield them from the impact of downturns. The answer is not absolute (with the exception of an adequately set minimum wage) but relative.
Finally I think you are confusing the wish to pay better wages with the ability to do so. If I could I would give everyone who worked for me a 10% pay rise tomorrow, they deserve it. Of course if I did they would only get it for a few months until the bank or HMRC closed us down.
Simon McGrath, yes of course the demand for labour will depend to some extent on the cost of labour, but that simple point doesn’t take us very far. Read my previous response to you, please, instead of just repeating the point I have answered already, and making it a snappy one-liner which might look damning and conclusive to a reader who has only skim-read the interchange. No doubt there are plenty of people who skim-read, and you may well feel that it is a good idea to seek to win the argument on a superficial basis. That’s politics I suppose.
https://www.libdemvoice.org/opinion-65-43616.html#comment-328293
To summarise: If we take the extra money Government will earn by removal of low-wage subsidies, and use it to reduce e.g. the basic rate of income tax, then we thereby reduce the cost of medium-wage labour. So we may very well increase the overall demand for labour.
Steve Way,
Please don’t take my comments personally. Of course I recognise that you “certainly never asked for the government to change the tax threshold”. I do not “have a view of employers as the bad guys in this”. What I would say is that, we all develop political blind spots when it is our own personal interests that come under the microscope. There aren’t many mansion-dwellers who call their houses mansions and would be happy to pay the mansion tax. There aren’t many farmers who complain that farm subsidies are too high. There are quite a lot of farmers who farm responsibly and do a good job in the community, but who nevertheless feel attacked and put-upon if ever the CAP is criticised. Similarly, employers don’t want to hear about proposals which might possibly hurt their businesses, however responsibly they may run those businesses, however justified the proposals might be. It’s human nature.
You tell me that in hard times, your own company has deliberately lowered wage differentials to protect jobs and protect the business. Clearly you deserve credit for that. Many businesses have of course done quite the opposite. So here we have a laissez-faire economy in which the good act responsibly and suffer for it, the bad get away with murder. Well, that’s what Cameron believes in. He would scrap welfare and replace it with the “Big Society”, voluntary charitable giving from Lady Bountiful, selfishness from anyone rich who wants to be selfish. That’s not my poiltical philosophy. Is it yours?
@David Allen
Sorry but I don’t believe I have that blind spot, merely the real world experience of running an SME. My political philosophy is markedly left of centre. My role as a businessman is shaped by that. I earn a very good wage albeit substantially lower than I have been offered to perform the same role for a larger company. My problem with your approach is that it doesn’t take into account the reality of regional businesses. If you look at the list of questions I put to you and try to answer them you will that the reality is not as simple as your piece assumes.
The Public Sector is probably the biggest ‘single’ consumer of services in the UK. It would have to pay substantially more for these services or source from overseas if wages had to rise substantially – not something I’m against but it would wipe out some of the savings.
Steve,
Yes, your questions do demonstrate that you face complex problems. If I tried to answer them all on paper I would inevitably get tied up in the complexity. So no, I’m not going to tell you a specific figure for the minimum wage, or answer your deliberately awkward questions such as “what percentage of profits should be assigned to wage increases”. I fear that giving answers to these questions would merely set you up some convenient Aunt Sallies, which you would then take delight in knocking down.
The fact that reality is not simple is not a good argument against changing the rules. It isn’t simple now and it won’t be if the rules are changed. You have complex questions on wage rates and competitiveness which you have to wrestle with, whether or not the rules are changed.
Changing the rules to disfavour those employers who pay preponderantly low wages, and favour those who don’t, would no doubt create winners and losers in the business community. Another natural fact of life is that the winners – those who would survive a little more easily, grow faster and make more money – would be much less concerned by the changes than the losers – those who actually feared a greater risk of going bust. So, natural “conservative” self interest dictates that business as a whole won’t like this idea, even though many businesses individually would gain. The nation as a whole would greatly gain from a shift away from the sweat shop economy!
Sorry David, but I am not looking for convenient “Aunt Sallies” as you put it but asking you to provide some detail to your proposal. If you do not have a level you feel is suitable for employers to pay it undermines your entire argument, for example is it the living wage? If so would this be a level sufficient to remove the majority of in work benefits, does it apply to apprenticeships?
These are not my complex problems, but the problems anyone who advocates your approach would need to seriously consider before cutting benefits. You have also not addressed the point about controlling cost, for example through rent controls.
Your approach to post a piece and then refuse to engage in reasonable debate is a bit odd to be honest…
Steve,
Oh come on. You are not “asking me to provide some detail to my proposal”. You are arguing vehemently that my proposal is completely wrong-headed. Of course you are entitled to do that. But be honest about your position, please.
You would like to embroil me in complex arguments about details. Let’s face it, your reason for wishing to do that is clearly because you think I would then lose the arguments. You probably think that would be fair do’s because you think that the complex arguments are on your side. However, I think things would simply get tangled up in lots of ifs and buts. This would obscure the simple fact that what you are defending is state support to favour low wage employers, and that’s pretty indefensible to anyone who doesn’t employ people on low wages.
The level which should be paid is something that should be assessed and determined by professionals after detailed study, not guessed on the basis of a back-of-an-envelope exercise by either you or me. I did in fact suggest in my article that the “living wage” would be appropriate, so if you’d read it properly you wouldn’t really have had to ask the question. However, I think that would need to be reviewed before implementation. If you read my response above to Malcolm Todd, I have also suggested a staged evolution toward a higher minimum wage and lower in-work benefits, so that snags can be identified and ironed out during the process.
Yes, I have put forward a broad general argument, leaving the details to be worked out later. Rather like Moses, who put forward the broad-brush argument “Let my people go!” I think of you as a kind of Pharoah who says “Can’t possibly do that, not until you have devised a logistical transport planning scheme which overcomes my host of detailed concerns to my own satisfaction…”!
David you really are putting up straw man here.
I am not saying your idea is completely wrong headed but that it is not thought through and is seemingly based on no evidence. You claim employers drop wages follwoing increases in what you call subsidies such as a raise in the threshold. I’m sure you have some evidence that like for like wages have dropped in response to the recent threshold rises. The figures I’ve seen show wages are finally starting to keep pace with inflation, in your theory they would be dropping below inflation as the tax threshold rises…
Also you didn’t advocate the Living Wage you said the minimum wage should become a living wage. The Living Wage has a value that is publically available. I don’t think employers would have a great fear of that, although it would need to have a graduated scale for school leavers etc. But a living wage to remove the need for in work benefits would need to be far higher than this. If we up the current level outside london to £8 per hour it would equate to £15,600 a month. For a single person with no family responsibilities this is OK, for a single mother with 3 children it is not enough and they will need in work benefits. If the two are doing the same job that is not the employer running a sweatshop, the family circumstances of their employees are not their responsiblity. This is why to even float this idea there needs to be an understanding of what level is required.
And the reason I tried to start the debate about distribution of profits is because it would help stop unscrupulous employers skewing their pay distribution to the lower end and have the benefit of ensuring pay awards are fair and affordable, and come before large dividend payments. In effect, far from saying that employers should not only pay their fair share I am saying they should pay more when times are good.
I’ve already stated I think employers should carry their fair share of the burden, the Tories are obsessed with reducing Corporation Tax and reduce the so called ‘red tape’ around employing people. If I were the type of employer who agreed with those type of very real subsidies I would have voted for them.
Steve Way,
“You claim employers drop wages follwoing increases in what you call subsidies such as a raise in the threshold. … The figures I’ve seen show wages are finally starting to keep pace with inflation, in your theory they would be dropping below inflation as the tax threshold rises…”
The figures that you’ve seen show that wages have consistently fallen behind inflation during this parliament, until very recently. That fits my “theory”, apart from a recent small blip. It’s like climate change. Scientists concentrate on the general trend. Denialists fix on the occasional counter-example and localised blip, and claim that it proves what they want it to prove.
“a living wage to remove the need for in work benefits would need to be far higher than this. If we up the current level outside london to £8 per hour it would equate to £15,600 a month. For a single person with no family responsibilities this is OK, for a single mother with 3 children it is not enough and they will need in work benefits”
That’s why I said that benefits should be retained in cases of real need, for “Those who are too old to work, too young, too sick, disabled, or incapable, or with caring responsibilities, all deserve state support – as do those who just can’t get a job”, to quote my own article. That would include some form of child benefit. Of course there would be complications. Of course it would be difficult to eliminate the sweat-shop-subsidy in its entirety. That doesn’t mean we should not seek to reduce it as far as is practical.
“The reason I tried to start the debate about distribution of profits is because it would help stop unscrupulous employers skewing their pay distribution to the lower end and have the benefit of ensuring pay awards are fair and affordable, and come before large dividend payments. In effect, far from saying that employers should not only pay their fair share I am saying they should pay more when times are good.”
I’m just not clear what you are proposing here. It sounds as if you are proposing some form of state control to regulate the ratio of dividends to wages. That may be well-intentioned, but it is surely a lot more complex and arbitrary than a simple decision to raise and enforce the minimum wage.