The great wage con is keeping you poor

minimum-wage-poverty

Is anyone else sick of employers bleating that the minimum wage is hindering their business?

They must think we’re all stupid.

A few of them were on the BBC’s Any Answers on Saturday, saying the minimum wage keeps pay down, and that people can’t afford to go to work – especially if they live in London – because their housing costs are paid by benefits. This is nonsense.

The minimum wage is exactly what it claims to be – a minimum. And if people aren’t getting up to work for it because benefits give them more, we can see that it is not enough.

But let’s take this further: We all know that Landlord Subsidy is being restricted – especially in London, where landlords charge more than in the rest of the country. This means that people on low incomes in rented homes will be unable to pay the bills and will be forced to move somewhere cheaper (if they can find it), as intended by our extreme right-wing government.

Where are all these minimum-wage employers going to find their minimum-wage workers then?

Even that isn’t the limit of it, though. We know from such sources as the summer’s excellent Dispatches documentary on Channel 4 that employers have found ways around the minimum wage.

  • They have taken people on as self-employed contractors who are paid a flat rate for a day’s work – no matter how long that work takes – and being self-employed, these people pay their own taxes and National Insurance, and get no time off for holidays or if they are ill.
  • They have taken on workers on part-time contracts, meaning reduced or non-existent holiday and sick pay entitlements – and then boosted up their hours to full-time levels with fake ‘overtime’ offers.
  • They have employed workers on zero-hours contracts, meaning they can demand an employee’s presence at any time and make them work for as long – or short – a period as required. Again, there are no tax administration obligations, NI, sickness or holiday benefits.

The result is very nice for a government of liars such as the current Westminster administration, because it seems they have managed to increase employment (in fact the last figures showed unemployment is greater than at the end of the Labour administration in 2010, but by such a small amount that it’s not worth mentioning).

Production, on the other hand, has remained flat. If more people are in work, it should have increased.

That is how we know we are looking at a con.

If more people are in work but production hasn’t gone up, we must question the incentive for this increased employment. It has already been mentioned: The lack of holiday and sick pay entitlement, National Insurance and tax admin obligations. The larger the employer, the larger the saving – but this doesn’t mean small firms aren’t feeling the benefit.

The minimum wage worker’s income is topped up by benefits – but the government is cutting these back. Landlord Subsidy in London won’t be enough for people on the kind of contracts described here to stay in their homes, and this means a consequent job loss if they have to move out of the area.

Tax credits are being removed; child benefit restricted. Universal Credit (if it ever works) will operate in real-time, adjusting benefits to ensure that low-paid workers remain in an income trap for as long as their wages remain below a certain level.

Employers reap the benefits. But even they are being conned, because this can’t last forever.

Imagine a Britain without in-work benefits but where the living wage has not been introduced nationwide (this will be a reality in a few years, under a Coalition or Conservative government). Workers on the self-employed, part-time or zero-hours contracts described here will not earn enough to survive.

Private debt will increase exponentially, leading to increased mental illness as the stress of trying to cope takes its toll on the workforce. Physical illness will increase as people cut back on heating in their homes and food in their fridges and larders. Result: malnourishment and disease.

What happens then? It’s hard to say. It may be that employers will take on increasing numbers of cheap foreign workers – but there is already resentment at the influx of immigrants from the European Union and this could lead to civil unrest.

It seems likely that the largest firms will leave these shores. If we compare them to huge parasites – and we can – then the host will have been drained almost dry and it will be time to move on and find another to treat the same way. These are the companies who have reaped huge rewards from tax avoidance, aided by the ‘Big Four’ accountancy firms – KPMG, Deloitte, PricewaterhouseCoopers and Ernst & Young – who have been writing – into British law – ways for them to get out of paying their share.

The smaller employers might keep going for a while or collapse; it depends how much their bosses save up for the inevitable crash. Deficit financing of their business will support them for a while but, if they don’t have any ideas, they’ll go under.

All because a few very greedy people just won’t pay a reasonable amount for a hard day’s work.

They get on the media, telling us they can’t afford higher wages. In that case, why are they even in business? If they need a workforce of a certain size, but cannot pay a living wage, then they simply should not bother. All they are doing, in the long run, is contributing to a monumental confidence trick that will cause immense harm to the economy and the nation’s health.

Of course, the UK did not always have in-work benefits. People used to be paid enough to make ends meet. We should be asking why that changed and who benefits. A return to that situation would benefit the country enormously – but it isn’t going to happen on the minimum wage, and it isn’t going to happen on zero-hours contracts.

It’s time to name these firms and ask bosses who employ on these terms why those contracts are necessary and why they feel justified in the damage they are causing.

And while we’re at it, it’s time to ask our MPs why they tolerate it, too.

22 thoughts on “The great wage con is keeping you poor

  1. Jon

    Look! It’s real simple. The definition of a “JOB” is just over broke.

    For the majority In this current system, all you can look forward to IF YOU’RE LUCKY is a European holiday once a year and a mortgage that at some point will break you!

  2. John B (@mork_ork)

    Personally I feel the minimum wage should be scrapped alongside in work benefits, I am fed up of subsidising company profits from my taxes, employers should pay a LIVING wage or go out of business, they not be subsidised to drive down wages and avoid taxes.

  3. Mam Bach

    Um, scrapping the minimum wage will not mean employers pay more. They would be allowed to pay less, and so likely would.

    I’m on less than minimum wage because I’m self-employed. So I get Working Tax Credits. New businesses do not spring into place with enough clients to keep me. So for all those advocating no help for businesses; thanks, should I go back on the dole?

    1. Mike Sivier

      I think they’re saying they want a living wage, rather than the minimum wage – then there would be no need for in-work benefits.

      I do sympathise with your situation, if you are not one of the self-employed contractors who work exclusively for another firm (I think it was Amazon, in the Dispatches doco) at a set rate per day. Those people are just employees under another name, and their employers have found a way to pay below-minimum wage.
      So, in the belief that you are in more productive self-employment, I think we can also believe that you don’t plan to be on sub-minimum wage income for the rest of your working life – right? You expect to build up your client list and eventually get past break-even point and into profit.
      ALL businesses have had to cope with such issues, and there are several known ways of doing so.
      Personally, I’m not averse to firms getting a little government help while they find their feet – it seems more practical, for example, to take a loan from the government and pay it back at a low interest rate, than to do so from a bank or Wonga.com, or whoever.
      If you’re serious about running your own business, though, you shouldn’t stay on the public pound forever.

      1. alison piearcey

        You’re right – eventually I do want to be keeping myself. We got a small lump sum, and were faced with either living on it for a coupla months or opening our own business. We tried the latter, cos it beats fighting for the jobs there ain’t! I used to teach in FE; the 30 closest colleges are all one firm, and they’ve ‘stopped employing’ 2000 staff in the last 5 years (That is to say, given zero hours, not renewed contracts, 2 ppl on half hours, reallocated office staff so three do five’s work etc. Class sizes of 50+ and I’m glad I got out) We craft liqueurs, and fudge

        It doesn’t help when I fight hard to get clients; and next month I go back and they’re cutting back or closing – because _their_ customers are all broke too. It all goes down the line to ‘where did all the money go?’ When we lived in Sheffield in the 80’s it was called Mill Economics – when the steel mill shuts, so does the pie shop and the pub who rely on them. These days I know it as written up by Keynes, but it still begs the same question.

        BTW Anyone who fancies a drink, drink in your local! They might be our customers:)

      2. Mike Sivier

        The money is sitting in offshore bank accounts belonging to the large corporations, shareholders in those corporations, and other rich tax avoiders – and in investment funds belonging to firms up and down the country that do not currently wish to invest in its people, for reasons of their own (greed).
        The UK government could have exercised the tax system to redistribute some of this money into investment in businesses like yours – or the larger firms that would sustain you and your customers. Successive administrations have chosen not to do so.
        You are right – lack of government investment (and the withdrawal of in-and-out-of-work benefits) means there is less money available and more businesses will go to the wall. In rural areas like mine, the potential result is devastation, with villages emptying as they become unsustainable.

        So, what are you going to do about it? Bear in mind that a lone voice will not gain credence with those in power. You should try to form alliances.

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  5. reecemjones

    Reblogged this on Braindroppings and commented:
    Working in an industry where this is common and having an employer who thinks just this, I can tell you the minimum wage is necessary to stop us all become more than indentured serfs again.

  6. Thomas M

    We need strong trade unions again that walk out at the slightest bad treatment. In France they know how to bring things to a standstill. Here, we either do nothing and take the abuse, do marches that achieve nothing, or violently riot and smash everything up, hurting innocent people and small shops in the process. Bad bosses should be given a chance to mend their ways, and then boycotted in their home towns like Captain Boycott was, so they have to go miles to buy food. There are ways to change things without crossing the line into genuine terrorism.

  7. wake-up-uk

    I always thought its ridiculous that we can work all full time and still not have enough to live on, however having recently started a restaurant business, with the intention of paying people above the minimum wage I’ve realised that the problem is not so easily rectified as simply raising the minimum wage. With massive VAT bills, employers NI, Business rates & utilities bills it simply isn’t possible to pay staff more, my business is reasonably busy and all our ‘percentages’ are in the right place according to ‘industry standards’ but with massive tax bills we can’t even make a decent wage for ourselves. Raising the minimum wage considerably (which it should be to give everyone in the country the right to a decent standard of life) without reducing the tax and utilities bills would simply mean reducing staff hours, meaning that they would also have to work harder on a skeleton crew, so less employment and harder work, other than that – of course we can go bust, but what happens then? A small business that actually contributes to the local economy goes, and a chain that can afford a raise in minimum wages moves in? I’m all for raising the minimum wage, but it can’t be done alone, taxes and rates need to be reduced, and spent more productivly, about 70% of council taxes and rates are currently ending up as profits for ‘outsourcing’ companies employed by our councils, and the government waste about the same paying just 4 private companies to do their work. THIS is the key – local and National Governemnt need to stop wasting money (or lining their own pockets as shareholders of these companies), educe taxes, and THEN increase the minimum wage. Actually I said it’s not so simple – but I was wrong – it is.

    1. Mike Sivier

      Okay, well your utility bills are set by private companies because the utilities were privatised during the Conservative governments of 1980-1997 – so my guess is you’re not likely to be voting Conservative in the near future, right?
      VAT was similarly hiked up to never-before-seen levels by the current Conservative-and-Liberal-Democrat coalition government, so I’m guessing you won’t be voting Liberal Democrat in the near future either.
      National Insurance is currently paid in an extremely regressive way – above a certain wage level it is paid at just one per cent per person. If you disagree with paying a high percentage on low wages, then you’ll be campaigning for more progressive rates, I hope.
      The Uniform Business Rate was brought in (again) by the Conservative government of 1987-92 and is set by central government. There were plans to vary it in Local Enterprise Zones but I don’t know what became of those. Once again, I imagine this means you won’t be voting Tory.
      I agree with you about outsourcing by councils and central government. Also you should be aware that taxes are paid disproportionately by small-to-medium sized enterprises because the larger firms can take advantage of the tax laws written for them by the ‘Big Four’ accountancy firms that are currently working the Treasury like a sockpuppet.

      Bottom line, though, is that nobody in power is going to listen to a lone voice in the wilderness. What are you going to do about THAT?

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  9. robert doyle

    The trouble with the minimum wage is its become the maximum wage…. this is all we have to pay the goverment will make up the rest…. plus the worker wont fight for a higher wage because the goverment will make up the rest…… yes a living wage should be brought in…. but this will be pointless if a system isnt put in place where it rises with inflation plus 1% every year or we will just end up where wr are now in a few years…

    1. Mike Sivier

      Inflation PLUS one per cent, is it? Hmm.
      When you say “the government will make up the rest”, you know you mean the TAXPAYER will make up the rest, yes?
      You’re right on the money (sorry) when you say the minimum wage has become the maximum wage for many businesses who can and should do better for their workers.

  10. Smiling Carcass

    Minimum wage is a con, plain and simple. We didn’t need a minimum wage in the 1970s. Why? Because we were damned Bolshie and had the unions to back us.

    Employers use minimum wage as an excuse to pay just that, despite their ability to pay more.

    A saying from those days long gone was ‘if you pay peanuts, you get monkeys’.

    Employers had to pay decent wages because if they didn’t, you’d literally go next door and start your new job the next day.

    As a shop steward for the now long-gone but excellent AUEW (Amalgamated Union of Engineering Workers) one of the arguments used to hold wages down was people can afford to live on what we pay because of the high level of absenteeism on Fridays after the Thursday payday. My argument was they can afford to take that day off because they are losing little; pay more and they’ll come to work because it will benefit them.

    If a minimum wage is a necessity, it tells us that employers refuse to pay a decent wage and that the worker has no ability to take the matter into his or her own hands thanks to weak, white collar unions that absorbed the powerful and pro-active blue collar unions. ‘Unite’ and ‘Unison’ just does not have the same impact on a gaffer as ‘Amalgamated Union of Engineering Workers’ or ‘Transport and General Workers Union’ used to have, the very mention of which would have a boss quaking in his boots.

    And it isn’t just wages; it is respect. Bosses were obliged to be respectful and I always insisted the workforce show a similar respect.

    Nowadays, just like the unions, we’re s*** to be scraped from the gaffers bank balance.

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  12. bikeman

    The minimum wage needs to be raised to a level where the wage bill of employers no longer needs to be subsidised by tax payers ie alleviate the drain that is working tax credits. I don’t subscribe to the claim that raising the minimum wage will result in job losses; companies who are not prepared to pay more and accept less profits will be replaced by others who are. Yes there will transition of pain but the short term impact of a raising of the minimum wage can be shouldered by large business by rolling this out on the basis of turnover. Tesco’s etc will bleat but ultimately they will either accept it or be replaced by another.

  13. bikeman

    And one more point, the minimum wage was originally set to counter exploitative employers yet all it has done is provide a lowest common denominator for all employers to exploit.

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