Tag Archives: FT350

Are wages too low, or is the cost of living too high? Or both?


How pleasing it is to see the Archbishop of York agrees with the view, long-held by Vox Political, that British workers should be paid a living wage, and that the taxpayer should not be subsidising big business!

Archbishop John Sentamu is to chair a year-long commission investigating the need for a living wage. In The Observer, he wrote: “The holes in millions of paycheques are being plugged by in-work support to the tune of £4 billion a year. But why aren’t those who are profiting from their workers paying up? Why is government having to subsidise businesses who don’t pay their employees enough to live on? It is a question we need to answer and act on – fast. The cost of living is rising but wages are not. In the rush for profit, and for high pay at the top, too many companies have forgotten the basic moral imperative that employees be paid enough to live on.”

This is a sentiment that Vox Political wholly supports.

Needless to say, there are also detractors. A commenter known as ‘neilcon’ pointed out: “The high cost of running a small business in this country is one of the main reasons why the hourly rates are so low. If you employ someone at £8 you then have to pay a further 13 per cent to the government in employer’s National Insurance contributions for the privilege of employing someone; you have to supply that person with suitable equipment for their work.” The commenter reeled off a few other business-related expenses before going on to “the issue of the banks utterly refusing to lend to small businesses, the high cost of renting office premises, business rates on your office premises to the government, the high cost of VAT, together with clients trying to squeeze the final price as much as possible and the very late payments by bigger companies.

“The real cost to an employer of an £8 per hour wage is calculated at about £15 to the business.”

I can sympathise with this sentiment. It doesn’t let off the bosses of larger companies, who have huge salaries and no excuse (FT 350 companies, for example) but they might have a reasonable excuse for not raising pay, if smaller companies say they’ll go out of business if the higher cost is forced on them.

But the simple fact is that the cost of living is too high and – if they had to rely on wages alone – millions of working people, up and down the country, would be unable to pay their bills…

… leading us to a recent blog article by our old friend Michael Meacher MP. He points out that our privatised utility companies are forcing every one of us to pay – through the nose – for substandard services.

He wrote: “More than £100 a year of an average household [water] bill, that is about 30 per cent, goes on profit, compared with 9 per cent in the energy sector which is itself known for egregious profiteering.

“In the last 10 years, water bills have risen by a massive 64 per cent, compared with an increase of just 28 per cent in average earnings. In the last three years alone, average earnings have fallen by 7 per cent while water bills have continued to rise remorselessly. There is no competition in the water industry and the only potential constraint is the industry regulator, but he has chosen to succumb to corporate lobbying in allowing water bills to continue to shoot upwards to feed fancy executive bonuses and big dividend handouts.”

The last sentence tellingly brings us back to the huge profits taken by executives. It seems that a few things are going on:

1. The privatisation of the national utilities – water, electricity, gas (and, some would say, telecommunications) – has failed in its stated aims, which were to democratise capitalism by making it possible for everybody to be a shareholder, to keep bills low, and to end government subsidies for these organisations. Instead, shares have been drawn into the hands of a very few rich investors, bills have risen far beyond wages, and government subsidies have either increased massively (rail) or companies have used the tax system to avoid paying the amount due on their profits (Thames Water and its ‘super sewer’).

2. Company bosses, keen to drive up their share prices in order to create larger dividends for their shareholders and higher salaries for themselves, have successfully held wages down in order to achieve this. As ‘neilcon’ pointed out, lower wages mean less spending on National Insurance, meaning that keeping the employee payout down by pennies per person leads to many pounds in increased revenue.

3. The government is unwilling to do anything about this because it wants to keep wages depressed as much as possible. This is the reason it has cracked down so hard on benefit payments – not because of fraud (which is minimal) but in order to create an urgent need among the unemployed to find work, and terror in those who have jobs that they could be replaced if they complain about the increasingly meagre pittance on which they are being told to survive.

There are many subtle sub-consequences as well. You may wish to raise some of them in the ‘comments’ column.

What’s the answer?

This may come as a surprise, but the best place to start might be with the private utility companies. An ultimatum to put their houses in order and charge a reasonable amount, rather than extorting money out of a captive clientele, might produce results – especially if the alternative is re-nationalisation.

This might take the pressure off the smaller private companies by actually reducing the amount calculated as the living wage; with lower utility bills, the amount of money needed for a working person’s survival will also drop.

If the government and the utility companies got their sums right, this could mean the need to subsidise working people’s pay would be wiped out, meaning a large saving on the tax bill. Feed this through to working people in the form of a tax cut and, again, smaller private companies would benefit (along with everybody else, of course). An alternative of using the money to help pay off the deficit would be unhelpful – we need more, and healthier, businesses in this country, employing more people. Get that sorted and the deficit will come down in any case.

On a completely different tack, what about Landlord Subsidy (otherwise known as Housing Benefit)? Why not put a cap on rents, thereby ensuring that the government is not subsidising the rapidly-increasing pace of (some) landlords’ greed?

Unfortunately, this is not likely to happen under the current Conservative/Liberal Democrat Coalition government – and it seems the Parliamentary Labour Party is to keen to become the Plastic Tory Party to take a stand; it will be up to its backbenchers and the party’s grassroots members to force a policy change.

At the end of the day, wages might still have to rise, due to matters unforeseen in this article.

But a plan that acknowledges the mistakes of the past and aims to redress the shocking way that the supply of money has overbalanced to favour a tiny minority – to the detriment of the vast majority – would constitute the first steps on the way to a nation that can not only provide Archbishop Sentamu’s living wage, but also help our struggling small businesses.

(The first Vox Political collection, Strong Words and Hard Times, is now available and may be ordered from this website)

Benefits v bonuses – everybody’s a loser!

As I type these words, this has been a day of defeat for the government. Its bid to cap benefits at £26,000 – forcing some families to face the prospect of losing their homes – has been defeated by the Lords, while in the Commons, MPs totally failed to cap the spectacularly high amounts paid to (for example) bankers.

The link between the two is the average amount of pay earned by workers in the UK today. The government says this is £26,000, which Tory MP Margot James seems to think is a large amount of money. I wonder how she describes the current average salary for an MP like herself, which is £65,738, two-and-a-half times as much. In addition, MPs receive allowances to cover the costs of running an office and employing staff, having somewhere to live in London and in their constituency, and travelling between Parliament and their constituency – and we all know that no MP has ever – ever – abused those allowances, don’t we?

The fact is that on a day when the Royal Bank of Scotland has been asking the government to allow it to pay bonuses worth £500 million to staff who have put that firm into the red by £750 million in the last six months, £26,000 is not a high figure. It is a derisory figure. A pittance.

People on benefits, and those speaking for them, have argued that this figure will not be enough to keep many of them in their homes. That is why the Lords voted to exempt Child Benefit from those included in the cap – in order to offer children a stable environment in which to grow up.

The question arises: If it isn’t enough to keep families on benefits in their homes, how do working people who are earning less than this amount manage to make ends meet?

My own experience colours my answer to that: Very badly. When I was last in a full-time job, the salary did not cover all my outgoings and I had to give it up for that reason. Simple as that. Fortunately my partner finally succeeded in a years-long battle to claim Disability Living Allowance shortly afterwards and I became a carer – and we’re better off that way. That’s not an indictment of the welfare and benefits system; it’s an indictment of the way wages have been depressed below the rate of inflation for the last 30 years or so.

I’m told the firm lost business after I left. To me, that indicates a lapse of judgement in allowing me to go, and that bosses might have been better off if they had offered me a sum that would have allowed me to go on living comfortably, rather than worrying about a long, slow slide into debt (to the bank! where the bonuses happen).

I would rather be in a paying job than a carer. I don’t believe I’m betraying my partner, who needs the care, by saying that. But I don’t believe I can earn the amount we would need, in order to get a better quality of life, for her or both of us.

What’s the solution? Obvious, really: pay working people the living wage they deserve!

If the average wage was a reasonable amount (and I feel no need to bind anyone’s thinking here, so I won’t suggest one) then, firstly, the poor working man or woman would not feel so hard-done-by, with people on benefits pulling down as much as them or more yet having done no work for it, and bosses taking home obscene amounts generated by the efforts of other people.

Those on benefits would have less reason to feel victimised because the average amount at which their benefits will be pegged would be high enough for them to survive, and possibly even enough for them to think about how to get back into work and earn more money for themselves and their families (if they have them), rather than focusing solely on survival.

All this hinges on the bosses who, as we know, are extremely reluctant to share out the profits they haven’t earned for themselves. I have no sympathy for those on obscenely large salaries and bonus schemes – those in FT350 companies whose salaries have multiplied seven times in the last 20 years, while the firms’ performance has improved by only 23 per cent and the wages they pay their workers has risen by just 27 per cent (less than the rate of inflation). They can take a smaller slice of the cake and put up with it.

But what about the bosses of smaller firms who might be struggling to keep their heads above water? They might not be taking very much more than their workforce. What’s the solution for them?

To my way of thinking, they need to be competitive, and a demoralised workforce does not make a business competitive. Also, they need the tools to do their job properly and I can foresee a time when the economic situation will mean their equipment will be out of date.

Perhaps this is a time for the government – either local or national – to come forward with a match-funding scheme of some kind to keep these firms on their feet; but with one major condition. The companies should re-form into co-operatives, in which every worker has a stake in the profits. This would re-fire their enthusiasm and, hopefully, improve performance, leading to a knock-on increase in wages and bonuses that are not unearned drains on resources but based on real profit.

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