To wonder why people think "raise the NMW" is the answer to poverty?

[windowwashingbanshee]

Without wanting to refer to another thread too much (...), I did at seeing yet another comment about raising the minimum wage being the answer to poverty.

I'm a small business (co-)owner. Five of our permies are on NMW, the starting point for all employees, with potential raises; having worked on NMW for years myself, I'm a firm believe of retaining people, rather than just hiring cheaply (too short-term thinking for me). Nevertheless, whichever way you look at it, we need fairly unskilled labour - it's warehouse work - packing, sorting, bagging, and preparing labels for shipping. Our work is fairly seasonal, with dips which are mostly predictable. When that happens, and orders are low, I normally focus on doing other things - making sure people are up to date on their training, we usually have a volunteer day which everyone can opt into, permitting extra-long holidays, and so on.

However, in those times we barely break even some years. And although the balance of the busy months makes us profitable overall, I know I'd face huge pressure to let one or two employees go every year if the NMW was put up to a "living wage" suddenly, depending on the length of the dip, or move to some sort of zero-hours contract situation, which I don't want to do.

I'm not sure I'm explaining it properly - but basically I can afford to keep under-utilised employees on full-time in quiet periods if they're paid NMW right now. If I had to pay several pounds more per employee, us "just breaking even" would tip into "making a loss", because the productivity of those employees wouldn't be worth the £8 / £9 (or whatever) it had been raised to.

So, AIBU to think that the posters who claim that "raise the NMW" is the miracle that would end poverty in this country are being quite short-sighted? It seems that way to me.

[cantspel]

1 35 hour week on mn before deductions is £11265.80 Or just over £216 per week. This would be livable if you were lifted out of paying tax and national insurance. So the answer has got be be lift anyone on mn wage above the tax and NI threashold.

[TeddyBare]

OP you haven't really explained why I, and all of the other tax payers in the UK, should pay your employees. As your business is getting the benefit of their work then it makes sense that you should be the one to pay for it. It sounds like you could probably re-work your business plan a little to save some of the profit from the busy times to pay a living wage during the off-peak times. You might not want to reduce your profits but that doesn't make it morally okay for you to foist the cost of paying your employees onto the tax payer.

[RubberDuck]

Has everyone seen this video that went viral regarding wealth inequality in America (it wouldn't surprise me if the same was true in the UK as well)

What shocked me was just HOW badly wealth was distributed and how much more complex the problem was. Living Wage/NMW issues are really just the tip of the iceberg.

[mumandboys123]

because:
a) there is a need for unskilled people to do 'easy' work such as cleaning, packing, sorting, bagging. Such people do not deserve to be treated like second class citizens or told they 'should have worked harder' at school if they wanted a 'decent' life.
b) people doing unskilled work at at least 40 hours a week should be afforded a decent standard of living which includes keeping a roof over their heads and being able to afford a small family.
c) 40 hours a week on NMW in most areas won't keep a roof over the heads of a small family, let alone feed them.

I have owned a small business and paid wages. Giving serious tax breaks to small business would be one solution.

[currentbuns]

It's all very well asking if I pay myself a director's wage, but a 'yes' or 'no' answer isn't going to cut it, because you need context for that. I believe last year my wages were just shy of the 40 grand mark, if you want a (totally meaningless, without that context) figure though.

Well, it isn't meaningless, really and your response is rather revealing. You believe you deserve a decent wage because you work hard, but are unwilling to apply the same standard to your employees. I agree with the other posters who said that if you are unwilling or unable to pay your employees a living wage then the business probably isn't viable.

[DorisIsWaiting]

IYABU

^^what Teddybare said

If tax credits were removed the government may be able to cut further taxes that small business pay. As it is people are too afraid to earn to much (and end up poorer) and business is not funding itself.

[MoreBeta]

window -I have miuch sympathy with your position an dit is widely beleived that raising NMW woudl cause unemployment as employers would cut staff.

However, that analysis does not acknowledge that if all employers had to raise NMW then your competitors costs would go up as well and not just yours. Hence you would be able to raise your prices to cover those costs wiothout losing business.

I have come to the conclusion that actually raising NMW is one way to ensure that people at the bototm of the ecponomic pile get a fair share of the economic growth in this country.

However, my better solution is get rid of NMW, get rid of tax credits and get rid of all benefits and just give everyone a universal benefit every month as a flat entitlement whether in work or out of work and regardless of how rich or poor they were. That would actually cause all wages to rise as some people would simply choose not to work and instead live on their universal benefit while others would work but demand a wage that was commensurate with their desire to work and their cost of getting to work, work clothes and childcare costs.

No one would be compelled to work though and hence employers would be forced to pay a wage that was high enough to attract employees into working.

NMW, tax credits and benefits cause huge distortions in the labour market. It sounds very counter intuitive but a universal benefit paid to all would cause employers to pay higher wages and get rid of the implicit subsidy that tax credits gives to employers who can then pay a below 'living wage' as a result.

[MoutardeDeDijon]

If you cannot pay your full time employees enough money for them to live on then your business is not viable.
It makes no sense at all to support a system in which the government has to top peoples' wages up with tax credits.

[Feminine]

While we lived in the US , my DH did a job that would be paid min wage here.

In the US he was paid twice the min wage there (around $8)

Although it was skilled, it was a very lowly job.

We didn't need any extra assistance from the state.

[Feminine]

He was paid $16 to clarify.

[JuliaScurr]

all other workers are subsidising your profits

[Feminine]

morebeta I totally agree.

A payment for all would be so much better.

I really think it would be fairer.

[mrscog]

Interesting thread. I would agree with the posters who have said it's not that wages are too low, it's that the costs of living are too high. Not much hope for fuel or food as they are resources which are having to be shared more and more across the world. Every government's objective should be to cut the cost of housing by 50%, it would help people's wages go further and cut the cost to the state of housing benefit massively.

I personally don't think raising the MW would help long term - it would just cause inflation and then we'd be asking for another living wage in 10 years time.

I own a small business with DH, we don't make enough money yet to pay ourselves the NMW, hopefully one day we'll be in a position to employ people. Given the lack of opportunities for decent employment I do think it's a bit harsh of people to say that if you can't afford a living wage your business is not viable - long term maybe, but while you're starting up, you are giving someone the opportunity to develop their own skills. There are lots of people who could afford to be paid NMW - students, people who have a partner with a higher salary etc. And if this is the sacrifice of developing a business where after 5/10/15/20 years you can employ more people and pay better wages then so be it.

Should big businesses be able to pay NMW and not pass profits back to staff - probably not. But then I think more people should be encouraged to buy shares - a Tesco worker on NMW could buy shares to share in the profits of their labour that way. I'm not saying this is possible or easy now, but it could be a laudable aim.

[Darkesteyes]

Sorry but i dont see why there is the expectation that childless people should be able to manage on minimum wage.
Childless people get working tax credit too because NMW is not enough to live on.
Childless people are struggling the same as everyone else. Especially if some are trying to support an ill partner on a low wage.
Its a bit blinkered to say that childless people "should be able to manage" As a childless person i have voiced my support for how hard it is for parents in these tough times on these boards many a time. So its not like i cant see the bigger picture.
Childless people who are signing on are expected to look for jobs with a 90 min travel time and pay those fares all on minimum wage. Im a childless person who thinks that working parents have it hard. But everyone in this climate has it hard including those without children.

[ChestyLeRoux]

If wages went up though most people couldnt work as the more you earn the less childcare you get. Unless we have state funded childcare then most people will continue to need tax credits/universal credit.

[ethelb]

OP I think you are getting a bit of a hard time on here tbh, and this thread is showing up a very negative view many people have of employers. I think this is deeply unfair.

No you shouldn't have employees if you can't afford to pay them NMW (I'm a sole trader myself and won't employ people until I can), but at the same time I do think people on here need a bit of a heads up about the personal financial risk small business owners take on in order to provide other individuals with a steady income.

And well done you for refusing to use zero-hour contracts, which are far more pernicious imo than any other threat to low wage workers imo (speaking as one myself!). I also think people on here need a real heads up about how much heads of business earn. A 3-4 multiple of NMW for a co-owner of a profitable business is a sensible salary.

In my last job the head of my department (didn't even own the business) was on 10x my salary, and the owner x100.

Surely the OP is running a far more sustainable model?

[CloudsAndTrees]

Childless people don't have dependants to feed, so obviously their costs are going to be lower. Adult dependants should have income in their own right if they cannot work, so I don't think it makes any sense at all to say that childless people can't manage on less than those with children. Of course they can.

But if childcare was more heavily subsidised by the state, then more people would be able to afford to work.

There really shouldn't be a need for tax credits. Wealth in business needs to be distributed more easily, and businesses that can't financially afford that should be subsidised. It's ridiculous that employees of companies that are large and extremely profitable have to be subsidised by tax credits. The company needs those people to be able to make its profits, so they should be paying a wage that can fully support an individual and a child, without the need for taxpayers to chip in. If the taxpayer has to chip in for the company to be able to exist, then it should be done through the company with subsidies and tax breaks. It should not be done through the individual.

[ethelb]

@chesty one would hope the threshold for help with childcare would go up to! (Not holding my breath though).

[HappyMummyOfOne]

Some jobs dont need any skills so simply cant command a high salary. Those jobs that need expertise etc would raise to stupid amounts if unskilled workers wages increase dramatically.

Raising NMW would see many more made redundant. Better to increase personal tax allownces to say £15k and abolish top up benefits.

Too many people cant survive on their household income as they have an adult who doesnt work, work part time or have children that they had no way of affording. Its always somebody elses fault though.

[bigkidsdidit]

Morebeta, do any serious political parties endorse that idea? It sounds really interesting

[ChestyLeRoux]

I think that would be the best thing ethelb then there would be a point to making a higher wage unfortunately at the moment it often doesnt make financial sense.

[ethelb]

@chesty but I think the very low thresholds this governments and the last government put for ANY help are a separate issue (and rant!). It's not really something the OP is responsible for.

[ChestyLeRoux]

No but thats why even if you offered me more money I would say no. I wouldnt want my wages to go up whilst the children are young as I would be worse off. Many people are in same boat, and so lots of people benefit from minimum wage.

[ethelb]

@chesty ar tax credits based on hours worked per week or take home? Or are you talking about child benefit?

[ChestyLeRoux]

Tax credits are based on take home if I had a better paid job I would get less childcare help so I wont do it. Nearly every family I know is in same boat so thats why I much prefer the current system than raising minimum wage and abolishing tax credits.