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.

If NMW is increased, other wages have to increase, too. If they don't there is no incentive to take a job with more responsibility.

As a result of all wages rising, price inflation would have to follow. Where a loaf of bread cost 1/6 of an hour of NMW, it would suddenly cost 1/6 of an hour of NMW+20% (or whatever).

No one ends up in a better position. Yes, there's 20% more coming in but there's 20% more going out, too.

For people saying Tesco et al could afford to pay much more than NMW, yes they could. But then what? If they start paying £10/hr for NMW jobs, very quickly the current people in the Tesco NMW jobs will find themselves out of work because Tesco's higher wages will attract people capable of more than the people previously employed in those jobs.

Don't get me wrong, I think it would be far, far preferable for NMW to be at such a level that people could actually live on it. It's just not a simple problem to solve.

How about the concept of a maximum wage eg that the CEO of a company is not allowed to earn more than 10X the wage of the lowest paid employee? Because there has to be something a bit wrong with a company that pays the unskilled staff £10 000 a year but the directors £2,000,000 a year. The directors can't be working 200 times harder than the staff.

Totally agree Solid.

Perhaps it comes down to where the greatest number of people on NMW are employed?

Tescos probably doesn't care hugely about whether it pays £6 / hour or £9 / hour. They've got to employ a bare minimum number of

Jo Bloggs with a start-up company that consists of herself might well decide that she'd rather risk not taking on another person.

If Tesco employes more people than all the Jo Bloggs's put together, then raising the NMW is probably a good thing.

This is fucking rediculos. NMW at 40h a week is take home pay of £965.

Are you telling me that a single person can't live on that a month? Very nice room and bills in a nice shared house in a nice area is around £400, in Leeds for example. Leave over £100 a week for food, clothing and transport.

Minimum wage jobs serve a purpose.

Zero hour contracts are a whole other issue though.

Hmmm I can't spell

Solid that is an awful idea. CEO of a massive company will have worked for many years, taken many risks, made many sacrifices of their time. Put work above family and friends and be operating at v high stress levels. Constantly dealing with decisions which will affect the livelyhood of hundred/thousands of other people.

And you think they shouldn't be allowed to be paid more than 10x some 22 year old guy who comes in for 8 hours a day stacking boxes? Um. Yeah.

Tell you what, while we are at it lets have EVERYONE paid the same. And have everyone live in the same standard of homes. Communism worked out so well for other countries :-)

Personally I like the fair pay ratio (nobody earning more than 10x more than the lowest paid employee). It was proposed by the New Economic Foundation and has had a reasonable amount of backing I believe.

10 times what someone else is earning is a big salary, particularly if the company pay their lowest earners at least a living wage, which outside of London is about £15.5k, and in London is around £17.5k. 10 times that is £150,000 plus. Nobody needs to earn more than that in a year.

Comparing it to communism is ridiculous.

NMW is roughly the same as the amount I earned 20 years ago when I was doing secretarial and retail jobs in London. Obviously I had brilliant typing skills and I could fold jumpers very well (still can) and wasn't at the bottom of the pay scale, but I wasn't that far off. You could buy a 1 bed flat in a nice area then for about £60k

Maybe there could a local minimum wage in London which would in turn encourage employers out of London?

No-one could make the idea of a wage ratio fly in the UK.

The NMW should go up so the Govt. doesn't, in effect, subsidise company profits with tax credits

The other issue is that the higher up a business you go salary becomes less relevant and ownership e.g. Shares and dividends become more relevant.

Re: house prices, historically low paid workers have been provided with houses by their employer/the state. Isn't a large part of the discrepancy between wages and housing costs in London due to the state relying on private landlords rather than building houses/having available housing stock?

NMW rises:

1.Foreign manufaturers who use British labour will pull out of the market to use cheaper labour else-where leaving workforce unemployed.

1. Small business will not be able to employ as many people, business will run with fewer, more stressed staffed, and eventually fail.

1. The owners who have invested money and hard work into their businesses surely deserve some payment for doing so, and providing employment for other people? NMW will mean that less people are inclined to this and start-ups will be rarer causing less new employment.

Where is the money to pay NMW to come from?
I can't see how NMW will do anything apart from drive more British people (including small business owners) onto the dole queue.

The universal credit idea mooted earlier is a very interesting one, I'd love to see it in action.

But an increased NMW wouldnt increase the amount of money in somebody's pocket. It would just increase the proportion they received as salary and decrease the proportion they received as benefits.

Higher earners might lose salary, but the tax burden would also be reduced (or tax money spent in other ways). It's more about changing the way the money flows in the economy than changing the amount of money in the economy.

This^^

If this happened people would get a fair wage and would have to decide how many children they could afford to have based on that. There wouldn't have to be working tax credits to subsidise low wages, there wouldn't have to be child tax credits that result in people getting paid more money based on how many children they have. Childcare could be subsidised to enable working parents to continue to earn, and people wouldn't find themselves unable to afford to work when they have children.

I realise we are talking about an ideal world here Darkest, but when you have a conversation about raising NMW, you are already doing that anyway.

Obviously it is an idealized conversation, but when nmw was introduced lots of people thought the economy would be fucked and it wasn't.

In practical terms in order to support small businesses like the ops through changes we would also need to be made to employer ni.

More support for groups of people to support businesses would also be helpful - if semi-skilled labour is integral to your business getting started, maybe a package could be offered of shares and a proportion of nmw. Obviously we need to be restricted/regulated to insure that it was only small starter businesses this applied to.

I also support the idea of a pay ratio although I realise this would be very unlikely to go ahead!

There is very poor understanding of the profitability of businesses.

If you run a business with many hundreds of employees and, as CEO, you take home £300,000 a year while most of your staff are on NMW for semi-skilled work and your business just turns a profit, there is nothing unfair about that. You are providing secure employment for many hundreds of people and even if you gave them half your own income it would barely make a difference to their lifestyles.

Whois: do you really think the head of a company works two hundred times harder than an unskilled employee? The difference between earning £15000 a year and £150000 a year seems to me to be a reasonable one.

The issue isn't about who works harder but about who adds more value.

Despite the more intelligent responses (than mine) I still have to say that

there is something very wrong with a min wage that is not enough to live on without governmental help.

I think many posters would be surprised to learn of the jobs that pay MW. The workers actually have to be skilled.

its not just packing boxes , or stacking shelves.

I think that we're looking at it in the wrong way - we keep talking about how the people currently on NMW hould be paid more, and the business owner should be paid less.

Why don't we look at getting those people who currently are on NMW to set up their own businesses, just as the OP did?

We've all agreed that the people on NMW are competent, intelligent, hard-working people, with the skills to contribute to a business - why shouldn't that business be their own?

Why shouldn't they earn their own salary of £20k or 40k or 60k from their own independent business, rather than working for someone else?

I don't think everyone is capable of that though grendels :)

My DH is a fantastic employee , but would struggle with being a boss/setting something up.

Not everyone is cut out to manage.

Being a boss is like a talent (almost) we are not all born with that skill.

We have both been self -employed in the past, however, it just became too risky when we had a family.

Grendel - because you cannot save a start-up fund on nmw, and banks are extremely reluctant to lend to new businesses. Thus us an ongoing problem that the government is not doing enough (or much at all really) about.

One of the real problems though with the current system of tax credits is that it is leading families into underemployment. Many families do not work the maximum they could, with both on the NMW at all. There have been two illuminating threads yesterday, in which the OP revealed that in a household of two adults, they only work 20 hours a week, another thread reveals people living apart though a family so as not to lose tax credits.

So many people are not getting the NMW anyway as they are deliberately working less so as to get their benefits. Surely part of the responsibility is on them to work longer hours as a household (like most people do when they don't have enough money). How much would the NMW have to go up if people are only working 20 hours, or living apart to look poorer?

Exactly feminine - risky. Another major factor in why bosses should be paid more. Paying bosses 10x the workers salary is in my opinion an awful idea. My workers don't have to go into work and cover on Easter Sunday because someone else has gone sick. In fact, they can go sick - bar life threatening illnesses if you run your own business you don't have that option. I think profit sharing is a much more viable alternative.

On the nmw bit - we run a small business that employs a few part time workers on just above nmw doing unskilled work producing a food stuff you all consume in one way or another every day. Would you be prepared to pay more for it in the supermarket? If so fair play but I see a lo of threads on here worried about the rising cost of fuel. We also chose to employ local people on school hours because we thought it would help locals and fit in well with our business.

Sorry food not fuel.