To think if your business can’t afford to pay employees a living wage then it isn’t a viable business?

[tequilasunrises]

I see so many posts on here along the lines of ‘my/my DHs business couldn’t afford to pay people anymore’, usually defending NMW being so low.

I think that if your business isn’t making enough to be able to pay its employees a proper living wage (ie they don’t have to claim benefits on top or live in poverty) then it isn’t a viable business?

People having more money to spend can also only be a good thing for the economy and businesses surely?

AIBU?

If your employees need state benefits to live on because their wages are too low, then your business and any profits are state subsidised. Either you're greedy (profiting off state funds, basically a rich 'benefits scrounger' - I'm looking at Amazon, Tesco etc) or your business is not actually viable (no profits, everyone in the business is hand to mouth and needs benefits to top up their salary to above-poverty level).

If you're in the second group (non-viable business) but your business benefits the community/society in a useful way then I'm not fussed. If you're in the first group then I am angry.

(I work for a business in which everyone is paid above living wage, and is private sector.)

I don't think it is quite as simple as that though, nothing ever is really.

In my example I wasn't talking about eg everyone in payroll leaving and then just being replaced. I mean if that job wasn't done at all, by anyone. And a lot of people do sneer at admin jobs. Particularly accounts related jobs. Even highly qualified accountants are looked down on by other people in business, often labelled as petty bean counters.

Also, companies are constantly complaining that they can't fill low skilled jobs because no one wants to do them. If market forces accounted for all pay decisions, then those jobs would pay a fortune, since there is a scarcity of people to do them.

I used to be outraged by the unfairness if executive pay until I stumbled on this analysis question posed by a economics professor. "The question should not be whether the CEOs should take huge salaries, the question should be what value are they bringing to the company that the company is willing to pay them those amounts." That CEO is responsible for over 224000 peoples livlihoods and £2.153billion in profits. His salary Vs the profits made is a drop in the ocean to the board who decide his pay.

I see the rationale behind that, but another way of looking at it is that those 224000 people whose livelihoods he is responsible for are also responsible for doing 224000 jobs without which he would have no profits to oversee or be responsible for in the first place - nor his own job, of course.

Some CEOs/bosses do a brilliant job at keeping everything together, but there are plenty who went to the right school and university, know (and are happy to brown-nose) the right people and have a grossly inflated impression of their own importance.

At our local hospital, there is a car park designated and reserved for the 'essential workers'. Doctors, nurses, lab staff, porters, catering staff, receptionists etc are not allowed to use it. It is for the managers. The same managers who will frequently send emails referring to 'close of business', meaning 5pm Monday to Friday. Aside from the fact that the NHS should not be a business, they clearly don't have a clue as to the importance of all of the staff that make it a hospital in the first place, let alone the fact that a hospital never actually closes.

People often say that charities need to pay a fortune for their CEOs as they're responsible for overseeing a vast amount of money and that the ordinary folk on the street just couldn't understand how crucial their skills are. That would be the same ordinary folk who, in their millions, have actually given and/or generated the money in the first place for the CEO to oversee.

But as I said, I'm not actually trying to argue that payroll staff should earn the same as the finance director, or that HR admin should earn the same as the HR director. Just that I think the more junior jobs are often undervalued.

@ oakmaiden raising 223542 wages by 1.80 an hour would not cost 15 million
assuming they work on average 25 hours a week (53 weeks a year) as lots are part time it is 223542 x 25 x 1,8 x 53 = £533,147,000 or 0.5 billion ie just over a quarter of pre tax profits or a third after tax
corportation tax is 28% of 2.153 billion so 1.53 billion

I'd be very interested to know how many of those were tiny/modest/struggling businesses as opposed to the huge ones with very clever accountants who can use every loophole going, offshore accounts and just-legal avoidance techniques to minimise the tax liability to an absurdly low amount.

"Small and medium-sized enterprises–or SMEs for short–are extremely important for the economy. From local shops to small tech firms working out of serviced offices, the majority of companies in the UK are SMEs. In 2018, Parliament identified 5.7 million SMEs, making up 99% of all businesses in the country."

"There were 5.4 million micro businesses (companies with 0-9 employees), which accounts for 96% of all businesses in the UK."

I just think it's a bit pointless trying to get the government to artificially set pay when the only thing that will happen is that the costs will be passed onto the consumer. The people with the pay rise will have to pay more anyway so won't benefit from the increase in the long run, but the people who didn't get an increase will also have to pay more too.

The problem with market rates is leaving everything to the much fetishisised market is a crap way of organising a modern society for loads of reasons. We are in a global market for some things (loads of service jobs can be done in India) and therefore can't compete (so none of those jobs should be located here). For others (warehouse workers, care workers), we are not and they must be done here. However, from a market point of view, you'd just ship in Indian workers, provide basic accomodation pay them for a year till they burnt out then ship them off again. The company in a competitive market has no interest or care in a states citizens unless it's compelled to do so. Government is supposed to act on behalf of its citizens and use laws to balance the market. So yeah, in this country if your profit margin can't be achieved by paying nmw then you need to move to India.
We've become (largely) low skilled low wage country with crap productivity and very low levels of investment (the two are related). This is hugely problematic because UK is also an expensive place to live. It's a perfect storm. People are slowly waking up to this huge systemic problem. There are a growing number of economists (Picketty kick started the debate) whose analysis point to why there are low wages and low investment/productivity...Mostly because wealth is being hoarded. Companies are paying out to shareholders instead of investing in training workers or in infrastructure. UK companies are short term in outlook (increase shareholder value) rather than embedded in long term strategic planning. Government policy has shaped this behaviour and now it will be very hard to change (wealth and power accumulated in a select few who have a vested interest in the status quo).

Very interesting @Clavinova

@havingtochangeusernameagain

Ok, so let’s force the small business owner to pay a minimum of £15 per hour and he’s got to give up the nice car and the private school fees. For examples sake, let’s say he sells and delivers water coolers to offices, he’s the main sales person with the customer relationships and he’s got a staff of ten, all on a little over the minimum wage delivering product, doing the account and office and warehouse.

So what’s his incentive now? He’s now earning £60k a year instead of £100k because he’s got to pay them all 50% more

So why run the business? Why have his house on the block to secure the debt he raised to start the business. He can just sack them all and phone up one of the big water cooler companies and say hi “just closed my business, pay me £65k a year and I’ll bring all my clients over” - they bite his hand off, he’s got a better income than under OPs world and he’s sleeping a dam sight better because his home (and indirectly the homes of the ten people he employs) are no longer at risk.

You remove the incentive to be entrepreneurial then we all end up working for big corporates who aren’t ever challenged by small business and can then do what they want and everyone ends up worse off.

Employees don’t get the stress employers have. Looking at the private school and the car on the drive is a naive way of looking at it. And trust me, that business owner almost always worked for far less than minimum. Wage when they were starting that company, they took the risk so you don’t have to.

Because businesses exist to make profits for the owner/s, not solely to provide an income for the staff? They aren't charities.

Thanks, Clavinova - that's interesting to read.

However, I think the other 1% of businesses HUGELY skew it, in terms of turnover and number of employees. 96% of businesses may have fewer than 10 employees, but that doesn't mean the others only have 20. If you asked all people who work for businesses how many employees their employers have, an enormous number would be working for a small-ish number of behemoths.

Personally, as a PP said, I don't have a problem with tiny/struggling businesses only paying NMW if the alternative is to go under.

Maybe if we had a law that the lowest-paid worker had to earn at least a certain percentage of the highest-paid worker's salary, we might get a fairer and more realistic system of businesses sustaining themselves and rewarding all of the people who make them a success.

Chattybum and Ola, you could say the exact same about child labour, maternity pay, EWTD hours restrictions, environmental and safety regulations. But funnily enough, we’ve moved on from sending children up chimneys, making women give birth in the fields and get straight back to work, and allowing people to work in factories where machines regularly rip people’s arms off. All of which eats into profits

Why is it ok for a company’s workers to be using food banks or not being able to clothe their children, despite working 60hrs a week, to shore up shareholders’ profits? It isn’t ok.

Because businesses exist to make profits for the owner/s, not solely to provide an income for the staff? They aren't charities.

No - they're just relying on charity (whether independently or government-funded) to enable their workers to remain in a position to keep working for them and making them those profits.

WeBuiltThisBuffetOnSausageRoll yes I understand that things were different in years gone by but the reasons for that are multifaceted & not just down to a singular thing like wages. Regardless of the reasons though, those days are long gone now.

My question is, in today’s society, how many adults / children is a single, full time min wage or living wage job meant to support?

Once we can answer that question, we can then start to work on what other measures should be put in place & where the rest of the money should come from to take people out of poverty. It’s simply not feasible to expect business to pay all its employees a minimum full time wage that covers an infinite number of dependents & then declare it unviable if it can’t.

I really don’t understand how people are demanding a “living” wage so that no one is in poverty without first defining how many people are supposed to be living on said wage.

@Sashkin you are getting very het up. I don't see how an artificially set wage has got anything to do with the things you listed. At all. Instead of sending our kids up chimney's and having people arms sliced off we now outsource those hideous things to the third world. But I doubt most people lose any sleep about buying shite from China knowing that the person who made probably lives under those conditions. So jump off your high horse, it's chilly up there.

Back in the early 1990s a friend of mine got a job working for MAFF (before it became part of Defra) at their lowest pay-rate.

He was eligible for housing benefit because the wage he was paid by them was not enough to get him a bedsit as well as food.

If the business can't afford to pay employees a living wage it isn't a viable business....

It's a tricky one as many industries profit margin is dictated by their customers essentially.
I am 25 years in the food industry and the retailers are notorious for driving down price. Frequently been in situations where we have lost money delivering a particular line because we know that overall we make a small margin on total portfolio manufactured for that retailer-the concept of loss leaders.
In situations like that it's nigh on impossible to pay production operatives more than NMW.
Sadly it's because as a nation we have devalued food and is all about price

If we drive businesses out of the UK then we won't have a choice but to buy cheap shit from places with very low standards of employment conditions. You can't have it both ways. The market always decides.

Anyone that doesn't like the wages paid can always go and find another job or you know, start their own business 🤷 No one forces people to stay in any job they aren't happy with.

Everyone is given the terms and rate of pay at the start, they don't have to take the position if they aren't happy with them.

I own a start up and we have been trading for 18 months. It's a coffee and food place. We pay all our staff London Living Wage. All except me amd my business partner, we pay ourselves nothing at the moment and do the bulk of the hours, but we can not yet afford to pay ourselves.

We haven't really found that paying above industry standard gets much better employees, probably because the sector is seen either as a dead end, non career job, or as a stop gap. People work for us because they need to pay their rent - usually their interests and energy is elsewhere.

Me and my business partner recognise that we are working for nothing as an investment in the future of our business. At the current rate, we will break even about 2yrs 8mths after we started trading. This is pretty standard for start-ups. So what I would appreciate as a start up is a 3 year break on my business rates, because that's the standard of how long it takes to move into profit. This would be a much more logical and less bureaucratic way of subsiding the business than the state having to manage the fluctuating shot wages of employees with zero hour contracts. If we were doing shit wages, there would be officers looking after 3 unhappy and precarious workers, instead of one person in business rates looking after us all as a business.

When we so move into profit you can bet I will be paying myself more than my employees for the same work, because the business will be paying us back for the three years of anxiety and graft, not to mention the fucked relationships and mental health this has cost us.

@Sparklyboots well I'm wishing you both good luck with your venture!

Depend what you call a livable wage.

The company I work for pays everyone well above minimum wage. They do this by only working for places prepared to pay higher rates such as schools, hospitals, universities and factories and by employing people prepared to work unsociable hours. Every day we get people ringing up needing an emergency plumber, being told how much it will cost per hour and being told we are ripping them off, we are too expensive.

On top of the wage paid to the worker, my company has to pay for training, keep an office running, pension, national insurance, holiday and sick pay, vehicle costs, tools & equipment etc. In addition the places that are currently willing to pay our rates are now insisting we maintain expensive memberships to health and safety organisations, and are slowly eroding our profit margin.

Every week we are getting phone calls from highly qualified people wanting jobs because other companies in the same sector are going bump or making redundancies. The consumer is only prepared to pay so much for goods and services.

I run payroll so I know what everyone earns, including the bosses. They don't earn nearly as much as everyone thinks, even including dividends and it is a 24/7 365 days per week a year job for them.

Aldi & Lidl might

My friend runs a small business and used to employ a 2/3 part time to fit in with school hours people and paid them well above NMW (almost double).

Sadly she found on the days/times she wasn't in the office she found that the work wasn't being done, instead these valued employees were utilising her phone and her computers to organise the school PTA events, ring their mate in USA for 3/4 an hour, post on twitter for 2 hours etc and so-on. Took her a few years to clock that their productivity was not as good as hers, for some reason the incoming phone calls were always reportedly busy when she wasn't in etc She was very disappointed and so she's downsized by automating processes as people have left, doesn't have any employees, and now earns a lot more.

Clavinova, those will be sole traders, like a lot of my family. Maybe also paying an apprentice/junior, and their wife to do the books (both of which will come out of the gross income, not the profits).

I don’t think £53k is a bad wage in most parts of the country, personally. It’s more than I earn as a doctor in the south east. Certainly not poverty wages.