Benefits are actually subsidies for big business

[Thatsalineallright]

I don't know, I'm not an economist, but I can't help feeling that all the various benefits and top-ups given to people in work are actually just subsidising greedy corporations.

For example an amazon delivery driver working full time. Can't afford to pay for the ordinary costs of living on their low salary. The gov gives various help with energy costs, housing, children etc. So instead of Amazon having to pay their workers a living wage, ordinary tax payers have to fill in the gap.

The delivery driver maybe feels a bit shit about needing the extra help instead of fully supporting themselves, tax payers are angry and complain about so-called benefit scroungers, the government have less money to spend on other areas. And then Jeff Bezos or whoever is happily pocketing billions in profits.

AIBU? What got me thinking was the announcement about energy subsidies for lower income households. I'm of course happy that people won't be freezing this winter, but the system just seems so broken.

YANBU

Im also not am economist but our whole society is built on an economic model that is totally unsustainable. I read doughnut economics a while back and it really helped me understand why I felt so uncomfortable about it all.

In short, I agree. The rich get richer, the poor get poorer and the state is left to try and plug the ever widening gaps, plus mitigate the environmental disaster that this is all creating.

I agree
This mini epiphany only came to me a few years ago.

In the pursuit of profit, wages are kept low. The tax payers pays for this.

I absolutely agree. I don’t think there’s a quick fix for it, but I do think bringing more of life’s essentials (housing/ water/ energy) back under public control is a good start, so as a society we’re held less hostage by big business. I would much rather my taxes went to building more social housing, than to housing benefits that ultimately end up in the pockets of a private landlord, for example.

Have you ever heard of the Speenhamland System?
https://en.wikipedia.org/wiki/Speenhamland_system

This was a form of outdoor relief, i.e. benefit, that was introduced in the late 18th Century to help poorly paid agricultural workers. Basically the amount someone needed to support themselves was calculated on a sliding scale based on how many children they had and the cost of a loaf of bread then, if their wage was insufficient, they were given relief to cover the difference between what they earned and what it was calculated they needed.

Criticism came at it from two sides. One side that it encouraged the poor to have more children. The other that it just allowed employers to pay workers less.

So not much seems to have changed in 250 years!

I agree too OP.

It’s not just Amazon. I was amazed at how many care homes are held by overseas conglomerates remitting their monies abroad whilst carer workers are low paid.
people need to be more circumspect and check each and every organisation they frequent TK ensure that proper taxes are paid.

The Gov needs to up minimum wages and also create a tax system that the more tax you pay per % of turnover the more you get a subsidy for employment. There has to be an innovative way to resolve these issues!

Interesting, thanks, though depressing that we haven't got anywhere new in 200 years.

What would happen if all benefits were stopped overnight? A lot of pain, obviously so don't actually recommend it, but surely after a while companies would actually have to start paying real wages? Otherwise their workers would all starve or at the very least productivity would plummet because everyone is cold and miserable.

What can be done to incentivise companies to actually pay a living wage?

I suspect it is more nuanced, but I think there is truth in what you say @Thatsalineallright . According to the Governments own figures, roughly 32% to 38% of all Universal Credit claimants are working while receiving financial support. That doesn't include the 1.4M people claiming carers allowance, who could also be working.

Part of the problem is that we all want cheap stuff. We want cheap ubers, cheap deliveries, cheap food, cheap products, healthcare that is free at the point of access, free education etc. The main expense in all of those things is usually the humans involved, so in order to facilitate our desire for things to be cheap, the humans are paid poorly. The poorly paid humans then need things to be cheap!!!! It is a self-perpetuating vicious cycle.

Maybe it just illustrates it is a difficult problem to solve. Policies change and have different names but are often basically the same idea trying to solve the same problem.

Similarly attitudes towards those needing help may be expressed in different language but are really broadly the same.

At least we do have a Welfare State now.

I agree, OP, and have long felt the same thing - all taxpayers subsidise the profits of minimum wage employers, even if we wouldn’t choose to use that business.

However, the flip side must be that prices would need to rise in order for some of these employers to pay the right amount. Yes, Tesco makes billions but its margins are thin (3-5% generally ok retail), it makes billions because it is so enormous.

That would then surely require all wages to rise, in order to afford the new prices. Or would taxes be able to reduce enough that people couple afford them? I’m no economist but it seems like there would be a lot of moving parts that could have unforeseen consequences.

Are there societies out there that do things differently for low earners? I’d be interested to know if this is just how western economies work.

I'm a small self employed business and I see it differently, I think the public sector historically earned slightly less than the private sector but now earns more.
Recent rebound: By 2026, public sector average earnings grew 6.2% year-on-year, outpacing the private sector's 3.7%

The operating profit for someone like Sainsbury's for instance in the last 12 month's is -
1.17%, with a gross profit margin of roughly 6.75% and an operating margin of about 3.14%. 1]

If you raised wages £1 an hour for the 140,000 employees how much profit would they make? Would the business be sustainable? Diesil prices are up and food costs are rising. They are trying to lay off staff with self checkouts etc.

We are 3 trillion in debt as a country, we are borrowing more than we are taking in tax per year! Tax take is dependant on how successful your businesses are.

You are not unreasonable. I recognised this some years ago when a group of friends were all chatting about one friend having to secure benefits on top of a full time job in a high street supermarket. We all acknowledged that the government supporting this system means their friends the shareholders get more profit, and again it's the workers (everybody who works who pay into the system to provide benefits to those who really need it) have less themselves.

I can hear my granddad and my father saying folk work hard enough so entitled to a fair day's pay for a fair day's work... and I don't think they envisaged the government propping up multimillion pound conglomerates for decades...

I agree with the OP.

Stopping benefits wouldn't encourage employers to pay a living wage; you only need to look at countries where there are no or very little state benefits. People eke out an existence on very little and rely on family support networks. I suppose what could happen is wages go down as lots of people would be desperate to get whatever pittance of an income they could.

Another agree here - remarkable how many businesses claim that they cannot afford to pay a barely living wage yet their owners/shareholders live in luxury. They rely on underpaying in the knowledge that the state will underwrite their employees living costs. In reality, what should happen is the profit margins SHOULD get squeezed so that owners/shareholders receive smaller payments/dividends and - to be brutal - those business that cannot generate a sustainable profit, simply fold.

I also do not understand why there is a requirement to increase profits year on year - why isn’t a sustained level of profit enough? Why do shareholders jump ship if John Lewis ‘only’ made a 9.8% return [made up figures], when last year it was 10.1 and the year previously 8.2? Surely the making of a consistent profit is enough - because this is one of the things that leads decisions to cut staff or reduce hours and pay. I understand the numbers, just not the drive?

Am actually going to Google that now and see if Professor AI can explain it to me.

Disagree on two points. It's not just 'greedy corporations' that pay low wages, but many public sector workers also earn NMW or only a small percentage more.

Also, top ups focus on people with higher essential costs, ie DC mostly. Otherwise employers would need to pay higher wages to 'breadwinners' ie illegal discrimination.

Or people without dependants who could live in smaller properties could use the ability to work for lower wages to their advantage and undercut people who needed to earn enough to support a family.

What about the benefits that top up the low paid teachers, teaching assistants, nursery workers, carers etc? Not everyone works for big businesses.

Yup.
Imagine what would happen if benefits were actually stopped?

Benefit bashers dont understand what's actually going on here.

Surely the welfare state should be needed by people who can't work, not people who are working?

We all have to spend so much money on accomodation for starters.

After WW1 the government managed to build huge amounts of new housing etc. Housing was affordable for most. Why can't we do the same now?

I know some countries like Denmark make it illegal to buy a property unless you are a resident. So the housing stock is kept for people actually living in the country. Why can't we do similar?

The current system isn't working so surely the answer shouldn't be more of the same - more subsidies for lower income families who are in work and billions in profits for their employers.

They wouldn't be able to afford very much if anything.
So big companies profits would reduce.

But if your business can't afford to pay living wages then is it actually a viable business?

The problem with affordable housing these days is not the building of it, it is the cost of the land on which it sits. Our economy is strangled in so many ways by the cost of land in this country. It is more cost effective at the moment for a developer to buy land and just hold on to it than actually go to the bother of building anything on it!

I completely agree, I had my first dc early 99’s . There were adverts on the tv telling people ( with postcode lottery style adverts) to make sure they claimed for tax credits . They really ramped up around the deadline, and heavily encouraged/ implied you were an idiot, for not putting a claim in. At the same time it became almost impossible to get a full time job. The market was flooded with 15 hr a week jobs. That’s where the rot set in. Now it’s just normal to rely on the state.