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.

No, they'd employ people who can afford to work for less because they don't need to support a family in a family sized house. I'm child free, mortgage free and have a working partner. If I didn't work, I'd likely not be entitled to much in benefits, nor would I receive help that parents are entitled to if I was in a low paid and/or part time work.

But say I can afford a good standard of living on £30k pa, I'd have a much better chance of getting a job than a parent who needs to earn £50/60/70k+ to pay their housing costs which will be large on a family sized home, support their partner and DC. More parents will be unable to find work that pays them enough so will likely end up receiving more benefits. Young adults who still live at home or older adults with lower housing costs for whatever reason will find it easier to get jobs for the wages on offer. For parents to be able to work, they'll struggle with a low standard of living because they won't earn enough and top ups won't exist.

Strange how the first solution appears to be making people starve to get businesses to behave (news flash, they don’t care about people)

A better solution would be, raising the minimum wage to a proper living wage, so companies are forced to pay enough to their staff so they don’t need benefits. The market will only sustain price rises to a certain level before people stop buying stuff, or other businesses will undercut.

YANBU. I posted a comment that pretty much says the same, on another thread just seconds ago, then saw your post.

The company would stop employing anyone who has children. As it is the existence of children that leads to in-work UC claims.

In reality, businesses are being propped up by govt (ie tax payers) by 'topping up' employee pay. But most of these same busineses are doing everything they can to minimize the tax they pay, maximise 'shareholder value', and make decisions that benefit directors/highest paid.

Claw back the taxes paid to top up wages by introducing a(nother) layer of corporation tax? Limit dividends & directors salaries to a set multiple of the lowest paid? Make minimum wage equal to the living wage? I dont know the solution. But it is a daft situation.

I agree. And not only do large businesses pay their staff rubbish wages, they also use every loophole possible to get away with paying less tax. It’s a double whammy.

Are you for real? That’s the most ridiculous thing I’ve ever read.

If shareholders don't get a return, they won't invest in the company. Many investors are pension schemes, i.e. investing to earn returns for current and future pensioners, i.e. today's workers! How else do you think businesses will raise funds to invest, i.e. start new businesses, build new factories, buy new machinery, etc??

It's true though. If it "cost" an employer more to employ people claiming benefits, i.e. mostly parents, then they'd stop hiring such people and start hiring people without children instead.

It’s a triple-whammy because not only do the large corporations use loopholes (corporation tax); the ultra rich employees at the top find loopholes to do the same with their income (income tax).

What you are saying is actually what I have always thought. Speaking to a shop worker a couple of years ago their employer was careful not to give too many hours even when people wanted extra as it would affect their benefits. When you look at large employers with an annual growth in profits every year almost invariably a lot of their staff will be on top up benefits, so the shareholders are winning at the expense of the taxpayer.

I don't understand your reaction.

I was just replying to @Woodeny who asked what would happen if the state billed companies for benefits paid to their employees.
Naturally, the companies would seek to avoid taking on any employees that were likely to be eligible for state benefits.

It really isn't. Plenty of people without children need jobs and will be happy to work for (say) £30k because that covers their lifestyle. An employer wants an employee. They offer £30k and employ someone willing and able to work for that salary. People with children can't work for that amount without top ups so won't take the job. No-one is going to pay £50k for a £30k job because some employees need £50k to pay their expenses. They'll just employ one of the people who can live on £30k.

If wages went up, so will prices, as we've seen with the increase in NMW and subsequent knock on in the cost of eating out etc, so no-one will be better off.

I completely agree OP.
Everything is set up to preserve existing power structures, this is a very difficult problem to solve.

I don’t know what the answer is but the issue surely is that what a living wage is for one person is very different from what it is for another.

A 60 year old whose children have left home and whose mortgage is paid off and a 25 year old living at home with parents, are likely to need less than a 35 year old with 4 children and a mortgage or high private rent.

Years ago, employers would have paid different types of employees different amounts for doing the same or similar jobs. Jobs typically done by women were lower paid than those typically done by men, partly because employers expected that men would need to earn enough to support a family whereas many women worked for “pin money”. Those working part-time (mainly women) were often paid less than full timers and were denied access to pension schemes and other benefits.

Rightly, employers can’t do that anymore so they either pay everyone what the neediest person needs, which is far more than many will need, and may not be affordable, especially for low skilled jobs, or they pay everyone at a low rate knowing that those who need it can get a top-up (or somewhere in between).

No benefits are subsidies to people who don't generate enough output to support themselves. People who can't pull their own weight in rowing parlance.

When I was a young Accountant, business owner/managers were advised on the most tax-efficient way to take money out of their company.
Then Blair/Brown introduced tax credits and the advice then focussed on the best way to get benefits (tax credits) from the Government.
The Labour Party: the masters of unintended consequences.

A full working week is 37.5 hours. That should be achieved by everyone before benefits are used to top-up.

@WoodenyI would think it would be very difficult for parents to get employment.

People whose only option is to work for low wages, is that who you are referring to?
In other words the people who do the essential work which allows people at the top to cream off the profits.

The budget is soon.
Although I don’t hold out any hope given I am not on benefits.
Speculation that those who are will have help with energy bills.
Which will simply move the welfare bill higher.

I do think there is a whole vast array of benefits that mean some people are ‘okay’ on benefits. And then there are those that barely get by.
Politicians would do well to differentiate between the two groups.

It's so easy to hate landlords but who has been providing housing for the last three decades when successive governments have opted out of providing social housing?

The UK government has farmed this responsibility out to the private sector and now it's all fallen apart because the government has regulated and taxed landlords so heavily that thousands have sold up and the rest have increased rents.

Some landlords are paying 70% upwards of their rental income in tax. That's why rents have gone up.

I think this is a large part of the mess we're in; treating human beings as economic units that have 'outputs'. It can't be long now before this inhumane system collapses around us.

This system is far more humane than the majority other system from the past. If a hunter-gather caveman didn't create enough output from hunting or gathering to feed their family they died. The equivalent has been true for much of the time humans have roamed the earth. Now people just get hurty feelings from the idea they are being subsidised by others and want to blame the system for their lack of "hunting or gathering".

The basic issue is that the UK has become a low wage high cost economy.

The figure to look at is the percentage of national income that goes to wages.

This peaked at 67% in the early 70's when we joined the EU and had almost Scandinavian levels of income equality. Now its nearer 60% AND its distribution has become more unequal.

Then there are housing and utility costs. The cost of building a house has risen roughly in line with inflation since the end of WW2 BUT average house prices have gone from about three times average earnings to about eight times largley due to inflated land prices and removal of controls on mortgage lending.

Thats before we get stopping Council House building, Council Tax etc and the resultant increase in costs in particular for lower income households.

And we have become a low productivity economy to boot - how else did we end up with hand car washes?

Oh and read 'The Ragged Trousered Philanthropists' basically low pay is subsidising the rich.

And 'The Property Lobby' by Bob Colenutt about House and Land prices.