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.

How many people on benefits get far more than the minimum wage for an adult working 37.5 hrs a week ? Which would be over the £24,000.

And I do mean far more…not nearly the same.

I suspect it is rather a lot. I think we do need an honest conversation about it.

The minimum wage is now 2/3 of the average wage, which shows how low wages are in the entire economy.

If the in-work benefits stopped, wouldn’t prices eventually go down?
We complain about COL but if we use our taxes to artificially increase min wage salaries, this increases buying power and in turn pushes prices up!

I think this is essentially the justification for having a benefits system which tops up wages rather than just a high minimum wage.

A couple without children each earning minimum wage in the north of England probably won’t need a top-up. A single mum with three children in London probably will.

To raise minimum wage enough that it would be adequate on its own for the single mother, would make some businesses non-viable, push up costs for everyone or cause them to reduce staff, which is increasingly possible with automation and AI.

I think there’s a reality that some people’s labour, often through no fault of their own, isn’t worth minimum wage in productivity terms and an economy which relies on a model of people offering their labour for pay is becoming problematic and outdated. If your product is software or another intangible which can be pushed to millions of people in the click of a button, you just don’t need the labour of thousands of relatively low skilled people to make that work. Whereas caring, healthcare, cleaning, childcare etc do still need a lot of labour. But wealth concentrates in the low-labour tech companies etc and you need redistribution via the tax system to access that wealth. You don’t want to put the whole burden of supporting people on the high labour (relatively low profit) bushinesses via minimum wage when there is wealth elsewhere in the economy.

There’s perhaps a better middle ground but there are good economic arguments against a very high minimum wage at the moment.

And most benefits aren't subject to tax and NIC, so you need to be comparing "net" take home pay against universal credit and other benefits. That means even more people are "taking home" far more in benefits than someone working full time on minimum wage. Then, of course, there are "in work" costs such as commuting, work clothes, childcare, etc that non working benefit claimants don't suffer in the same way. No wonder so many people (rightly) believe that working, or working longer hours, simple doesn't pay.

I've been saying it for years on here, but we really need a "guarantee" where someone working is ALWAYS better off than someone on benefits, and part of that is to have a maximum "marginal" loss of benefits/increases in taxes of 50%, so whether you are thinking of starting work when you don't, or whether you're on "in work" benefits thinking of taking a promotion or extra shifts, your "take" home after accounting for taxes, nic, loss of benefits etc must always be at least 50% of your extra earnings. It's the only way to "make work pay". Apply that at ALL income levels, not just at the lower end, but at the cliff edges too, and yes, including the £100k cliff edge - people should ALWAYS be able to benefit from at least half of every single extra pound they earn.

Yes, as predicted, and entirely foreseeable, pushing wages up from the bottom hasn't pushed up wages in the middle because employers simply can't afford to increase everyone's pay, especially when also hit with compulsory workplace pension contributions, hikes in employers NIC, etc. So, as expected, the "differentials" have been eroded meaning there's often little difference in pay between the minimum wage worker (often needing little experience/few qualifications etc) and supervisors/managers/senior staff, so there's no real incentive for minimum wage workers to "better themselves" by taking on extra responsibilities, or training etc., "just" to get a rung up the ladder for another paltry 50p per hour or whatever (which often also means a reduction in their benefits and loss of some of that 50p to tax and nic!). The "squeezed middle" is very real, but people just don't understand nor believe it until they experience it themselves. There should be a massive difference in "income" between someone working part time on NMW claiming UC, compared with someone earning a bit more, full time, but not eligible for UC, but in reality, the difference is often far too small to justify the extra hours worked.

Have you only just realised?

Tesco’s profits last year were 1.8 billion pounds. What do they pay? Minimum wage.

It’s absolutely unconscionable.

That's not entirely true. Anthropologists have long documented the existence of cooperative behaviour between non-related individuals. This has even been witnessed in the wider animal kingdom (e.g. Darwin seeing other birds feed the blind one etc). It is also highly unlikely that ''cavemen" lived in isolated nuclear families. They would have lived in small groups and cooperated for survival.

Human beings have a nature and our current way of living is anathema to it.

All of this, as someone upthread has suggested, makes the idea of Universal Basic Income, or a Citizens' Wage, appealing, though it requires such a vast overhaul of existing systems and prejudices that I'm not sure any government has the courage to try it. At the moment, since unlike hunter gatherers we don't have free access to the land or the means of production, we are forced to give labour to those who do in exchange for a means of getting food and shelter. I can't just go out and pick crops or shoot animals or build a shelter where I want - someone else owns the land and the farms and the factories.

By giving everyone a basic income, which they can then top up with extra work, we remove the unhelpful distinction between the 'deserving' and the 'undeserving' poor. We don't need people to demonstrate their inability to earn as everyone starts off with something, including, in some models, children. And this surely would force employers to make their conditions more appealing.

Karl Widerquist's short primer on this is interesting reading.

I tend to disagree. Benefits are there to take into account specific personal circumstances. Should Amazon pay single young man Bob who rents a room in a shared house less than married father of 3 Jim because Jim needs more money to live? They do the same job.

The government steps in to ensure that Jim has sufficient money to house and feed his family.

I agree. Global Capitalism doesn’t work very well.

Profits are raked off the top by elite fat cat bosses. Often the big corporations are avoiding paying tax on profits in the Uk so you might think “oh well people are paid less; companies make more profit; corporation tax yields go up” but it doesn’t always work that way.

The feckless men should be supporting their children, not the taxpayer, but that is never going to happen.

A couple without children each earning minimum wage in the north of England probably won’t need a top-up. A single mum with three children in London probably will.
Hmm. I'm not keen on the idea of the poor North subsidising London weighting.

All of this makes the idea of Universal Basic Income, or a Citizens' Wage, appealing
I'm not convinced. If everybody has an extra £XXX in their pocket then won't the cost of living magically increase by £XXX. So we are all back to Square One.

Come back to use when you divide the 1.8 billion by number of stores, or by number of staff, or by number of customers. You'll then see it's not unreasonable and comparable with other similar businesses, large and small.

That's the problem - people can't cope with "big" numbers.

Would you have the same problem if Tesco didn't exist and instead we had a few thousands extra "independent" supermarkets each making the same kind of profits that an averagely successful independent supermarket made? Because that's the reality.

We need to stop thinking in terms of "big" numbers when talking about huge businesses as it becomes meaningless. We need to start drilling down to profit per store, profit per customer, profit per employee, and then we see that it's all pretty much comparable to smaller businesses.

Very interesting, thank you.
Don’t you think that not supplementing min wage would lower prices overall as many consumers would have less money to spend?

Hard agree with OP

I agree entirely. It is a broken system.

A huge yes to both those points. As Gordon Brown discovered, if you flood the economy with money, prices rise and you end up no better off (well normal people end up no better off). It happened with his tax credits which drove housing cost inflation. It gives the illusion of a growing economy but it's smoke and mirrors.

Maybe we should have a single chain of state run supermarket.

You mean a bit like the NHS?? So you want inefficiency, waste, poor service, etc for shopping as well? I don't think so.

Look at the positives, supermarket workers could act like train drivers and make a good wage. No competition would mean food prices would be much higher so farmers could get a decent price.

Yes this all sounds correct to me, OP
.But then why is it that just about every company seems outraged in April when the new national minimum wage figures come out ?
I guess we should accept these annual rises are needed.

Totally agree

So according to Neil O’Brien’s substack (Tory, so not unbiased), govt stats gathered via the Family Resource Survey suggests there are at least 819,000 households garnering £30- 60k+ in benefits. (Screen shot attached)

Acc to the DWP, as many as 70-90% of these households will be in receipt of PIP for one or more household member. This is a max of around £10k in annual PIP payments. Again according to the DWP, ‘only’ 37% of the 4m PIP claimants receive the full amount - over 1.4m claimants who, along with those on lesser payments, are likely included in the 819000 figures above.

It very much is benefits topping up businesses. The truth is, in order to businesses to actually pay living wages all the way through, things would become more expensive than they already are and many people would have to be prepared to make significant life changes. We have got used to cheap food, cheap clothes, eating and drinking out, free or cheap delivery, free healthcare ect.

If we look back in history we see the sorts of decisions that people made when things were expensive. Poor pay has been an issue for centuries, the whole peasants revolt was due to poor pay.

Clothing: normal working people had 2 or 3 sets of clothes and they were 3rd/ 4th/ 5th hand that had been altered and mended many times over. Clothes were passed down from child to child through the family until it was completely outgrown (then passed on to someone else) or fell to bits.

Food: was expensive, most families were on the brink of starvation. Meat was a once weekly treat and sometimes only for one member of the family. Food was seasonal and was stretched out to make the most of it. Eating out was not something typically done.

Medical care: very expensive, there were payment schemes (my nan born in 1900 paid 2p a week to the local Dr which went towards the cost of consultations and medication). The Dr was only called when it was serious. Where possible herbal remedies and treatment at home was used.

These are a few examples. I personally would like to see the end of privatisation of things like water/ gas/ electric/ housing/ education to 16 / transport and infrastructure. I would much prefer money raised to be invested rather than put into shareholder profits. I would rather companies be incentivised by the govt to pay proper wages rather than using tax payer money to pay top up benefits. It would take some creative thinking and will be unpopular as it would probably mean huge tax breaks to companies paying proper living wages in order to stop them moving elsewhere in the world.