Sunday, April 19, 2009

Is this the right target?

"Business leaders have called for a minimum wage freeze as part of measures to help private industry drive the economy out of recession."

Business Leader: Someone who is not attempting to live on minimum wage.

Minimum Wage: In the UK, for people over 22 years of age, £5.73 per hour. In real terms* a minimum-wage full-time worker has about £20 more per week in their pocket than someone on state benefits, which are defined as the minimum amount the government says a person needs to live on.

The cost of living is rising and basic essentials like accommodation, food, water and fuel are becoming more and more expensive. The problem is... let's say that in the next year the cost of these necessities rises by £500 overall. A Business Leader might have to cut back on luxuries - perhaps one less meal out per month, or one less holiday per year, to cover that. They'll still have a pretty good quality of life. A Minimum Wage Worker, on the other hand, doesn't have that many luxuries to cut. They're already on the poverty line.

I don't know what the way out of the recession is, but I feel certain that it shouldn't be the people who are working their backsides off for a tiny wage who get kicked in the shorts in the name of saving the economy.

* For a full-time worker, minimum wage is £212 per week. This is about £60 a week more than a single person's state benefits of approximately £150pw (comprised of Housing Benefit (~£70pw), Council Tax Benefit (~£20pw) and Jobseeker's Allowance (£60.50pw)) but must also cover things like prescriptions and dental work (free for people on income-related benefit) as well as additional work-related expenses such as suitable work clothing, transport to and from work, and of course tax.


Pandora Caitiff said...

It's a stupid idea on so many levels.

At the very least the average worker needs a cost of living increase so that their wages (in real terms) don't *drop*.

What annoys me is that the business leaders (who are mostly responsible for the recession) will still get their bonuses and vast pay rises.

And before you think I'm just a grumpy old lefty (and I am) it makes better capitalist sense to give the actual workers more money, because unlike the business leaders, they'll use that money to buy things that stimulate the general economy (rather than stuff it in offshore banks, or importing luxury goods).

But as we all know, when you get to a certain level of income, all you care about is maintaining that lifestyle, economy (or general population) be damned!

Anonymous said...

OR, the other side of the argument, if businesses are struggling, forcing them to pay more could drive them out of business, thus resulting in there being no job for the person earning minimum wage. Just a thought.

evilstevie said...

"if businesses are struggling, forcing them to pay more could drive them out of business"... this sounds so very sensible, provided that this is across the entire business - shareholders, workers, the board of directors, etc.
The point being made by Pandora is that the people at the top of the foodchain still get all the perks and bonuses because they have enough clout to make it happen (anyone else thinking about an ex-banker's pension here?) regardless of how the business as a whole is performing.
Reality, however, points out that "lucky to have a job" is a much bigger argument when you're on or around minimum-wage and need to eat, so that's the logical place to make cuts: if your current staff don't like it, it's not going to be overly difficult in the current economic climate to replace them with new staff who will put up with it. Bonus points for the boss who thinks up the scheme, and he gets another percent on his salary for saving the company money.
(yes, sorry, I really am that cynical, but I do know of people hit by this round of stupidity, and the only time you generally see someone at the top making a statement about not taking a payrise/bonus/etc this year, it generally indicates that the business is very close to folding or there's a bit of a PR issue ongoing. further down the foodchain, people are being asked to take cuts to help with the figures, not necessarily because the business is that close to folding but to keep it looking just a bit more competetive)

(who really shouldn't be thinking about such things)

Mary said...

"if businesses are struggling, forcing them to pay more could drive them out of business, thus resulting in there being no job for the person earning minimum wage."

See, that works if everyone employed by the company is on minimum wage. But to only freeze (in real terms cut) the income of those at the bottom of the pile, who are least able to afford it and have no wiggle-room in their household budget...

Paying your full-time employees a living wage is a central and essential business expense alongside rent and rates. If an employer can't afford it then the business simply isn't sustainable. To try and pretend that it is sustainable for a few more months by paying hard-working employees less than a living wage is an idea that belongs in the same bracket as saving money by cancelling equipment maintenance. Saves a bit of money on the cashflow, but at the price of non-cash assets (machinery, or employee health, loyalty and motivation) and you'd feel kind of embarrassed if your mother found out you were doing it.

Pandora Caitiff said...

Maybe Anonymous is a Dilbert-style pointy-haired-boss?

Also people on lower incomes spend a higher percentage of their income on essentials (like food and rent), than the rich, meaning a small increase (or just staying even in real terms) makes a bigger difference to national spending than any change to higher earners' wages.

(I still think taking Economics at college was a waste though!)

Anonymous said...

businesses unhappy about the minimum wage shocker, who would have guessed?