Living Wage.....a Flawed Concept.

[CaleyD]

My point is quite simple really.....

 

If employers are forced into paying the "living wage" then they need to pass on the cost of that by increasing the cost of their product or services....simple economics.

 

This in turn makes it more expensive to "live" as you need those products and services, so the level of living wage has to increase to compensate for it.

 

Cue a viscous circle which does nothing other than drive up the cost of living, rate of inflation etc.

 

Discuss....

[Oddquine]

What's the difference between forcing businesses to increase the minimum wage and forcing them to pay a living wage?  A lot of companies don't comply with minimum wage law now, anyway..and the one thing about having minimum wage rates (or maximum MPs Allowances) is that businesses will mostly pay only what they must(or less if they can get off with it) and MPs will blithely spend up to the max without looking for cheaper alternatives. 

 

After all, it's not as if the Government would be increasing the minimum wage by £1.15 an hour to living wage levels in one fell swoop...it would be a gradual increase, albeit one at a higher annual percentage than this years 3% to get there faster, but gradual nonetheless and more easily absorbed. 

 

If you think about it, more money in the individual's pocket would be less money out of the taxpayers' pockets to subsidise low paying companies via tax credits, which cost about £21 billion annually....more money floating about in the economy to spend on goods and services from those companies paying the wages, as it does take disposable income to buy "stuff" (and an extra 5million people currently on around minimum wage having more disposable income can be seen as an opportunity cost for the companies selling the "stuff" )....more tax take from earnings to the Treasury.....and if folk were getting a decentish wage, then they might work harder at their jobs and productivity would rise....because it would be worth an employee finding a work ethic if companies found a reciprocal fair day's pay for a fair day's work ethic as encouragement.

 

 

[kilda]

CaleyD is right. We just create a never ending spiral of inflation which benefits no one in the long term. Everyone would take one step up an ever lengthening ladder but remain, relatively, in exactly the same position. Average incomes are driven ever higher along with increases in the minimum and living wage. Which in fact positively hurts those on fixed incomes or pensions, who will find themselves increasingly worse off as a result. We already have real poverty for some of the older, low paid and weaker members of society, why would we want to make it worse for them?

 

Of course the Government pensions will eventually rise as will welfare payments but never quite matching, always a year or two behind, increasing the gap for the worst off. Indeed most pensioners in our society do not have an index linked pension and will suffer and so require increased support from the welfare system just to stay exactly where they are. This in turn would increase government spending, pushing up taxes and all to no good effect other than to hurt the lowest on the ladder. Those at the base of the ladder would still be at the bottom but have bigger rungs ahead of them
 

Differentials in income are at the highest levels ever in modern times. That is those at the top are, on average, now earning many more times the average  workers wage than was true in the past.  In the not too distant past those at the top of the ladder managed very well on incomes of about, again on average, 5 times that of their workers. i believe that  now averages more than 30 times higher than their workers. 

We are looking at the problem from the wrong angle and I think the solution lies more in cutting wages for those at the top of the ladder, by compulsion if necessary. This would force average wages down, drive down prices and make the rungs on the ladder closer together. We would still have those at the top and those at the bottom but at least those at the bottom would be a little better off and those at the top would still be very comfortable.

I hear the cries already from those at the top of the ladder looking down at us on the bottom. "If you don't give us what we want we will move out of the country."  Let them go and let them leave their fortunes behind. There are plenty more willing and able to take their place for a smaller reward. Plenty more with a conscience.

Edited November 9, 2014 by kilda

[Alex MacLeod]

Its a worldwide problem http://www.pewresearch.org/fact-tank/2014/11/08/with-41-of-global-wealth-in-the-hands-of-less-than-1-elites-and-citizens-agree-inequality-is-a-top-priority/

[Alex MacLeod]

Kilda, those you refer to above as being the very high earners are mostly employed by companies who already pay those at the bottom in excess of living wage. The majority of those on low wages tend to be employed by small business people who dont pay themselves high wages. By that I mean folk like small time hoteliers and pub owners, small time builders, joiners etc. People who need to keep costs down, due to competition, just to keep the business solvent. For those people the minimum wage is set into their budget and an increase to living wage would hit them hard.

 

It is a very difficult area. Those who are prepared to work can find themselves having to give up on the luxuries of life like car or Sky TV etc because it takes all their hard earned just to feed the family and keep a roof over their head and clothes on their back yet there are very many who sit back claiming state benefits and enjoy their nine million Sky channels whilst beating the world on their games consoles. There are people who cannot work for whatever reason and need the help of the state but there are many more who wont work and will do all in their power to avoid work. Should they also qualify for living wage equivalent in their benefits?

 

Government could help employers and employees by adopting a fairer taxation system. Increase the tax free allowance such that the living wage can be earned before tax eligibility. Around £15,500. Offset this by increasing to 50% earnings over £150,000. At present its 45%. Though it sounds a big figure the high earner will also be eligible to earn £15,500 tax free. Yes they'll pay more tax but they'll benefit the low paid. Government wont do this though because it doesnt buy voters.

[+Tree]

Kilda, those you refer to above as being the very high earners are mostly employed by companies who already pay those at the bottom in excess of living wage. The majority of those on low wages tend to be employed by small business people who dont pay themselves high wages. By that I mean folk like small time hoteliers and pub owners, small time builders, joiners etc. People who need to keep costs down, due to competition, just to keep the business solvent. For those people the minimum wage is set into their budget and an increase to living wage would hit them hard.

 

It is a very difficult area. Those who are prepared to work can find themselves having to give up on the luxuries of life like car or Sky TV etc because it takes all their hard earned just to feed the family and keep a roof over their head and clothes on their back yet there are very many who sit back claiming state benefits and enjoy their nine million Sky channels whilst beating the world on their games consoles. There are people who cannot work for whatever reason and need the help of the state but there are many more who wont work and will do all in their power to avoid work. Should they also qualify for living wage equivalent in their benefits?

 

Government could help employers and employees by adopting a fairer taxation system. Increase the tax free allowance such that the living wage can be earned before tax eligibility. Around £15,500. Offset this by increasing to 50% earnings over £150,000. At present its 45%. Though it sounds a big figure the high earner will also be eligible to earn £15,500 tax free. Yes they'll pay more tax but they'll benefit the low paid. Government wont do this though because it doesnt buy voters.

 

Except at the moment anyone earning over £100k loses tax free allowances.

[AlexJones]

Higher labour costs just means fewer companies will want to create jobs in Scotland.

[Kingsmills]

Higher labour costs just means fewer companies will want to create jobs in Scotland.

Perhaps we are better off without prospective employers who are merely looking for a supply of cheap labour to exploit.

[+DoofersDad]

It's a difficult one.  If you pay employees more then there is less available to invest in the business in other ways and this can threaten the viability of the business.  On the other hand, if you pay better wages there is a tendency to get better staff which in turn can help gain business or sometimes simply reduce the number of staff you need because of their productivity and the fact that they actually turn up for work!

 

Undoubtedly those at the very top of the wage tree earn far too much and it is not good to see owners of businesses taking hundreds of thousands out of their businesses as profit when they pay their staff as little as possible.  But it is not just owners of businesses who earn too much, the amount some folk with particular skills get (commodity traders, top footballers etc) is also not justified in my view but is, unfortunately a result of market forces.  We have a minimum wage set in legislation. There should be no compulsion to pay the  living wage, rather we should have that as an aspirational thing that firms should aspire to pay if the business can afford it.

 

Compared to other countries we do have a significant wealth gap and there is scope to narrow that whilst maintaining financial incentives.  Increasing the tax free allowance seems to me to be a no brainer as does increasing the levels of tax at the top end.  I really don't buy the argument that increasing top end tax to, say, 60% will drive folk overseas.  .  Clearly there are a lot of folk who earn less than top end tax rates and live very comfortably whilst those earning at top end levels are earning in excess of that - it wouldn't be as though all of their earnings were taxed at top end.  If they want to live in this country then clearly they can do so - and very comfortably at that.  Folk who live abroad in "tax havens" do so because they want to, not because they can't afford to live here. 

[Sneckboy]

Agree with every word, DD. You've put it in a nutshell.

My opinion is that the wealth gap in the UK isn't healthy. I'm not exactly calling for communism, but rather a better balance in affluence. It's demonstrably* more beneficial to society. *It's been 'proven' that more equal societies are happier and prosper more effectively. The Scandinavian countries tend to do excel in 'happiness' / 'life satisfaction' scales.

[Ayeseetee]

Agree with every word, DD. You've put it in a nutshell.

My opinion is that the wealth gap in the UK isn't healthy. I'm not exactly calling for communism, but rather a better balance in affluence. It's demonstrably* more beneficial to society. *It's been 'proven' that more equal societies are happier and prosper more effectively. The Scandinavian countries tend to do excel in 'happiness' / 'life satisfaction' scales.

 

Two of the major reasons I voted the way I did in september, If I remember correctly the weath gap has only been widening since the 1960's the rich get richer and poor get poorer.

 

Maybe we should ask vodafone / starbucks / amazon / google to pay their taxes and maybe we could afford a decent living wage?

Edited November 10, 2014 by Ayeseetee