Apparently, George Osborne and Iain Duncan Smith have decided to cut benefits to people of working age. This will include tax credits payable to people in work and which support families on a very low income. They claim this is a part of, “making work pay“! Many of those affected will be on the minimum wage. It seems crazy to me that the government (or the taxpayer, you and me) should subsidise companies which do not pay enough to their staff to enable them to look after their families. The answer must be to increase the minimum wage sufficiently to make work really pay.
From October 2015, the minimum wage will be £6.70 per hour. For a person working a 35 hour week this will amount to £235 a week or £12,194 a year. Of course, this will be less for a person on a zero hour contract, because sickness, holidays and national holidays mean that they cannot achieve 35 hours a week every week throughout the year.
- The Conservative government has said that, “No-one on the minimum wage will pay income tax”. Although they plan to increase the tax-free allowance in future years, it is difficult to see how they will keep minimum wage earners out of income tax altogether.
- The Labour Party have said that they want to increase the minimum wage to £8 an hour. This would be a help, but wouldn’t prevent many low-wage earners living in poverty.
- The Green party said that they want to increase the minimum wage to £10 an hour.
Many people employed by the government, for instance as cleaners, will still be on the minimum wage and we have the absurd situation of the welfare budget having to subsidise the National Health, Department of Defence, etc.
The living wage
The living wage foundation sets higher rates than the minimum wage in an attempt to persuade employers to pay their workers a living wage. The current rate is £7.85 per hour outside of London, and £9.15 per hour in the boroughs of Greater London. This means that a worker in London would receive £320 for a 35 hour week. Outside of London the same worker would only earn £275 a week, which is not a great improvement on the minimum wage of £235.
The living wage has no legal significance and it is up to government departments, local governments and forward thinking companies to voluntarily pay this rate.
Average and maximum wage
The average wage in the United Kingdom is calculated at £26,500 per year. This makes the minimum wage of £12,194 and the living wage of £14,300 seemed very miserly indeed. Of course there is no maximum wage! The following demonstrates some of the huge differences in salaries.
- A person working for 35 hours at the minimum wage: £12,194
- The same person on the living wage: £14,300
- The average UK salary: £26,500
- David Cameron: £142,500
- Tony Hall (BBC boss): £450,000
- Mike Rees (Standard Chartered bank boss): £8,986,000
- Wayne Rooney: £15,600,000
- Angela Ahrendts (Burberry boss): £16,900,000
- Adele: £27,540,000
- The Queen: £36,100,000
- One Direction: £59,330,000
- Michael Jackson (deceased): £108,108,000
Now, I am all for talented people, and entrepreneurs who take risks, to benefit from the pleasure they bring to people, or for the success of their business, but can we really tolerate a society which values a pop star as being worth 9000 times more than the worker who cleans for them? (Or up to 400,000 times a typical worker from a developing country?)
A party for working people?
The Labour Party was formed to look after the interests of workers in Great Britain who had very few rights in the last century. Now, the Conservative party claims to be, “the party for the working people”. With parties fighting for the centre ground there as there is little to choose between them, but I would challenge whichever party is in power to:
- Increase the minimum wage so that no one who has a job will be forced to rely on government handouts to survive.
- Enforce the minimum wage. In the latest debate before the last election, Ed Miliband said, “There have been just two prosecutions for failure to pay the minimum wage in the last five years”.
- Ensure that its own employees, in government departments and the national health system are payed at least the minimum wage or use the living wage guidelines.
- Ensure that local government also does the same.
- Encourage United Kingdom companies and multinational companies working in the United Kingdom to use the living wage guidelines.
Challenge to companies
It has been shown that companies who value their employees, and pay them accordingly, have a happier workforce resulting in a more efficient and profitable business. There are numerous examples of companies who do ensure that their staff are paid well, but unfortunately there are many examples of companies regarding their staff as a “necessary cost “and exploit the workers by paying the minimum that they can get away with.
My challenge to employers is to pay all of your employees a fair wage, value them, and see your company grow more profitable as staff are happier, and therefore more efficient.