Minimum wage scandal

[Tangled up in Blue]

Today's good news on the British economy.37 firms have been "named and shamed" for not paying the minimum wage to their employees.

That's a national scandal and it's just "the tip of the iceberg" according to the TUC.

http://www.bbc.com/news/business-30822565

 

[Massimo Giovanni]

The prosecutions are fixed/generated spin style figures IMO with some of the prosecutions being for firms not paying the correct rate when staff reached 21 (higher rate) and those are then part of propaganda to show the gov IS doing something for the poorest paid workers.
This is released at the same "spin" time as Camamoron talks about firms that are making big profits should pay living wage not minimum wage, note he doesn't put a raise in minimum wage on Tory manifesto!
The minimum wage IS akin to work house rates and should be an embarrassment to companies making big profits and paying the MW; the press & unions ought to publicize, name and shame the companies doing that (including lots of FTSE top 100) and see if that can get things progressing.

 

[Benfleet A1]

Today's good news on the British economy.37 firms have been "named and shamed" for not paying the minimum wage to their employees.

That's a national scandal and it's just "the tip of the iceberg" according to the TUC.

http://www.bbc.com/news/business-30822565

79 workers underpaid by those companies named and shamed. Shocking. What's more shocking is Francis O'Grady of the TUC on her 88 grand a year for a 35 hour a week. Perhaps that's the bigger story, overpaid and seriously underworked union barons.

What do you think comrade?

 

[Neil_F]

The minimum wage IS akin to work house rates

This is somewhat hyperbolic.

The minimum wage is a bit of a misnomer in my view because it is a gross rate. There are two ways to increase net pay: increase gross pay or decrease tax and NIC withholding. If 35 hours of minimum wage work were exempt from tax and NIC then it would be the equivalent of the gross London living wage rate. I find it nauseating to hear commentators justify paying the living wage because more tax could be collected from low earners.

Likewise wage rates could rise if the dead weight costs of employment were reduced: corporation tax, employer NIC and pension auto-enrolment. Employment is a simple equation of the cost of employing someone against the value they would generate (or protect). Increasing the cost of employing someone will have an impact on low margin businesses. Some people don't care about that and that's fair enough, but nothing is ever cost free.

 

[steveo]

79 workers underpaid by those companies named and shamed. Shocking. What's more shocking is Francis O'Grady of the TUC on her 88 grand a year for a 35 hour a week. Perhaps that's the bigger story, overpaid and seriously underworked union barons.

What do you think comrade?

Does she live in a council house?

 

[davewebbsbrain]

Does she live in a council house?

She probably has two

 

[Davros]

Why are, or indeed is it legal for a 17 year old, and a 21 year old to have different minimum wages, to, potentially do the same job? Surely that is direct age discrimination from the rule setters?

 

[Another Surrey Shrimper]

79 workers underpaid by those companies named and shamed. Shocking. What's more shocking is Francis O'Grady of the TUC on her 88 grand a year for a 35 hour a week. Perhaps that's the bigger story, overpaid and seriously underworked union barons.

What do you think comrade?

restore the top rate of tax to the rate it was when this government came into power then you can feel a bit less aggrieved about those on high pay

 

[Neil_F]

Why are, or indeed is it legal for a 17 year old, and a 21 year old to have different minimum wages, to, potentially do the same job? Surely that is direct age discrimination from the rule setters?

The minimum wage is explicitly exempt from the Equality Act.

 

[Benfleet A1]

restore the top rate of tax to the rate it was when this government came into power then you can feel a bit less aggrieved about those on high pay

It's not me feeling aggrieved while getting £ 88,000 a year for a 35 hour a week and clocking up 40 plus days holiday. I wonder what other perks and benefits she gets, the poor love.

 

[Another Surrey Shrimper]

It's not me feeling aggrieved while getting £ 88,000 a year for a 35 hour a week and clocking up 40 plus days holiday. I wonder what other perks and benefits she gets, the poor love.

If it's stated as 35hours a week that just indicates its a full time job - mine would be classed the same but I do way more hours than that in reality. Does she have other jobs too - is that why you are emphasising the number of official hours? £88k for someone at the top of their trade isn't out of the ordinary I wouldn't have thought. I would class it in a similar category as civil service and there a lot of them plus some head teachers on £100k+
Has her pay scale been in the news for some reason that I have missed? Not another Mail filling up some pages because they have run out of things to write vibe is it?

 

[Another Surrey Shrimper]

This is somewhat hyperbolic.

The minimum wage is a bit of a misnomer in my view because it is a gross rate. There are two ways to increase net pay: increase gross pay or decrease tax and NIC withholding. If 35 hours of minimum wage work were exempt from tax and NIC then it would be the equivalent of the gross London living wage rate. I find it nauseating to hear commentators justify paying the living wage because more tax could be collected from low earners.

Likewise wage rates could rise if the dead weight costs of employment were reduced: corporation tax, employer NIC and pension auto-enrolment. Employment is a simple equation of the cost of employing someone against the value they would generate (or protect). Increasing the cost of employing someone will have an impact on low margin businesses. Some people don't care about that and that's fair enough, but nothing is ever cost free.

What you are saying here is obviously part of a bigger restructure as tax cuts would need to be matched with reduced government spending (assuming you are not advocating increased borrowing). Within the current set up the amount of people on minimum wage (or worse with zero hour contracts) is an issue not just for the individual but also for the government and the wider economy as their tax revenue is below what was budgeted as they hadn't predicted so many of the newly generated jobs to be on low pay. This reduced tax income is part of the reason that government borrowing is up. Low pay has knock on effects.

 

[Tangled up in Blue]

79 workers underpaid by those companies named and shamed. Shocking. What's more shocking is Francis O'Grady of the TUC on her 88 grand a year for a 35 hour a week. Perhaps that's the bigger story, overpaid and seriously underworked union barons.

What do you think comrade?

I'm pleased to see a woman in the top union job.I also think she's very articulate and highly intelligent.

 

[londonblue]

restore the top rate of tax to the rate it was when this government came into power then you can feel a bit less aggrieved about those on high pay

It would probably also pay for Neil_F's suggestion of giving people on the minimum wage tax exemptions.

 

[Neil_F]

It would probably also pay for Neil_F's suggestion of giving people on the minimum wage tax exemptions.

It wouldn't. The Treasury and the IFS both found that a tax rate of 50% costs the Exchequer money through behavioural changes. That was the reason for getting rid of it, although the politics of that decision were absolutely nuts.

 

[Neil_F]

What you are saying here is obviously part of a bigger restructure as tax cuts would need to be matched with reduced government spending (assuming you are not advocating increased borrowing). Within the current set up the amount of people on minimum wage (or worse with zero hour contracts) is an issue not just for the individual but also for the government and the wider economy as their tax revenue is below what was budgeted as they hadn't predicted so many of the newly generated jobs to be on low pay. This reduced tax income is part of the reason that government borrowing is up. Low pay has knock on effects.

There would need to be a spending reduction but it wouldn't need to be a matched reduction. There would be a GDP benefit of increasing the spending power of the lowest earners (who tend to spend almost all additional earnings as they have low savings rates) that would lead to increased VAT and general tax revenue growth.

In a politics free world I would cut spending by reducing benefits to pensioners, who have become a state spending equivalent of a protected species because they vote.

I would prefer to see the net living wage achieved through tax cuts rather than increased employment costs because it has a much smaller impact on unemployment. Increasing the costs of employment by 15% in a 10% margin business will lead to job reductions. Increasing net pay by 15% but without an increase to the cost of employment would keep that business going and people in a job.

For the record, increasing the minimum wage to the living wage would probably reduce the tax take as well. Increasing wages would reduce profits and thus reduce corporation tax payments. For any part time workers there won't be an increase in tax take because they will still fall below the personal allowance. I haven't seen a macro level study on this but I suspect any increase would be virtually zero.

 

[Another Surrey Shrimper]

Pensions are protected politically as pensioners vote and they are an increasing demograph.

Increased wages for the lowest paid hits company profits and therefore corporation tax but people should be paid a wage that reflects their efforts and seemingly there is an ever increasing list of companies not paying corporation tax despite making the relevant level of profits.

 

[Massimo Giovanni]

I read your points Neil_F and you explain most of the economics clearly and accurately;-
BUT what is not included in a better pay deal is growth in social aspirations, reduced social security top up payments, also likely better in-job training and management from employees valuing the staff more (as they are paying them more).
For sure there would be problems in a "hike" of minimum wage, and for small companies that could be painful, but successful, huge profit companies need to strike a fairer balance between shareholders bonuses and staff inclusive schemes in the success of the organisation - for example the John Lewis ethos of profit sharing and paying above minimum wage.