To wonder why people think "raise the NMW" is the answer to poverty?

(141 Posts)
windowwashingbanshee Thu 28-Mar-13 16:05:59

Without wanting to refer to another thread too much (...), I did hmm at seeing yet another comment about raising the minimum wage being the answer to poverty.

I'm a small business (co-)owner. Five of our permies are on NMW, the starting point for all employees, with potential raises; having worked on NMW for years myself, I'm a firm believe of retaining people, rather than just hiring cheaply (too short-term thinking for me). Nevertheless, whichever way you look at it, we need fairly unskilled labour - it's warehouse work - packing, sorting, bagging, and preparing labels for shipping. Our work is fairly seasonal, with dips which are mostly predictable. When that happens, and orders are low, I normally focus on doing other things - making sure people are up to date on their training, we usually have a volunteer day which everyone can opt into, permitting extra-long holidays, and so on.

However, in those times we barely break even some years. And although the balance of the busy months makes us profitable overall, I know I'd face huge pressure to let one or two employees go every year if the NMW was put up to a "living wage" suddenly, depending on the length of the dip, or move to some sort of zero-hours contract situation, which I don't want to do.

I'm not sure I'm explaining it properly - but basically I can afford to keep under-utilised employees on full-time in quiet periods if they're paid NMW right now. If I had to pay several pounds more per employee, us "just breaking even" would tip into "making a loss", because the productivity of those employees wouldn't be worth the £8 / £9 (or whatever) it had been raised to.

So, AIBU to think that the posters who claim that "raise the NMW" is the miracle that would end poverty in this country are being quite short-sighted? It seems that way to me.

ParadiseChick Thu 28-Mar-13 16:41:43

It's ridiculous when lots of huge multi's with millions of pounds profit aren't paying their staff a living wage because the government are topping up their earnings.

stressyBessy22 Thu 28-Mar-13 16:43:35

Whois the only one it is better for is the employer who is either greedy or lacking the acumen to be successful without exploiting workers

TeWiSavesTheDay Thu 28-Mar-13 16:44:02

There are other ways to approach making it easier for small business to employ people outside of keeping nmw low though - how much employer ni is paid on top of nmw is key in lots of cases.

IslaValargeone Thu 28-Mar-13 16:45:12

Small business owners shouldn't be tarred with the same brush as the huge multis though.
Lots of small business owners jump through a thousand hoops, have sleepness nights and ulcers trying to keep their employees in jobs and their businesses running.

MrsKoala Thu 28-Mar-13 16:45:48

forgive me if i'm being thick OP but if all of the staff in your industry earned more, then could the cost be passed on to those purchasing your product? If it was in all businesses similar to yours the cost would go up across the industry then if people wanted/needed your product the market would support an increase? or is that too simplistic?

Before i went to uni there was no NMW and i got £8-9 per hour as a receptionist. Now when i temp (way more experience and qualified in much more) i get nmw. Because the bar was lowered. But the cost of living has gone up massively in the last 16 years.

windowwashingbanshee Thu 28-Mar-13 16:46:46

Didn't expect so many replies so quickly, will try to answer questions whilst i catch up with the responses:

- We don't use zero hour contracts at the moment, and never have, mainly because i like to employ the same people again - yes, anyone could do the roles we've hired for, but i also like people that i can trust, get on well with the rest of the team. i wouldn't get that if we started using too many temp workers

- We do have a very high retention rate, yes, but I try to focus on not just thinking i can buy people's loyalty with higher wages - people start on NMW but we do reward people with higher wages to keep them and offer other little things that I think make a difference (for starters, when I was doing warehouse work myself, sometimes it got very very cold with the delivery doors open - why not free tea and coffee? cheap and such a little perk at work)

- we could afford to pay people a living wage when their activity is equal to or more than the outlay in costs (and not just salary - NI contributions etc) but that was sort of my whole point - there would be increased pressure to be much more ruthless with employing people when during our (almost predictable) quiet periods mean their "cost" to the business is a loss-maker - I can afford to be slightly more flexible with employment (keeping people on) because I think it brings other rewards (loyalty, quality work)... I wouldn't have the same discretion or agreement of my business partner if NMW rose to a "living wage" level

- we don't employ students or temp workers for the above reasons (as in, we don't actively recruit for them specifically, we have had examples in the past) - our dips are industry related, not in terms of calendar months

ItsAllGoingToBeFine Thu 28-Mar-13 16:47:59

OK increasing NMW should not have a negative impact on businesses that only trade within the UK. If NMW goes up all businesses would have to increase prices to cover increased wages. Everyone would still be competing on a minimum play ying field.

Increasing NMW to a living wage wouldn't cure poverty but it would help a lot if people out. It is a bit ridiculous that you can go to work full time and not earn enough to support yourself.

EasilyBored Thu 28-Mar-13 16:49:28

If NMW doesn't go up, then housing and cost of living will have to come down.

I imagine you could live on it if you were childless. But when you're factoring in childcare costs it becomes unworkable without help.

Some people will work on minimum wage for their whole lives, for a whole variety of reasons, should they just not have children at all?

Bramshott Thu 28-Mar-13 16:49:29

I think because people realise the very real problems caused by trying to live on NMW - which full time is about £10,000 a year isn't it? If you're a family with two parents and three kids, there's no way you can live on that. Mainly because of high housing costs I guess, but 50 years ago it WOULD have been possible to support a family on a basic factory worker's or farm labourer's wage, and it grates that it just isn't possible any more.

JustinBsMum Thu 28-Mar-13 16:50:02

People's expectations are going to have to lower. How did people manage in the past? I think families were more supportive of each other. Young people doing apprenticeships earned very little for years (was it 5 years to be a plumber?) so there was no expectations of DCs or mortgage, or even of a car. Then you probably rented for years before saving enough for a mortgage.
Families on low wages didn't have holidays or luxuries.

Perhaps there was alot of tied housing so rents were lower but tied to the job.

Am just surmising - the well paid jobs for the majority are not going to return I don't think.

ChestyLeRoux Thu 28-Mar-13 16:51:08

Easilybored thats why its better to be on minimum wage as you get lots of help. If I had a higher wage I would get less help so its swings and roundabouts.

Surely, though, there are ways to raise NMW without affecting small businesses too much. You could exempt businesses with fewer than 25 employees, for example.

I appreciate what you're saying OP but it's crazy to let huge corporations like Tesco get away with too low wages for the sake of businesses like yours. There must be some practical ways of getting around the problem.

acceptableinthe80s Thu 28-Mar-13 16:52:22

Isla I agree i'm lucky in that respect but the reality is if NMW is increased then Op will need to reduce staff levels or take staff on temporary contracts. Lots of people have more than one job. As a pp said, tax credits are just a way for employers to pay their staff shit wages. Having people working for NMW and claiming tax credits (bearing in mind there'll not be much income tax being paid) is no way for any economy to survive. If as a small business you cannot afford to pay say £9 per hour instead of £6 then the business is not viable.

Feminine Thu 28-Mar-13 16:54:51

Of course it should go up!

That will separate the decent business owners from the greedy!

My DH works for about 1.50 over min wage. The company he works for hard turns over millions!

If the min wage increased properly , we could tell TC/WTC etc...to bugger off!

I'm sick of having to answer to Government bodies just because wages are so dreadfully low.

IslaValargeone Thu 28-Mar-13 16:57:09

Some small businesses do require certain skills from certain employees though, it isn't always about packing boxes and shipping.
There are niche high street businesses that rely on the continuity of a specific skill that some random temp can't cover for a few weeks at a time.
That's the person you have to keep on, even during the quiet periods, because he isn't going to find other work outside his area either.

CloudsAndTrees Thu 28-Mar-13 16:59:11

Small business should be exempt from having to pay tax, and I think companies should be given the money that is currently used in tax credits. It makes no sense for people to work and then have to claim benefits. It would be much simpler if NMW was a living wage, and companies were subsidised rather than individuals.

The point is, that working has to pay. If companies were able to pay their employees a living wage rather than NMW, we would have less people in the benefits system, and it would be clear that working would be beneficial financially. It would also mean that companies who could afford to pay their employees a living wage would have to do so without being subsidised by government either in tax credits or tax incentives. They would pay their own way and the public purse would be left completely out of the equation.

currentbuns Thu 28-Mar-13 17:01:33

OP, I don't think you answered the question about how much you pay yourself?

Feminine Thu 28-Mar-13 17:02:59

My Dad has a theory ( well he can't be the only one) that thinks MW should be abolished totally! apparently market forces will then dictate what workers get paid. confused

My Dad is a very successful self-employed business owner.

How easy for him to have that opinion.

MrsKoala Thu 28-Mar-13 17:03:40

But that's the problem isn't it - there are some people who can live on nmw, even in London, but they are young people living with m&d, or in a shared house. If you have a family you just can't compete. Where i used to live some neighbours moved into a 2 bed flat, there were loads of them. When i got chatting to one she told me they have 2/3 to a room including the lounge. They were from a very poor country and she said she grew up sharing a room so didn't mind. To them our standards were too high. But i would not consider living like that - so maybe they are. Or maybe we are creating a massive divide in peoples living standards and in turn putting more pressure on infrastructures like public transport, sewage, doctors, refuse collections etc. Which in turn costs more than paying people a decent living wage.

It's interesting to see the arguments about this, coming from the US where we have had NMW -- and the debate about it! -- since the 1930s.

Every single time they raise it, through all those decades, business claims it will drive up unemployment and destroy the economy, but it doesn't happen.

There's a good overview about it here:

www.huffingtonpost.com/peter-dreier/raising-the-minimum-wage-_b_2750336.html

What would ideally happen OP is that with everyone making more money, there should be more demand for your products and so your profits should stabilise. They found for example that restaurants in cities that passed living wage laws still did okay because more people were going out to eat.

MrsKoala Thu 28-Mar-13 17:07:45

Feminine - i remember working before nmw and campaigning for it. When i worked in a pub it was £3.50 per hour, but as a receptionist it was £9. Now they are both NMW. it just became the default pay.

MoodyDidIt Thu 28-Mar-13 17:08:20

YANBU

it isn't wages that are too low, its the cost of living is too HIGH, particularly housing and fuel

have said it a million times.....

windowwashingbanshee Thu 28-Mar-13 17:09:09

currentbuns because I'm not sure how I should share that information here. Do you want me to talk about the tends of thousands we paid into the business to set it up? Or should I put anything I say in with a disclaimer about how, for the first year of running the place, I didn't actually take any wages? Do I talk about the two days a week last week that I did in the site office? Or talk about the seventy hours I did the week before?

It's all very well asking if I pay myself a director's wage, but a 'yes' or 'no' answer isn't going to cut it, because you need context for that. I believe last year my wages were just shy of the 40 grand mark, if you want a (totally meaningless, without that context) figure though.

bollywoodfan Thu 28-Mar-13 17:12:09

OP what is it you sell? The thing is if more people have more money to spend then your business should also do better in the long run. So the extra cost in wages should be offset by better sales, in thoery.

GrendelsMum Thu 28-Mar-13 17:14:07

I think it's very difficult to understand the pressures on a small business if you haven't experienced it yourself, which most people in the UK haven't.

When we see images of business in the news, particularly lately, it tends to focus on "fat cat" chairmen of multinationals. There's a lot less about the small business employing 50 or so people and constantly having to go out and sell their product.

Interestingly, I just worked out my DH's hourly salary as a small business owner, which appears to be 3 x minimum wage, for what in many ways is a pretty successful business. I don't know whether that's what people would have anticipated.

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