Politics, politics, politics

[Danishfurniturelover]

If all these businesses are folding under the weight of having to pay over 25s £7.50 an hour, why is unemployment so low?

The company I work for put the minimum wage to £7.50 for all staff, regardless of age. There's about 12 of us in the warehouse, another 100 or so in other areas of the company. Nobody lost their job and iirc, the CEO pulls in £250k per year. To me, if a company can't afford to stay afloat when having to pay staff £7.50 an hour (or £10 an hour by 2020) then that is a business that is far too reliant on the government topping up the wages of its workforce with in-work benefits.

I agree with this and feel that in some businesses workers are underpaid and the bosses fleecing them.

I will always be on the side of the working class, not a socialist but still on the side of the working class.

 

[scaramanga]

If all these businesses are folding under the weight of having to pay over 25s £7.50 an hour, why is unemployment so low?

The company I work for put the minimum wage to £7.50 for all staff, regardless of age. There's about 12 of us in the warehouse, another 100 or so in other areas of the company. Nobody lost their job and iirc, the CEO pulls in £250k per year. To me, if a company can't afford to stay afloat when having to pay staff £7.50 an hour (or £10 an hour by 2020) then that is a business that is far too reliant on the government topping up the wages of its workforce with in-work benefits.

I can only speak for those I've had contact with, but I believe it's a representative sample. It is across my industry and it is in the regions where we have factories.

Most businesses of this size are owner managed. That means they don't jump ship at the first sign of losses like a large corporate can. Most of these people have invested their working lives into these businesses and many a lot more (life's savings, charges on their own properties, etc.). So they'll take a loss this year and probably next too. They'll put some more of their kids' university funds down or increase the mortgage on their house because it's not just an investment, it's where they (as people late on in their careers who really don't want to be on the job market) take their salaries - most of them 5 figure ones too.

And they'll continue to do this and continue to hope that someone in government sees sense because that's the only option they have. They don't have access to £300k of CAPEX like we did to negate these increases, they don't have profitable overseas arms that can finance the up front losses. These are small business owners with their entire lives in their companies and it's what makes up most of this country.

So you won't see the effect in employment figures this year, you probably won't see it next, but without a sensible government it is a time bomb that will go off in the life of the next parliament. One interesting figure is the YouGov brexit survey that I'm always being asked to take. It's one of those surveys where you know the intention just from reading the questions. They ask about revenues and profits between this year and last - mainly centred around Brexit. Profits for most SMEs are down and the automatic assumption (and the one they're looking for) is that Brexit has caused it - that's not what I'm seeing. For most of the SMEs, profits are down but revenues are actually up - in part due to weaker Sterling, and these losses (or reduced profits) are all in the margins - there's a slight increase in import costs but a massive increase in labour.

Now I know as well as anyone that the plural of anecdote is not evidence, but to my knowledge you won't find this evidence anywhere. We're members of a number of industry bodies, and I see a lot of local businesses (in two parts of the country) through MP lunches, council committees, etc. This is a real effect and it's going to cause a massive surge in unemployment unless a government gets on top of it.

 

[the dza]

I can only speak for those I've had contact with, but I believe it's a representative sample. It is across my industry and it is in the regions where we have factories.

Most businesses of this size are owner managed. That means they don't jump ship at the first sign of losses like a large corporate can. Most of these people have invested their working lives into these businesses and many a lot more (life's savings, charges on their own properties, etc.). So they'll take a loss this year and probably next too. They'll put some more of their kids' university funds down or increase the mortgage on their house because it's not just an investment, it's where they (as people late on in their careers who really don't want to be on the job mark) take their salaries - most of them 5 figure ones too.

And they'll continue to do this and continue to hope that someone in government sees sense because that's the only option they have. They don't have access to £300k of CAPEX like we did to negate these increases, they don't have profitable overseas arms that can finance the up front losses. These are small business owners with their entire lives in their companies and it's what makes up most of this country.

So you won't see the effect in employment figures this year, you probably won't see it next, but without a sensible government it is a time bomb that will go off in the life of the next parliament. One interesting figure is the YouGov brexit survey that I'm always being asked to take. It's one of those surveys where you know the intention just from reading the questions. They ask about revenues and profits between this year and last - mainly centred around Brexit. Profits for most SMEs are down and the automatic answer (and the one they're looking for) is that Brexit has caused it - that's not what I'm seeing. For most of the SMEs, profits are down but revenues are actually up - in part due to weaker Sterling, and these losses (or reduced profits) are all in the margins - there's a slight increase in import costs but a massive increase in labour.

Now I know as well as anyone that the plural of anecdote is not evidence, but to my knowledge you won't find this evidence anywhere. We're members of a number of industry bodies, and I see a lot of local businesses (in two parts of the country) through MP lunches, council committees, etc. This is a real effect and it's going to cause a massive surge in unemployment unless a government gets on top of it.

Only time will tell if your anecdotal evidence translates to a nationwide problem in the future. But didn't the CBI make a very similar case when the minimum wage was initially introduced in the late 90s? The dire warnings of mass unemployment etc. but it did not materialise. And it did not materialise with subsequent increases to the minimum wage either.

For workers over the age of 25, the minimum wage went from £6.70 p/h to £7.20 p/h in April 2016, an increase of 7.5%. A year later, with a further increase in the minimum wage (for over 25s) to £7.50 p/h, surely there would be some negative movement in the unemployment figures if there was a major problem? However, the opposite has been the case.

If business didn't have a track record of crying wolf over the issue of minimum wage/economic armageddon then I'd be more inclined to believe people when they tell me that making an actual living wage the minimum you can pay people, by 2020, would be a disaster. But the rhetoric from the likes of the CBI has, so far, never matched the reality.

 

[scaramanga]

Only time will tell if your anecdotal evidence translates to a nationwide problem in the future. But didn't the CBI make a very similar case when the minimum wage was initially introduced in the late 90s? The dire warnings of mass unemployment etc. but it did not materialise. And it did not materialise with subsequent increases to the minimum wage either.

For workers over the age of 25, the minimum wage went from £6.70 p/h to £7.20 p/h in April 2016, an increase of 7.5%. A year later, with a further increase in the minimum wage (for over 25s) to £7.50 p/h, surely there would be some negative movement in the unemployment figures if there was a major problem? However, the opposite has been the case.

If business didn't have a track record of crying wolf over the issue of minimum wage/economic armageddon then I'd be more inclined to believe people when they tell me that making an actual living wage the minimum you can pay people, by 2020, would be a disaster. But the rhetoric from the likes of the CBI has, so far, never matched the reality.

In the late 90s we weren't under the external pressures of a global market that can undercut our prices.

The first wage increase was mainly accepted by customers - ours did and so did many customers of those businesses I spoke to. This year, the response has been entirely different. There is absolutely no room for price increases and (this will vary from industry to industry) there comes a tipping point where the arse ache of shopping overseas is bested by the savings available. Most industries I've had experience with are being told to hold prices or move to China.

The first increase also didn't have that much of an effect because anyone half-decent was already being paid more than £6.70 per hour. Market rates for a labourer at either of the two locations where we have factories were £7-7.10 per hr. The increase was a little painful because the increase has to be matched across the board to keep a training/improvement incentive in place, but it didn't really increase the bottom end much at all. We were paying £7.10 in the South and £7 in the Midlands. £7.50 is well over the market rate for an unskilled labourer - any business with unskilled labour will have seen a massive hit to their margin over the last couple of months.

I can't speak for places like Liverpool or Saudi Sportswashing Machine where the market rate was probably lower than the initial increase, but the second one has been a massive hit where I do have experience and the next will be just as bad.

 

[Gilzeantoscore]

The lower rate of tax was designed to offset the increase in wages and that already hasn't worked. Small businesses all over the country are collapsing under the weight of increased wages.

Those putting these wages in place don't understand the fine margins that small businesses work on. It's not unheard of at all for a business with a £750k wage bill to be making profits of £20-30k a year - small reward for the owner. A 4% increase in labour would wipe out all profits - a lower rate of tax does nothing for that business.

In the last month I've had to make 6 people redundant and another jumped before being pushed - all completely down to rises in the minimum wage. The company was doing fine before, but the new minimum wage made what was previously an unaffordable £300k investment in plant very affordable.

In a world where anyone from any country can undercut pretty much any of our goods or services, an artificially high wage is suicide.

flimflam! 750K wage bill, for a 20-30K profit. Yeah that would be the tax dodging declared profit would it not Ha, ha, ha. He should sell out to one his employees and take a wage then, shouldn't he?

 

[Gilzeantoscore]

I agree with this and feel that in some businesses workers are underpaid and the bosses fleecing them.

I will always be on the side of the working class, not a socialist but still on the side of the working class.

That's what Theresa May says...

 

[Gilzeantoscore]

If low wages are so good for employment, why has the US got such an in built structural unemployment? Take the drug trade and prison incarceration out of the equation and they are always battling high unemployment, despite workers being so poorly paid, they have to rely on food stamps. In fact the business model of Walmart is shamelessly based on a low rent work force. If these linkages were true, there would scarcely be an unemployment problem in America.

 

[scaramanga]

flimflam! 750K wage bill, for a 20-30K profit. Yeah that would be the tax dodging declared profit would it not Ha, ha, ha. He should sell out to one his employees and take a wage then, shouldn't he?

I'm starting to see why you hold the opinions you do. You clearly have no concept whatsoever of business and/or accounting. Those figures are extremely common for a labour-intensive SME.

In fact, I could point you to my company's (clean) results last year which show a 1.3M direct labour cost (before any office staff) and a profit of around 60K. LAbour is very, very expensive in the UK - that's a fairly common figure.

 

[Gilzeantoscore]

I'm starting to see why you hold the opinions you do. You clearly have no concept whatsoever of business and/or accounting. Those figures are extremely common for a labour-intensive SME.

In fact, I could point you to my company's (clean) results last year which show a 1.3M direct labour cost (before any office staff) and a profit of around 60K. LAbour is very, very expensive in the UK - that's a fairly common figure.

That's flimflam too! If the profit margins were so low, the owner would not remain in the industry, it's as simple as that. Why would anyone stay in an industry where profits were so low? And as you say, if things are so tough move to another industry, you said it yourself earlier in this thread when we were discussing poor work conditions, casualization etc. You know, what's good for the goose and all that.

 

[scaramanga]

That's flimflam too! If the profit margins were so low, the owner would not remain in the industry, it's as simple as that. Why would anyone stay in an industry where profits were so low? And as you say, if things are so tough move to another industry, you said it yourself earlier in this thread when we were discussing poor work conditions, casualization etc. You know, what's good for the goose and all that.

Because they're owner-managed businesses - like the vast majority of UK businesses are. If you close the business then you have to go and get a job elsewhere.

Not to mention that most owners have their mortgages tied into whatever finance the business needed or the initial purchase.

 

[Gilzeantoscore]

Because they're owner-managed businesses - like the vast majority of UK businesses are. If you close the business then you have to go and get a job elsewhere.

Correct. So what? As per your neo liberal ideology, if they cannot stand the heat from the fire, get out of the kitchen. They can get out and somebody can take advantage of that opening in the market. Isn't that how it works? Hey Scara this is the brave new world of free market Toryism, there's no room for sentiment you know.

 

[Parklaner81]

Only time will tell if your anecdotal evidence translates to a nationwide problem in the future. But didn't the CBI make a very similar case when the minimum wage was initially introduced in the late 90s? The dire warnings of mass unemployment etc. but it did not materialise. And it did not materialise with subsequent increases to the minimum wage either.

For workers over the age of 25, the minimum wage went from £6.70 p/h to £7.20 p/h in April 2016, an increase of 7.5%. A year later, with a further increase in the minimum wage (for over 25s) to £7.50 p/h, surely there would be some negative movement in the unemployment figures if there was a major problem? However, the opposite has been the case.

If business didn't have a track record of crying wolf over the issue of minimum wage/economic armageddon then I'd be more inclined to believe people when they tell me that making an actual living wage the minimum you can pay people, by 2020, would be a disaster. But the rhetoric from the likes of the CBI has, so far, never matched the reality.

Agree with your first point - only time will tell. It's therefore too early to make the judgement. The NMW, as you illustrate, has increased by in the region of 11% over the 18 months to April 2017. Consider also that workplace pensions became law over a similar timescale. That's a hefty increase in anyone's language. And I suspect the effects are yet to become fully apparent.

 

[scaramanga]

Correct. So what? As per your neo liberal ideology, if they cannot stand the heat from the fire, get out of the kitchen. They can get out and somebody can take advantage of that opening in the market. Isn't that how it works? Hey Scara this is the brave new world of free market Toryism, there's no room for sentiment you know.

If it were a free market I wouldn't have a problem. It's not though - our own government is tipping the scales against us and they don't even realise they're doing it.

In a free market (the one that most of these businesses were created in) the well run businesses would be doing well. This is market intervention that doesn't have an upside to anyone other than overseas producers of cheaper alternatives.

 

[scaramanga]

Agree with your first point - only time will tell. It's therefore too early to make the judgement. The NMW, as you illustrate, has increased by in the region of 11% over the 18 months to April 2017. Consider also that workplace pensions became law over a similar timescale. That's a hefty increase in anyone's language. And I suspect the effects are yet to become fully apparent.

And staff still expect to keep their differentials. It's an 11% increase across the board, not just for those on NMW

 

[Gilzeantoscore]

If it were a free market I wouldn't have a problem. It's not though - our own government is tipping the scales against us and they don't even realise they're doing it.

In a free market (the one that most of these businesses were created in) the well run businesses would be doing well. This is market intervention that doesn't have an upside to anyone other than overseas producers of cheaper alternatives.

No, in a 'free market' the business that does well is the one that underpays it's staff, holds back entitlements and lies about it's tax commitments. It's all part of the modern business model.

 

[scaramanga]

No, in a 'free market' the business that does well is the one that underpays it's staff, holds back entitlements and lies about it's tax commitments. It's all part of the modern business model.

Of course it doesn't. In a free market the business that underpays its staff gets the worst from the employment pool and has worsened efficiency and quality as a result.

And any business breaking the law on its tax commitments should be punished to the full extent of the law. Although I suspect what you're really getting at is tax avoidance, which is perfectly legal and something I'm sure you do yourself.

 

[Parklaner81]

That's flimflam too! If the profit margins were so low, the owner would not remain in the industry, it's as simple as that. Why would anyone stay in an industry where profits were so low? And as you say, if things are so tough move to another industry, you said it yourself earlier in this thread when we were discussing poor work conditions, casualization etc. You know, what's good for the goose and all that.

Closing down a business that employs a significant number of staff is far from as straightforward as you seem to be suggesting. Particularly owner-managed SME's.

 

[r-u-s-x]

Closing down a business that employs a significant number of staff is far from as straightforward as you seem to be suggesting. Particularly owner-managed SME's.

think he is parodying Scara's views rather than making a statement - may be wrong but that's what I get out of it.

 

[the dza]

This is a good quote for the current Tory campaign, one they should heed imo:

"I always cheer up immensely if an attack is particularly wounding because I think, well, if they attack one personally, it means they have not a single political argument left."

Margaret Thatcher.

 

[milo]

This article is worth reading

https://twitter.com/x/status/869629543128203265