Apologies if this has been done, but some chap from Next has finally articulated what presumably lots of people have thought already: That the increase in the minimum wage is almost certainly going to cause inflation.
http://www.retail-week.com/sectors/fashion/next-boss-lord-wolfson-confident-customers-can-afford-price-hikes/5078870.article

Was this GO’s plan all along? It seems logical to me that it will cause inflation: If a company’s costs go up, and they still want to return the same value to shareholders, they have to increase their prices. Unless of course anyone believes that paying people more would make them any more “efficient” in some way.

Is it all just a cunning wheeze to finally vindicate Carney and his endless harping on about interest rate rises? Am I looking at this too simplistically?

Cant read the article but there will be a link between sale price increases and cost increases, doesnt have to result in interest rate increases as you would assume the cost would be a one time step increase? Who knows what will actually happen, no doubt some places will put the prices up disproportionately to the cost. Of course the main issue as mentioned on the travel cost thread is the affect this will have on the lower wages roles such as care.

Well if people have more cash they will spend more in the shops and the forces of competition should self-regulate prices and keep inflation under control. But your point about a businesses cost rates going up is a valid one. The living wage is more likely to increase unemployment as most companies won’t have the luxury of being able to pass additional costs onto customers so will have to cut costs i.e. make people redundant.

Wonder how much Lord Wolfson’s “wage” has gone up compared to his workers?

The concern in my place of work is that the lowest workers are going to get a pay rise where everyone else is being held stagnant.

Have seen this throughout the lifetime of the minimum wage (which I agree with). If person A is on the minimum and person B is on A+10% for taking on extra duties then as A has risen B has not kept up until the extra duties aren’t worth the pay increase.

Something tells me the consequences of this haven’t been fully analysed.

Time for the low paid to close the gap with those at the top. The pay differential between workers and the top is morally unjustifiable. The imbalance is at a historical all time high both here and US

STATO, take your point on being a one-time increase. Except of course, that the living wage is due to increase to £9 by 2020.

I briefly thought that it may give rise to a lot more people becoming self-employed (I’m thinking particularly in industries like cleaning), as companies seek to drive down costs and take advantage of the fact that IR35 is so loosely regulated – but is this likely in reality?

I don’t disagree that in some companies those at the top earn ridiculous salaries far beyond their worth, but they are a small % of workers so cutting their salaries and redistributing them will not solve the pay gap problem – not even a drop in the ocean. Similarly loading up businesses with additional costs pushed down from government won’t work either – it’ll just increase redundancies and businesses going under.

The problem in the UK is a lack of those middle earning skilled jobs that we used to have like, jobs in manufacturing. All we’re left with is a 2 tier economy of the unskilled menial low paid jobs at one end of the scale, and high skilled/high value jobs at the top. You aint going to solve that situation easily.

Pawsey is right, but milkys point is valid. Public sector pay restraint has meant that in our agency those at the bottom have received bigger rises than those of us in the middle, the differential for quite big differences in responsibilities has narrowed markedly.

Those at the top, of course…..

rj2dj – Member

STATO, take your point on being a one-time increase. Except of course, that the living wage is due to increase to £9 by 2020.

That’s more or less 2.8% per year from the current living wage. CPI is low right now but in most years, it’s been higher than that. There’s a real chance that the £9 ends up being below CPI.

hey are a small % of workers so cutting their salaries and redistributing them will not solve the pay gap problem – not even a drop in the ocean.

IT really will as it is a gap between the highest paid and the worst paid. If you lower the top pay you close the gap. I think you mean to say it wont make the poor better off [ which is true]

Similarly loading up businesses with additional costs pushed down from government won’t work either – it’ll just increase redundancies and businesses going under.

this always gets said they probably said it for the six day week in the 18 th century and ever since right up to the equal pay act and the minimum wage.

It never actually happens

The payrise thing is a little bit of a red herring. A large % of a small wage isn’t necessarily a big payrise in terms of £, whereas a better paid person getting a smaller % payrise would still probably receive a larger payrise in terms of £ than those on the lowest wages.

I’m sure those on £40k per year receiving a 2% payrise are not going want to trade places with their toilet cleaner on £12k per year who might be getting a 10% payrise. But unfortunately if it came to redundancies the toilet cleaner is more likely to be in the firing line.

But if the CEO of the company I work for who’s on a £6.5M ‘package’ (though is salary is a paltry £900k) redistributed his package across all the global employees then we’d net less than £200 per year on our salaries. That’s not going to make much of a difference to many peoples lives in reality – and it would only be a one-off payrise. The answer is not to bash the bosses. Our economy needs more of those middle paid jobs that it’s lost over the last 30 years or so.

It depends if you’re happy to subsidise “big business” by topping up the low-paid with state benefits.

Junkyard – it sort of did in the ’80’s. Not for the same reasons, but large chunks of entire industries practically disappeared overnight putting millions of people on half decent middle salaries onto lower paid lesser skilled work as they didn’t have the skills to move up the scale. unfortunately those industries and jobs were not replaced with similar quantities of similarly paid jobs. Instead they were replaced with an increasing number of low paid, low skilled ‘service sector’ jobs at the bottom and high skilled highly paid jobs at the top thereby increasing the pay gap.

Our economy is not balanced. That is the cause of the pay gap. Only a re-balancing of the economy will fix it.

You have confused “de industrialisation/ the decline of the staple industries/manufacturing with government red tape/legislation/social contracts causing unemployment

I dont believe reasonable legislation, to improve working conditions, cause the negative effects that they always say it will.
Its a red herring

The pay gap is not caused by a mis matched economy[ it is real and does cause problems] but by unregulated avarice for the well paid matched with weaker unions and legislative rights for the poor/many

They could just reduce their dividends a bit and swallow the cost increase…..

De-industialisation of industries that were not viable and being propped up by taxpayers. But anyway, the effect of that was to cause the two tier economy which is the cause of the pay gap.

In the area of economics there are no experts and we’re all guessing, so it is ultimately a big gamble. You can squeeze businesses only so much, you never know how far away from bursting they are. Big businesses will be fine, they can absorb these costs or move the jobs abroad (what my company is doing), its the small to medium companies that employ the vast majority of people that are under the most threat.

Stuff costs too much, that’s the problem.

Footflaps, Not sure that would impress the shareholders much.

Using Next as the example, given that a number of people’s pension pots are probably at least partly invested with Fidelity and Blackrock (who own 22% of Next between them), that might cause slightly more widespread issues too.

the effect of that was to cause the two tier economy which is the cause of the pay gap.

Repeating it wont make it true – though clearly this happening had many effects but it was not the cause of the rising pay inequality as it happened across multiple sectors as well as across time.

Bosses wages escalated massively as workers wages stagnated/did not keep pace..

Footflaps, Not sure that would impress the shareholders much.

Tough titty is all I can say to that (and before you ask, I have over £500k of shares in my funds).

I’d much rather live in a more equitable society and be a bit less well off than live in a massively divided one.

prices will go up? well i never! 😆

a wee hint, inflation for yer average punter has never stopped through this recession, most every day things are more expensive.

We desperately need some inflation. If we go Japanese and fall into 20 years of deflation then our already-unaffordable levels of personal debt will get even larger in real terms.

In which case expect some serious standard of living issues and some really very serious problems for people who’ve gorged on credit on the assumption their salaries would go up over time/inflation would reduce the debt in real terms…

With so many of us having been brought up in a time of ever-increasing affluence I’m not sure too many people will know how to cope in a time of falling living standards brought about by deflation…

I would seriously love to take part in this debate but fear that if I did then a ban would be inevitable.

As junkyard said, this is the same cobblers that came out before the minimum wage was introduced (and every time it’s raised), and before numerous other improvements to workers’ conditions, and it never happens.

Inflation has never been lower and interest rates are so low because the Bank of England wants to encourage spending. Equally, the less shitty wages are subsidised by social security and the more they’re paid for by employers, the lower everyone’s tax bills will be. Right now it’s corporate welfare to low paying employers.

Inflation is absolutely not a problem right now.

The big companies trot this line out every time there is a change that will help their low paid workers. When it comes to Board renumeration then it all goes out of the window and we get the claptrap about having to attract the best, when its clear they are not even close to the best. Etc etc

But if the CEO of the company I work for who’s on a £6.5M ‘package’ (though is salary is a paltry £900k) redistributed his package across all the global employees then we’d net less than £200 per year on our salaries. That’s not going to make much of a difference to many peoples lives in reality – and it would only be a one-off payrise.

But you are missing that the top layer and the two layers below have all had multi-percentage rises over the last 30 years – while driving down the pay of the employees at the bottom, and the Govt helped them by paying out subsidies (Tax Credits) to those employees.

Paying the crowd at the bottom an extra £1 per hour will make bu99er all difference at the end of the day, especially as the majority of those jobs are not in competition with anyone else but other UK companies who will also increase their costs.

Cost increases for the Public Sector will just mean more money been spent by those employees, as folk at the bottom spend pretty much all their cash.

the Govt helped them by paying out subsidies (Tax Credits) to those employees.

Conservatives prefer to use the term “taxpayers”. As in wobbliscott’s comment above : “De-industialisation of industries that were not viable and being propped up by taxpayers“.

So nonviable private companies are being propped up by taxpayers through subsidies to their low-paid employees. Or even worse, perfectly viable private companies are being propped up by taxpayers through subsidies to their low-paid employees.

It all depends on the level set. One certainty it will be wrong by defintion as cant be one figure and gov’s are crap and working these things out. Double fail.

Increasing wages without increasing productivity less to higher salaries for fewer people – labour economics 101 – what does that do for inequality?

I doubt that there will be inflation for those on the higher “minimum wage” (It’s not the living wage however many times the chancellor ministers name it as such). The IFS has all ready stated that the drop in subsidy to those on low pay with families will be larger than the pay rise.
Net result business will start to pay it’s own way but there will be a bit less cash in the economy from all those lower paid, zero hours hard-working folk to spend.
History graduates should not run economies, economics “scientists” have a hard enough time deciding on what is the correct course of action.

Increasing wages without increasing productivity less to higher salaries for fewer people – labour economics 101 – what does that do for inequality?

What does decreasing public subsidy do to the tax burden? What does lower tax do for job creation? “Economics 101” 🙄

what does that do for inequality?

Something vague and imprecise that you only hint at but never say explicitly?
THM MO 101.
Insert smileys here to show humour.

Its an interesting policy from this government

Of course it will have some negative effects. But we can’t carry on with a world where people in work can only get by with state help. That has negative consequences for economy as well. The living wage may well boost the economy as well. More wages in the pockets of the low paid means more spending. More money o the rich often just means more saving

Of course the thing I find offensive is that low pay and working benefits effectively subsidises Tescos (and other low pay employers).

A decent minimum / living wage and a consequential reduction in working benefits (and therefore overall taxation – divvy the reduction up as you see fit) feels better, but I’m not sure how it actually pans out.

The purpose of state support should not be to support low pay employers.

IFS has all ready stated that the drop in subsidy to those on low pay with families will be larger than the pay rise.

Does that take into account behaviour changes. At the moment many people choose not to work more than 16 hrs per week because they lose tax credits. So if they lose tax credits but work more hours at a higher pay rate they may not lose out.

A living wage in a capitalist society always seems like a non starter to me. Prices go up, the living wage is no longer enough to live on, up it goes again, and around we go.

If we are to have people who earn more than others, there will always be people who aren’t well off and struggling.

Solution though? Pie in the sky Corbynism? How about communism? Everyone is equal, work for the state and society, not yourself. End result, state can’t afford the social guff and everyone is poor.

Solution though?

Everyone who earns more than the national mean average could give to those who earn less.

Simple.

Paypal details are in my profile. 🙂

A living wage in a capitalist society always seems like a non starter to me. Prices go up, the living wage is no longer enough to live on, up it goes again, and around we go.

State support of private companies (through tax credits) in a capitalist society is an acceptable solution?

This is not a living wage its an increase in the minimum wage being called a living wage, big difference especially as we dont know what the cost of living will be in 2020. (more than £1200 a month I suspect).

Also, the age criteria will skew the market and proliferate shit contracts for under 25’s.

Not paying a living wage is either a) an abuse or b) corperate theft.

http://www.theguardian.com/politics/2015/jul/07/corporate-welfare-a-93bn-handshake