Tuesday, 22 March 2016

Customers and employees

There was a report on Sunday claiming that the introduction of the national Living Wage will disproportionately affect Welsh jobs, because “we have a more economically instable (sic) environment".
I don’t doubt that for companies trading on the margins, any increase in costs could indeed tip the company into the red.  But how viable really, in economic terms, is any company which can only survive by paying its staff less than the amount which the government calculates they need to live on?  Paying staff a low wage and then depending on those staff receiving in-work benefits to survive is a form of back-door subsidy to any company affected; in essence it transfers part of the cost of wages from the employer to the state.  And since the state has no magic money tree, it transfers the cost of wages to taxation.
There was another aspect of this which struck me as well.  It was also stated that "We're seeing accelerated rates of shop closures in Wales - we're also seeing higher rates of footfall decline”.  I don’t doubt that; it's something we see in our towns regularly.  But the question is why it is happening.  At its simplest, people don’t feel that they have the money to spend by going to the shops and businesses.  Arguing that, therefore, wages should be kept low seems to me to be a somewhat curious response to a problem of a lack of money in the pockets of customers.
But it goes to the heart of the real problem which the businesses complaining about the living wage have.  They seem at times not to understand that employees are also customers – and it’s an underlying problem with the current economic paradigm in general.  Companies look at their own situation, and from that perspective, minimising wages can seem like a good idea.  But seen from a wider perspective, it’s simply a race to the bottom which nobody wins in the end.

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