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Monday 5 March 2007

Low-paying employers

The unemployed are a favourite target for government ministers and tabloid headline-writers. But, strangely, unscrupulous business-owners rarely get a mention.

If an employee is paid a low wage, he or she can receive help with rent and council tax and also tax credits from the government.

Imagine two businesses, one is ethical and pays its employees enough so they don’t have to claim any of these benefits. The other business pays low wages in the knowledge that the government will top up the amount, so its employees have enough to pay their rent and live.

This is just a subsidy by the tax payer that goes straight into the pocket of the owner of that business and, in the case of housing benefit, to a private landlord.

I suppose the argument is that these business-owners are somehow ‘stimulating the economy’ by running what are in effect state-subsidised businesses? But, perhaps, as well as means testing the low-paid employees, the government should means test the business and take a percentage of the profits that were produced with the help of public money?

Oddly, I’ve never seen this suggested anywhere. It seems it’s not OK for ordinary people to live ‘off the state’, but it is fine for low-paying employers to do it.

The minimum wage is currently £5.35 per hour for workers aged 22 years and older. That is £214 for a 40-hour week.

As a test, I entered the details of an imaginary couple into the ‘do I qualify‘ page on the HM Revenue & Customs website. Both of them work 40 hours a week and earn the minimum wage (£214 per week each). They have two children aged under ten.

It seems they would be entitled to Child Tax Credit and Working Tax Credit. I assume they would also qualify for help with their rent.

Why should any business be allowed to employ people when the state still has to subsidise them because their full-time wages don’t give them enough to live on? It’s hardly surprising that some people see no point in getting a job when the money they actually earn is not enough to live on and get them off benefits.

There is no incentive and, often, a lot of risk in taking a job.


Filed under: Politics — GS @ 5:09 am

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