Banbury Constituency Labour Party

Will the Real Living Wage ‘Kill’ Jobs?

Bicester relies heavily on retail jobs. We are always told that Bicester Village and the other large retail stores bring ‘prosperity’ to the Town. But how many pay the Living Wage? And what additional benefit would it bring to the town if they did? Well, on the 18th September, Lidl said it will become the first UK supermarket to implement the minimum wage as recommended by the Living Wage Foundation. From October, Lidl UK employees will earn a minimum of £8.20 an hour across England, Scotland and Wales, and £9.35 an hour in London.

Bicester's Lidl store

Bicester’s Lidl store

The new pay rate will amount to an average wage increase of £1,200 a year, “with 53% of Lidl UK’s 17,000 workforce and all age brackets benefiting from the rise”. Further, the company stated that if the Living Wage Foundation raised its recommended rate in its annual announcement in November, Lidl would adjust its minimum wage accordingly.

This initiative is a far cry and light years ahead of the so called ‘National Living Wage’ as announced by George Osborne in the July Budget, of £7.20 an hour from April 2016, and for people aged over 25 only.It flies in the face of the outburst of doom and gloom from business leaders since July about the impact on jobs of even Osborne’s modest and less than honest proposal. Most recently, John Cridland, the outgoing director general of the CBI, said that he believes the government’s plan to push up the minimum wage for the over-25s is a gamble

“A £7.20 national living wage in 2016 and a £9 national living wage by 2020 are laudable objectives, but they are a gamble,” he says. “I’ve talked to many CEOs who feel they may now have to make changes to their business models, which could result in fewer job and progression opportunities.”

Never mind the fact that £7.20 an hour is not a living wage at all according to the Living Wage Foundation, the prospect of paying even a little more to those employees earning the least is seen as a threat to business and employment prospects. Whitbread, who own Costa Coffee, has suggested that prices will have to go up to pay for even this modest increase. It strikes us that if a company has to pay poverty wages to keep its business going, it may not have a viable business in the first place.

But perhaps more to the point, the High Pay Centre’s analysis shows that FTSE100 Chief Executives (CEOs) are now paid 130 times more than the average for their employees, up from 47 times in 1998 and 13-44 times in 1980, and that it is rising year on year. Just taking Costa Coffee’s owners Whitbread as an example, the CEO is paid £6.375M a year, or 415 times more a year than the average annual wage of his employees of £15362! More to the point, 34000 Whitbread employees are paid less than £7.20 per hour now of which just less than half (15000) are over 25. Whitbread complain that Osborne’s policy will cost them £15M pa, but if we look at their annual report, for last year, the CEO and his 4 (yes just 4) Executive Directors alone trousered £13.7M from the company.  So let’s suppose, the Whitbread CEO (and his senior executives and managers) were to take a pay cut of say 50% (after all £3M+ pa is not a bad income for a CEO to live on is it?), then half the cost would be covered. If these businessmen are really worth their salaries, perhaps they could keep the business growing anyway and start earning it, after all that’s what the big salaries are supposed to buy.

So, if LIDL, which is a retail business, can pay the real Living Wage which will cost them £9M pa out of a turnover of £4Bn, why can’t Whitbread and all the others do the same for a much lower, risible so-called National Living Wage? It seems that ‘changes to the business model’, in other words threats to employees and customers to raise prices and/or reduce the level of service as stated by the CBI, are based on the notion that the CEO and well paid executives and managers don’t lose out. After all, when you buy your coffee, it’s from the low paid employee not the CEO. It’s about time that this issue of income inequality was faced fairly and squarely, as LIDL is doing, rather than continuing with the myth that higher wages for workers results in fewer jobs. The same things were said about the minimum wage when it was introduced but the forecast apocalypse never occurred. It won’t this time either.

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