The Minimum wage

StevieJ

jamesmorgan wrote: »

s.

What tax credits do, however, is change the equation from the employee's viewpoint. If the employee decides he needs £6.30/hr to fund his chosen lifestyle he would normally need to work full time at one of these companies. If he now receives tax credits, he may decide instead to only work part-time (or possibly not at all if he is receiving large amounts of Child Tax Credits).

What if they need £10/hr?

Carl31

ukcarper wrote: »

The average price or a terraced house in Brighton in 1996 was £68k, £5 an hour is £10.4k so they would have needed quite a big mortgage.

and deposit

but, they didnt necessarily buy then, maybe a few years before, but they still manage to service a mortgage on that sort of wage

imagine that now

StevieJ

Carl31 wrote: »

About 96/97

I live in the south east, about 10 mins north of brighton

Doing a quick back of the enevelope job I that make a mortgage of a least 8-10 times salary for a typical FTB terraced house :eek: maybe slighly lower for a flat.

Carl31

StevieJ wrote: »

Doing a quick back of the enevelope job I that make a mortgage of a least 8-10 times salary for a typical FTB terraced house :eek: maybe slighly lower for a flat.

eh?

using 68k as an example

say 15% deposit (i dont know what the requirements were then) thats 10.2k, needing a 57k mortgage, thats like 5 times salary

but like i just said, i think they bought before then at some point. according to the uk house price site, prices in the area were around the 60k mark during Q1 1996, i cant see any data going back further than that

but, even then, all i know is i worked with people who worked on £4-5 an hour, who owned their own houses, i dont know the finer details of how

ukcarper

Carl31 wrote: »

and deposit

but, they didnt necessarily buy then, maybe a few years before, but they still manage to service a mortgage on that sort of wage

imagine that now

I expect a lot of people could do it now in depends on when they bought I paid mine for a few of years on the equivalent of minimum wage.

House prices have increased a lot since then, but that is when they were at there cheapest in relation to wages.

ash28

jamesmorgan wrote: »

Take the simple example of 2 companies trying to secure the employment of a worker. Let's say the worker can generate £7/hr of value to both companies (by value, this means the value once all other company costs are accounted for). The company owners need to secure some profit from this value (otherwise they wouldn't
be taking the risk to be a company owner). Typical net profits for most businesses are in the range of 5-10%, but to keep it simple let's say both owners want 10% profit. This means both owners are willing to pay up to £6.30 for the services of the employee. The company that pays closest to £6.30 gets the services of the employee - the other company loses out.

Now if we add a further complication that both companies know the employee gets additional income from other sources (it doesn't matter how - it could be tax credits, investments, gifts/inheritance). This doesn't change the situation from the owners viewpoint. Both owners are still willing to offer up to £6.30 to secure the employment of the worker and whoever offers closest to this level still wins.

What tax credits do, however, is change the equation from the employee's viewpoint. If the employee decides he needs £6.30/hr to fund his chosen lifestyle he would normally need to work full time at one of these companies. If he now receives tax credits, he may decide instead to only work part-time (or possibly not at all if he is receiving large amounts of Child Tax Credits).

Why do, for example, Tesco pay wages that aren't a living wage to staff - and employ so many part time staff on zero hours contracts?

Tesco's profits in the the UK were £2.5bn in 2011 which equated to a profit from each employee of £15k.

Clearly they can afford to pay a living wage (£7.20 outside London) to their cashiers and shelf stackers and the others who are at the bottom of the heap but choose not to. Far more profitable to let the taxpayer pick up the slack.

Could that be because ultimately they (Tesco) want to maximise profits for their shareholders and not paying staff a living wage helps them to do that.

They will cut costs to the bone where ever they can in search of profits , and if it means low wages and zero hours contracts or squeezing their suppliers until the pips squeak then that is what they will do, to think otherwise is naive.

I'm not picking on Tesco by the way - they are just an example.

I thought the tax credits would be working tax credits not child tax credits - not everyone has children.

£6.08 per hour for 37.5 hours a week= £228 gross a week or £200 nett a week - not a lot.

Thrugelmir

ash28 wrote: »

Tesco's profits in the the UK were £2.5bn in 2011 which equated to a profit from each employee of £15k.

Very simplistic. As Tesco's generates profit a range of sources.

Retailing side will be the lowest margin part of the business.

jamesmorgan

ash28 wrote: »

Why do, for example, Tesco pay wages that aren't a living wage to staff - and employ so many part time staff on zero hours contracts?

Tesco's profits in the the UK were £2.5bn in 2011

Tesco's profits of £2.5b equate to a net profit margin of only 4.6%. This is pretty poor for a commercial organisation and is borderline acceptable for any shareholder. It is not surprising that their share price has fallen by around 30% in the past year. To suggest that they should pay their employees higher salaries is somewhat naive. I suspect that Tesco's problems are the opposite. Labour costs are a huge issue to them as they employ around 500,000 employees. They need to look at ways of reducing their wage bill - or try to improve productivity from their current employees.

For any commercial organistion, they are not going to be driven by whether the wages they pay their staff provide a certain standard of living. They are purely driven by whether they can provide an acceptable profit for their owners/shareholders - in this regard they are currently failing.

ash28

Thrugelmir wrote: »

Very simplistic. As Tesco's generates profit a range of sources.

Retailing side will be the lowest margin part of the business.

Perhaps - but accord to Tesco it's UK retail productivity -

http://www.tescoplc.com/index.asp?pageid=30#ref_investors/financials/five-year-summary

jamesmorgan

StevieJ wrote: »

What if they need £10/hr?

We are now starting to get close to the real issue facing the UK at the moment. If a worker wants to receive a higher income than his value then something has to give. There are broadly one of 3 possible outcomes:

a) Employer pays the worker what he wants, make a loss and eventually goes out of business

b) Employers pays the worker what he wants, but raises prices to reflect this. This causes inflation and the workers £10/hr may still only be worth £6.30/hr in real terms

c) Worker lowers their aspiration and accepts a lower standard of living.

All 3 of these outcomes are happening at the moment in the UK.