And who thought it would be any different?

From fish factories in Grimsby to coffee shops in central London and even Waitrose supermarkets, workers across the country are seeing perks and pay rates cut as companies try to offset the cost of George Osborne’s national living wage.

On Monday, just over two weeks after the new minimum pay rate of £7.20 an hour for over-25s came into force, MPs will debate the effect the 50p rise in basic pay has had on thousands of workers.

In the past few weeks the Observer has learned of companies withdrawing overtime and Sunday pay, bonuses, free food and paid breaks in order to keep the wage bill down.

That this is happening is a useful indication that wages were as high as they should be. Sorry, that compensation was as high as it should be. That trying to increase one part of the package leads to another part being decreased is indeed a useful sign (no, not proof) that the overall package was in some kind of equilibrium between the demand for (and thus productivity of) labour and its supply.

21 thoughts on “And who thought it would be any different?”

  1. From an organisation that is supposed to be cutting costs by 20% including job losses.

    Why is the Guardian doing that?

    Caprice?
    A middle-class marxistic whim?
    This Viner female (still editor is she?) feeling a bit liverish?
    The desire for more–indeed any– profits?

    No –because their revenues have fallen–oh dear–and they can no longer support the level of costs/outgoings they have. Peddling CM is the Guardians real purpose not making money. Obviously.

    Well thanks to a meddling socialist prick–The Grinning BluLabour Skull Ausbuke himself, lots of small-time operations have had their costs increased.

    So they are trying to stay afloat as best they can. How evil of them.

  2. The Meissen Bison

    And who thought it would be any different?

    Presumably Osborne, who can contemplate the effects of his ill-conceived populist policy while simultaneously watching his leadership prospects go up in smoke.

    Excellent.

    If he could now just ramp up his involvement in the Remain campaign he could help the disenlunched and others make up their minds about the EU.

  3. “MPs will debate the effect the 50p rise in basic pay has had on thousands of workers.”

    What’s the point? Every major party supports this, or wants it even higher. They’re all going to stand there complaining about businesses not following the spirit of the law, how we’re all in it together, how business should do its part like everyone else. Other than Philip Davies, who is going to point out that this doesn’t work?

  4. It’s tragic that all the political parties currently see this compulsory increase as good.
    Those workers on welfare are losing some combination of 41% of the extra due to the tax credits taper rate, 32% tax and NI ( employees ), 65% withdrawal of Housing Benefit from net income remaining, and 20% withdrawal of council tax support from net income remaining.
    And the loss of the free sandwich or a free bacon pantani or whatever it’s called probably wipes out any of the rest of the income gain.
    The government should butt out, concentrate on cutting other spending, and implement policies that promote free exchange.

  5. And underneath all ,the old mole remains.Under capitalism the combined wages of the workers do not equal and cannot pay for the goods the workers produce. So cut wages and you cut demand.

  6. About5 years ago this price-fixing was being referred to rather cutely as ‘predistribution’. This was much worse than redistribution but seemed to sound more palatable to the electorate.

    Me, I’m not at all opposed to redistribution and like the idea of in-work benefits, or a basic wage. Much better than inventing a demonic “unscrupulous employer”.

  7. So whose doing the buying then Numb-Nuts?

    Is their a source of wealth outside of that produced by work?*

    * Yeah you might find the Treasure of The Sierra Madre but if the rest of the Human Race have downed tools for good it won’t be of much benefit to you.

    “You don’t have to get up very early in the morning to put one over on Fred DBC Dobbs.”

  8. Henry Marsh,

    “And the loss of the free sandwich or a free bacon pantani or whatever it’s called probably wipes out any of the rest of the income gain.”

    More than it. Perks were done because they were things that could be provided cheaply, but employees valued. Plus, they were often not classed as taxable benefits. When I knocked on the door of a record shop enquiring about Saturday jobs, it was partly because I’d been told you got a discount on records. The girls I knew seemed to queue up to take jobs in shoe shops for similar reasons. The record shop discount + being able to take home VHS tapes at the end of Saturday was like adding another £5 to my £10 pay.

  9. Labour doesn’t like being a commodity.

    “We’re not a commodity; we’re people.”

    Uh . . . yes, you are a commodity.

    “Employers pay what they have to pay to attract and retain people who can do what they want done.” – GC

    Government insists employers pay more than they need to. Market distortion ensues.

  10. Under capitalism the combined wages of the workers do not equal and cannot pay for the goods the workers produce.

    Sort of, but trivial. And, factually incorrect – there are plenty of capitalist ventures where the pay exceeds the value of the goods. Until recently, they went bust. Now some of them become unicorns.

    That actually is part of an important point that Tim occasionally addresses – the value to society of free or near-free goods will not be well captured by traditional measures such as GDP.

    And, taking your comment at face value, under what system of economical ownership has worker pay ever reliably and continuous exceeded the price of the goods they produce? Without some extraneous input, usually of valuable commodities that, in a fiscal version of the 2nd Law of Thermodynamics, provides an external input of low-entropy money to keep the creaking system afloat.

  11. “Under capitalism the combined wages of the workers do not equal and cannot pay for the goods the workers produce.”

    It would be fascinating to know how it works under the alternatives.

    You buy materials, tools, pay rent and taxes, and then pay workers to use those tools and turn those materials into goods you can sell, which you have to do for a price that equals or exceeds the cost of materials, tools, rent, taxes, and workers.

    For the workers wages to equal or exceed the price of the goods sold, the total of the material costs, tools, rent, and taxes must be zero or negative. There’s only one of those the government has any control over…

    So in this non-capitalist world, taxes are hugely negative?!

    I assume that with a negative tax rate, the government must be just printing the money to pay for it all…

  12. “That trying to increase one part of the package leads to another part being decreased is indeed a useful sign (no, not proof) that the overall package was in some kind of equilibrium between the demand for (and thus productivity of) labour and its supply.”

    Are you getting soft on us? I expected a sod off you tosser and the qualification wasn’t that.

    DBC Reed,

    While I completely agree what system would be better than what we have?

    In the real world capitalism is slightly better than communism. As we don’t have an alternative that is slightly better than capitalism it makes sense to use it as the basis with social programs attempting to smooth out the rough bits. Come up with an alternative, that works with actual humans, and we can get rid of the notion that the rich having a bigger piece of the pie will lead to job creation.

  13. @The Stigler, April 17, 2016 at 1:20 pm

    “More than it. Perks were done because they were things that could be provided cheaply, but employees valued. Plus, they were often not classed as taxable benefits.”

    Perks: parents owned hotels. Live in staff had very low wages. However, they had free full board accommodation inc laundry, utilities & facilities – excluding alcohol, tobacco etc.

    Wages were effectively free cash for them to spend/save as they desired.

    Live out staff had free meals.

    This would all be impossible now in socialist UK.

    OT:
    Spectator punching back.

    Why are we ignoring David Furnish? – Charles Moore

    Highly amusing 🙂

  14. “Perks: parents owned hotels. Live in staff had very low wages. However, they had free full board accommodation inc laundry, utilities & facilities – excluding alcohol, tobacco etc.”

    What exactly stops a person from doing the same now? Assign whatever value is appropriate for the perk, report it, and pay the taxes on the money that would have otherwise gone to wages. I would think that any competent accountant would be able to get the books right in short order so the only major cost would be the added taxes, which hopefully were being paid anyway, on the perks.

  15. Bloke in Costa Rica

    I think Reed, to the extent any sense can be extracted from his witterings, is trying to resurrect the old and stupid idea that Henry Ford paid his workers enough for them to be able to buy a Model T. It’s an idea that’s repeatedly been demolished here and elsewhere but it seems to be as stubbornly difficult to put down as Jason Vorhees.

  16. @Liberal Yank, April 17, 2016 at 9:13 pm

    “What exactly stops a person from doing the same now? Assign whatever value is appropriate for the perk, report it, and pay the taxes on the money that would have otherwise gone to wages. I would think that any competent accountant would be able to get the books right in short order so the only major cost would be the added taxes, which hopefully were being paid anyway, on the perks.”

    iirc accommodation and other benefits may not be deducted from wages. If full value of perk must be declared on P11D and taxed, it is no longer a perk. Some will value living in a tent/under a bridge above warm comfy taxed accommodation. Fewer live in or no live in staff. As Tim says, make workers more expensive, fewer employed.

    P

  17. Those that “value living in a tent/under a bridge above warm comfy taxed accommodation” are few and far between. Even if all of our current homeless population existed just because of a moral objection to taxes they are still a small subset of society. This still doesn’t explain why a business can’t offer non-cash compensation as long as taxes are paid as appropriate.

  18. @Liberal Yank, April 18, 2016 at 2:29 am
    “This still doesn’t explain why a business can’t offer non-cash compensation as long as taxes are paid as appropriate.

    LY, You keep mentioning tax, tax is irrelevant here – we are discussing Gov’t imposed wage costs for employer which can not be lowered by proving free perquisites.

    A clue to the answer to your “why” question is in thread subject – minimum wage laws.

    In UK maximum deduction from minimum wage for accommodation inc laundry, utilities etc is £37.45 per week.

    Deductions for food & beverages, use of facilities, transport etc are not allowed.

    Thus perquisites stopped.

    Is that clear enough now?

    P

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