The Minimum Wage Con-Trick

For the likes of Terra Firma, a debt-fuelled private equity firm run by Guy Hands from his tax haven in Guernsey, the rise in the minimum wage threatens the viability of its Four Seasons Care Homes. This is the biggest group of homes for the elderly in Britain but exists for nothing more than financial speculation. Terra Firma used borrowed money to take over the care homes from the Royal Bank of Scotland in 2012 and ever since has been trying to prove to it can turn a profit for the speculators. Four Seasons itself is a murky entity consisting of 185 companies in 15 tiers, registered in multiple jurisdictions including the UK and many tax havens. It also manages to pay no corpora­tion tax. In fact, of course, the main source of Four Seasons revenue is the state.

From the standpoint of the likes of Guy Hands paying your workers a ‘living wage’ means reducing the financial flow to investors. Isn’t it obvious which is more important? What is not obvious is the dramatic impact ‘bumping up’ the minimum wage from £6.70 to £7.20 an hour has made to the 1.8 million people, mainly women, some of them care workers, whose lives changed at the beginning of the new finan­cial year.

And, wait for it, no less a body than the Institute for Fiscal Studies points out that, despite the headline wage increase lower-income families are set to become poorer. Why? It’s the cuts, stupid. Don’t be misled by Ian Duncan Smith’s resignation, by 2020 the govern­ment aims to have cut in-work benefits and tax credits to the UK’s poorest households by the sum of £12bn. But don’t just take our word for it:

By 2019, when most of the government’s planned welfare cuts will have been made, the average household in this position will have gained an extra £198 thanks to the national living wage. However, they will have lost £754 a year in benefits, according to the IFS, leaving them facing an annual net loss of £556. The sums are even worse for low-income households with children. Although the living wage stands to make them better off to the tune of £172 a year by 2019, the IFS estimates that they will have lost £909 from benefit and credit reduc­tions, making an annual net loss of £737. These lower earners are losing out, the IFS reports, from measures including a four-year freeze on most working age benefits and tax credits, and a cut to “the gener­osity of the benefit and tax credit system for those with more than two children.” [Naomi Rovnick, ‘The National Living Wage’ Financial Times, 30.3.16]

The hypocrisy about rewarding hard-working families is glaring. This toying with people’s lives is the result of the state’s attempt to reduce its debt burden and preserve the financial architec­ture of corrupt and rotten capi­talism. Osborne has also calcu­lated on extra tax receipts derived from the so-called national living wage.

And in a system based on profit the firms themselves are already clawing back with one hand what they are supposed to be giving with the other. This takes many forms. Tesco has reduced Sunday pay from double time to time and half, Dunelm has scrapped double pay on bank holidays whilst B&Q has done both. And then there are the loss of “perks”. Caffe Nero has cut out the free panini for workers during their shift whilst Zizzi, which has also “restructured” its wage system, has reduced the free food to staff to a margherita pizza or spaghetti with tomato sauce.

A recent survey by XpertHR has highlighted that many employers are using a “zero-cost approach” by cutting bonuses or discretionary payments (15%), or cutting what was spent on staff benefits (11%). It probably goes deeper than these figures suggest. Simon Rice-Birchall, an employment lawyer, told the Financial Times that

“There are a lot of employers out there who’ve made changes but haven’t been named and shamed … I’ve seen bonuses looked at, shift premiums, overtime, whether or not you get time and a half on Saturday – all things being chipped away at with a view to finding money.”

Osborne has bleated that this in not in the spirit of the law but it is in the spirit of capitalist exploitation. This is especially true in the downward part of an accumulation cycle when all capitalism can turn to is absolute exploitation. Whether you look at it from the point of view of state spending cuts or from the basic profits rationale of capitalism, it’s the poorest members of the working class who are once again going to pay for a crisis not of their making.

For more on the continuing impact of state spending cuts on working class lives read: UK Capital … New Pain for the Working Class 04-19/uk-capital-%E2%80%93- new-steps-new-drama-new-pain-for-the-working-cla

  • This article is a slightly extended version of the one that appears in Aurora 38
Friday, April 29, 2016

Aurora (en)

Aurora is the broadsheet of the ICT for the interventions amongst the working class. It is published and distributed in several countries and languages. So far it has been distributed in UK, France, Italy, Canada, USA, Colombia.