Minimum wage linked to profit

[Funkycoldribena]

Keep reading about certain companies making millions and millions yet the employees at the bottom still being paid minimum wage (or near as).Now in a lot of cases these employees have to claim working tax credit to bring them up to a liveable wage, which to me just seems that the government is bailing out bad paying employers.
Surely there could be some sort of system where these companies profits are linked to the minimum wage that they could pay their employees? Eg;(in v. simplistic terms)if Tasdco supermarket makes 10 billion profit then minimum wage should be £10 ph for their employees,20 billion profit-£20 ph min wage.
Im sure this would cause problems with people further up the salary chain but surely there must be a way to stop employers paying such poor unliveable wages when such obscene profits are being made?

[0a]

And using the same logic, companies that fail to make a profit (for example the ALDI chain a few years ago) should be able to force their workers for free, and workers should take a pay cut when profits go down?

[Pints]

And then there's the size of the company to consider. £10m profit for a one-man band and his crew of 7 is very respectable, but if company X of 14,000 employees turned a profit of only £10m, executive heads would roll.

[Mojooo]

A minimum wage but profit linked is probably better.

But it would fluctuate a lot (possibly).

The next best thing but without the commitment is free shares.

[rich1231]

Funkycoldribena said:

Keep reading about certain companies making millions and millions yet the employees at the bottom still being paid minimum wage (or near as).Now in a lot of cases these employees have to claim working tax credit to bring them up to a liveable wage, which to me just seems that the government is bailing out bad paying employers.
Surely there could be some sort of system where these companies profits are linked to the minimum wage that they could pay their employees? Eg;(in v. simplistic terms)if Tasdco supermarket makes 10 billion profit then minimum wage should be £10 ph for their employees,20 billion profit-£20 ph min wage.
Im sure this would cause problems with people further up the salary chain but surely there must be a way to stop employers paying such poor unliveable wages when such obscene profits are being made?

You know people are free to work elsewhere.

Please promise you are not working for any financial entity nor do you have any responsiblity in life beyond shoe laces.

[Funkycoldribena]

rich1231 said:

You know people are free to work elsewhere.

Please promise you are not working for any financial entity nor do you have any responsiblity in life beyond shoe laces.

Let me guess..you pay minimum wage.
Do you think the government should carry on making up the shortfall of lousy wages?

[Justayellowbadge]

Funkycoldribena said:

rich1231 said:

You know people are free to work elsewhere.

Please promise you are not working for any financial entity nor do you have any responsiblity in life beyond shoe laces.

Let me guess..you pay minimum wage.
Do you think the government should carry on making up the shortfall of lousy wages?

No.

[davepoth]

Funkycoldribena said:

rich1231 said:

You know people are free to work elsewhere.

Please promise you are not working for any financial entity nor do you have any responsiblity in life beyond shoe laces.

Let me guess..you pay minimum wage.
Do you think the government should carry on making up the shortfall of lousy wages?

Of course not - they should tax low earners far less, possibly by raising the income tax threshold to the level of someone working full time on minimum wage.

[Justayellowbadge]

davepoth said:

Of course not - they should tax low earners far less, possibly by raising the income tax threshold to the level of someone working full time on minimum wage.

Can't argue with that. Isn't taxing many lower earners a negative sum operation anyway, as housing benefits etc outweigh tax take?

Punish lower earners less and balance it by paying out less to those that do not earn.

Dacre-ish I know, but it does make a certain sense.

[GavinPearson]

There should be no minimum wage - employers should pay whatever the market will bear. If they pay too little they will get low quality people and a high staff turnover, if they optimise their cost it keeps them at their most competitive.

[speedy_thrills]

GavinPearson said:

There should be no minimum wage - employers should pay whatever the market will bear. If they pay too little they will get low quality people and a high staff turnover, if they optimise their cost it keeps them at their most competitive.

I agree if there was a basic livable income for everybody. Let me make my case:
1. Wealth redistribution systems are an inefficient, if look at the total cost if distributed in weekly payments across the entire population you notice we are already half way there with this plan (perhaps more so in the UK where your unemployment rate is very high).
2. Even with the minimum wage at a low £10 an hour (or whatever it is) there are still a shortage of available positions.
3. There would no longer be a disincentive for those living on the basic wage not to work because their social welfare payments would be penalized, this would probably also raise GDP since at £1 an hour even digging ditches or having someone put in screws manually starts to look viable.
4. It would encourage entrepreneurship because people would be able to feed their families even if their business went tits-up.

Of course this won't happen because we are attached to a system that works no matter how flawed or impractical it is.

[davepoth]

GavinPearson said:

There should be no minimum wage - employers should pay whatever the market will bear. If they pay too little they will get low quality people and a high staff turnover, if they optimise their cost it keeps them at their most competitive.

Ideally, yes. Employers should pay what the market will bear, employees will be paid what they're worth. Businesses tend to undervalue people though, so it will inevitably end in a race to the bottom.

So it becomes a question of conscience more than economics, whether as a society we want to provide a welfare benefit of a minimum wage (since it's merely an efficient way of providing a minimum income guarantee to the poor) or let loose the dogs of capitalism.

[turbobloke]

Sounds like a recipe for fun. Employees paying a company to work there when a loss is made will go down well with the unions. Oh yes of course, it would only work one way, obvious really.

Instead of bellyaching about what employers should do or not do, could the issue be that potential employees who haven't got what it takes to start a successful business themselves need to work a bit more on their employability so they are clearly worth more and can command a better wage, no thought not.

Equally nobody on low or minimum wages has ever wasted free education and training opportunities, they all worked soooooo hard as they knew the world didn't owe them a living and after all there are no generous benefits available.

[Derek Smith]

GavinPearson said:

There should be no minimum wage - employers should pay whatever the market will bear. If they pay too little they will get low quality people and a high staff turnover, if they optimise their cost it keeps them at their most competitive.

So you are quite happy for your taxes to subsidise companies? Because that is, in essence, the suggestion. Indeed, as the OP pointed out, it is what happens now. So perhaps 'even more' is what I should have said.

We have at the moment a quiescent workforce, remarkably so. This may have something to do with the minimum wage, I don't know. But start paying wages which are just a pound or two an hour then trouble might well start.

I was brought up to believe that employment is a two way thing: you do a fair day's work, you get a fair day's pay.

Wages that are below subsistence level perpetuate the dependency culture.

Just to make it clear: I do not want my taxes subsidising companies' profits.

[turbobloke]

Derek Smith said:

Just to make it clear: I do not want my taxes subsidising companies' profits.

There will be many in agreement with you, me included, but there is a balance to be struck and if people were a lot more focused on making maximum use of education and training or simply being employable by presenting decently, not communicating via gruntspeak and working hard rather than 'what I is entitled to innit' as they earn their wage ho ho by updating their facebook status on a new 4S (poor things) then they and the country as a whole would be a lot better off and there would be fewer threads like this on PH.

[Eric Mc]

Once you start linking wages to business profits, it is easy to manipulate either the profits or the employing entity to ensure that the wages are paid from an operation that has predetermined and fixed profits.

That is what used to go on in the days of tax free profit related pay.

[98elise]

Derek Smith said:

GavinPearson said:

There should be no minimum wage - employers should pay whatever the market will bear. If they pay too little they will get low quality people and a high staff turnover, if they optimise their cost it keeps them at their most competitive.

So you are quite happy for your taxes to subsidise companies? Because that is, in essence, the suggestion. Indeed, as the OP pointed out, it is what happens now. So perhaps 'even more' is what I should have said.

We have at the moment a quiescent workforce, remarkably so. This may have something to do with the minimum wage, I don't know. But start paying wages which are just a pound or two an hour then trouble might well start.

I was brought up to believe that employment is a two way thing: you do a fair day's work, you get a fair day's pay.

Wages that are below subsistence level perpetuate the dependency culture.

Just to make it clear: I do not want my taxes subsidising companies' profits.

Profit is taxed, so in effect its just a cycle of money. If you link low paid workers pay to profits then its going to be up and down. Also companies going through a rough time would not be able to get people to work there.

In effect the governement is leveling the playing field at the low end of the wages market.

Also i would assume that the benefits are based on household income, so if a second person in a relationship is in the low paid job, the benefits don't apply.

I don't agree with the system, but its better than linking it to profits.

[Eric Mc]

And as I said, profits are extremely easy to manipulate.

[TwigtheWonderkid]

In the run up to the introduction of the minimum wage, those that opposed it said it would drive small businessess to the wall. But research showed that 90% of employees earning below the intended minimum wage were working for fims with a turnover in excess of £10m, and 65% of them worked for companies with a turnover in excess of £100m (large hotel chains, fast food chains were the biggest culprits).

[rich1231]

Funkycoldribena said:

Let me guess..you pay minimum wage.
Do you think the government should carry on making up the shortfall of lousy wages?

No we pay way over.

Busiess don't operate in isolation you know. They are totally reactive to huge amount of red tape and regulation that can be changed on a whim. The key is getting low earners out of tax and reducing the welfare state.

That you made a suggestion that companies pay staff based on profits, is insane and ill thought out. As other have mentioned does a company making a loss mean that the employees pay the company to remain employed? What would you do as in investor do if you were being asked to invest in a business but were offered no return on that risk?

This demonising of business and profit that keeps rearing its head is such a pathetic state of affairs.