If the British Government wanted to strip £12bn off the benefits bill it could do so at the stroke of a pen. All it has to do is “make it a legal requirement for employers to pay a living wage”. At the moment firms routinely pay their workers less than is needed to live on, knowing the taxpayer will pick up the tab for subsidising such “poverty wages”. An estimated £76bn is spent on people in work, compared with £8bn on benefits for the unemployed.
Businesses milk the system by creating more subsidy-attracting, part-time jobs and fewer full-time ones. Not that firms admit their dependency on the state: they affect to despise “red tape” but see nothing wrong in employing people who must “submit themselves to miles of it”.
This is quite the wrong way round. If a company really can’t afford to pay a living wage, it’s the company, not its workers, who should apply for benefits. That has the virtue of both honesty and of saving the state a huge amount of money. (Deborah Orr, The Guardian)
The cost of administering the present broken, if not corrupt, system must be huge. The advantages of “company welfare” as described by Deborah Orr is that the number of bureaucrats could be severly cut, administration streamlined, and companies would soon be getting unwanted attention for being cheap, exploiting their workers and taking taxpayer handouts. They might well decide that paying a genuine living wage would be preferable to the bad publicity.
Correct me if I’m wrong, but I was under the impression that the government wanted to raise the minimum wage to £9 a hour by 2020, which would be a living wage. The reason why it’s being phased in is so companies can get used to paying the higher costs. Maybe that’s wrong, and that it should be introduced immediately, but there you go.
Once everyone is paid properly, there wouldn’t be any need for in work benefits at all, thus saving an enormous amount of money as you quite rightly point out. And a higher minimum wage wouldn’t lead to higher unemployment because the reduction in the welfare bill would allow the government to invest in other areas, such as infrastructure and education, which create jobs themselves. I like the idea of company welfare, but in reality, most companies can afford the increase, meaning that most won’t be eligible for the program.