Who owns all the oranges? by Oran Burke

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Who owns all the oranges?

Photograph © Phil Campbell 2009

Low income job

January 3, 2013

Benefits and low pay

It is fair to say that the demonisation of multinational companies who pay minimal tax in the UK has probably reached its peak. They have been called before committees, pilloried in the press and put under so much pressure that Starbucks felt compelled to offer a charity donation to the government. Their argument has been that they’re not doing anything illegal and this is of course true, no matter how many times they are called immoral.

Another side of the morality argument which has been drowned out in the cacophony surrounding the ongoing tax saga is the recent decision by Starbucks to change working conditions for about 7,000 of its 8,500 directly employed UK staff.

This is to include removal of a paid 30 minute lunch break and reduced sick leave, and The Guardian reported one staff member as claiming he had been told to sign a new contract or face losing his job. Working conditions however may not be the highest priority for employees of Starbucks and several other companies large and small.

The campaign for a living wage was launched in 2001 by parents in East London who were frustrated by not having enough time to spend with their families as many worked two minimum wage jobs just to make ends meet. The philosophy behind the organisation they created is simple, the national minimum wage, at £6.19 per hour, is set too low for people to stay out of poverty.

The Living Wage Foundation accredits employers who pay a living wage, currently £7.45 nationally and £8.55 in London, with the figures calculated by the Centre for Research in Social Policy at Loughborough University and the Greater London Authority (GLA).

However several companies in the UK, including large employers like Starbucks and McDonalds, do pay more than the minimum wage but not many pay the living wage. The GLA have insisted that their own staff members and contractors are paid it since 2005, affecting the lives of more than 2,500 people. The scheme has also been taken up by a number of private companies with big names in the financial industry like Barclays, HSBC and Goldman Sachs joining.

There are still plenty of companies unwilling to take part though as evidenced by the treatment of Valdemar Ventura, a 44-year-old father of two who used to clean Nick Clegg’s office. He was suspended for a day and moved to another site by contract cleaners ETDE when his picture appeared in newspapers as part of a campaign to improve wages for 150 Whitehall cleaners. Mr Clegg eventually came out in support of Mr Ventura saying, “I firmly believe people should not be punished for campaigning for better pay.”

A report released in October 2012 by The School of Geography at Queen Mary University of London has indicated that a living wage (LW) may not just be good for low paid workers; it may also help businesses and the Government. The research, funded by Trust for London, a charitable organisation that aims to reduce poverty and inequality in London, interviewed 416 employees at eight companies with roughly half of them being paid the LW and half not. The companies surveyed were mostly external contractors who provided services such as cleaning, catering and grounds work.

The face-to-face questioning found that 54 per cent of those who worked somewhere that had adopted the LW felt more positive about their employment and 52 per cent felt more loyal towards their employer. Around a third of workers said their family life had benefitted since being paid the LW, allowing them more time to spend at home and the ability to take holidays. More than a third said they were now able to buy extra goods or save money.

The companies involved also noticed a change with staff leaving rates falling by 25 per cent while identifying improvements in the stability, attitudes and characteristics of workers. This involved an 11 per cent increase in the cost of covering a contract with the lowest paid receiving an average wage increase of 26 per cent. Overall the report suggested that people in LW workplaces had better psychological well-being than those in non-LW ones.

The statistics in the report which might make interesting reading for the government relate to how much could be saved in welfare payments if people were paid a living wage. Just over a quarter of those surveyed (28.1 per cent) were receiving some form of benefit with very little difference between LW and non-LW workers (27 and 29 per cent respectively).

However LW employees were found to be claiming on average £112 less than those in non-LW firms. When the researchers scaled this up to cover the population of London using demographic analysis, they estimated that if the city’s low-paid workers were moved onto a living wage it would save the Treasury £823 million a year. This figure consists of an extra £477 million in income tax and national insurance receipts and a reduction of £346 million in welfare payments. This figure is only for London so the impact of a countrywide change in low-end wages could be even more significant at a time when welfare cuts are taking place in many areas.

This level of saving brings us back to Starbucks who will of course not be the only company in the country who pay below the living wage but as they pay almost no tax, are not only depriving the treasury of money, it also appears that their profits are being indirectly topped up by government welfare payments. The above figures make the £20 million pounds over two years offered seem a little irrelevant if their employees need to be subsidised to live.

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