The Living Wage, Tesco and Basic Economics

I had a lengthy conversation yesterday with someone about the Living Wage. Now before I go any further I do think people should be paid enough to live on and a it is something we should be working towards.

The problem to me was a figure of £30,000 a year was quoted. Again, I can understand this but what I failed to get an answer on was “where is the money coming from?”.

This is the thing that never gets answered – an idea is useless without implementation. So I was accused of not believing in it just because I asked questions that couldn’t be weren’t answered.

Tesco announced profits of £1.6bn and this seemed to be the yardstick being used – in effect, Tesco can afford to pay all their staff a minimum of £30,000 a year so that should be the living wage.

The problem to me then was, so how do the local butcher pay that? The local greengrocer? Yes I know, there are very few of them these days but how would they survive if they had to pay a minimum wage of £30k a year? I can many closing or laying off staff.

Basic economics says a business needs to make a profit. To do this you need to cover your costs which include staff costs such as wages. Forcing a small business to pay £30k could well put them under – so increasing unemployment.

The alternative is to put prices up – but that potentially cancels out any increase in wages (yes, the inflation word).

I’m not Tesco’s biggest fan but I shop there when I have to – so I am partly to blame for their £1.6bn profits. How many others moaning about Tesco’s  profits shop there and will still shop there?

I also realise they are a huge company (maybe too huge) so therefore their profits will be in proportion – in fact the £1.6bn works out at around £4,000 profit per employee in the UK alone (open to being corrected on this).

So yes, let’s work towards a Living Wage – but please, let’s not base it on what the UK’s largest private sector employer is making.

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4 comments on “The Living Wage, Tesco and Basic Economics
  1. […] This post was mentioned on Twitter by Get Labour Out, Get Labour Out. Get Labour Out said: New blog post: The Living Wage, Tesco and Basic Economics http://wp.me/pOoYT-bB […]

  2. blindsteve says:

    30 K ? I don’t think so. That’s way way to high, the last full time job I had before going solo was four years ago, paid 25 K, and made me comfy.

    A ‘living wage’ should be based on how much it costs to, y’know, live. Not on how much somebody else earns. In fact since you mention Tesco, the living wage should be based on how much it costs to buy a years grub from the Tesco basics range, plus electricity and/or gas, rent, and council tax.

    And at that, it would still be enough that you could swap to veg shops and Aldi and still have money left over for luxury goods.

    It would be interesting to do the numbers and find out how that actually compares to the current minimum wage.

    • getlabourout says:

      I know – I think he was maybe hoping he’d get paid that. There is a big gap between top and bottom pay, there is no denying that, but to say it can be fixed by making the “minimum salary” £30k is just kidding yourself I think. It does need something doing though.

      You put up the lowest salary to £30k and anyone on £30k will say “I want more” and eventually prices go up…then £30k becomes too little to live on.

  3. theangryteen says:

    A living wage?

    I don’t think so.

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