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Encouragement – but nothing more

Big business lobby rejects raising wages as answer to eroded living standards
Hajera Blagg, Monday, November 10th, 2014


The Confederation of British Industry (CBI)—Britain’s largest business lobby, representing some of the country’s biggest corporations—has admitted that the so-called economic recovery has not raised the living standards of most people.
But the solution it put forward to its annual conference today (November 11) was yet another bailout of big business.
Rejecting that the problem was deliberately depressed wages, the CBI’s director general, John Cridland, said additional tax cuts would be an instant boost to people’s living standards.
In a CBI report, A Better off Britain, released to coincide with the conference, the business lobby suggests the tax cut could come from raising the threshold at which workers begin making National Insurance contributions.
The CBI estimates this would make a single person £181 better off a year. How £15 a month – roughly the cost of a meal for two at McDonald’s – would put much of a dent in the living standards problem is not explained.
Also calling for expanded childcare subsidies, Cridland insisted that business was not to blame for the fact that so many working people aren’t able to pay their bills, despite being employed full-time.
He noted that many businesses simply cannot afford to increase wages, but that those who could, should be “encouraged” to pay all their workers the Living Wage.
“The National Minimum Wage is about ability to pay,” Cridland told the Guardian. “The Living Wage is what people need to earn. Should companies pay the Living Wage if they are able to? Yes. I would encourage them to. Can it ever be more than an encouragement? No.”
“You can’t mandate increases in wages,” he added. “Wages are at the level that an employer can sustain with the business that they can generate.”
£500bn cash hoard
Cridland’s contention that many businesses cannot afford to pay their workers higher wages, and that businesses will always pay as much as they can afford, is not new. It’s been the business community’s mantra throughout the recession and into the economic recovery.
The problem with this contention is that it is patently false.
As Unite has argued in its evidence submitted to the Low Pay Commission, the statutory minimum wage can be raised to £8 immediately with absolutely no adverse effect on businesses or the economy as a whole.
Instead of the paltry £181 that workers would benefit from each year with the CBI’s tax cut solution, the average worker would gain over £800 a year by increasing the minimum wage alone.
The extent to which business can afford to substantially raise their workers’ wages is revealed in ONS figures that show British firms hoarded £500bn by the end of 2013.
As Left Futures has pointed out, this £500bn “cash hoard” represents the profits that businesses are simply sitting on – with no attempt made at investment, another measure that would do much to increase productivity and help the economy full recover.
While there are various reasons that this “cash hoard” may exist, the level to which the hoard has grown in perfect tandem with skyrocketing boardroom pay and shareholder returns is too much of a coincidence.
 

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