Opinion

Charlie Mullins: If you can’t take the National Living Wage heat, get out of the business

4 min read

04 April 2016

If you run a business where you can't afford to pay a proper wage, then you're not running a proper business.

This is something I genuinely believe and why I think the National Living Wage is a great step forward for the UK economy.

The new £7.20-an-hour wage came into force on 1 April for workers over the age of 25, which is a 50p-an-hour increase on the National Minimum Wage of £6.70 per hour, which workers aged 21-24 are entitled to receive.

When business owners complain about this sort of minimum wage legislation they tend to couch their concerns in terms of the numbers of jobs that will be lost.

But, what they really mean is that their profits are going to be squeezed, or that they are about to be found out, and that forcing them to pay decent money will collapse their financial model.

In the latter case they have been making a loss, and the only reason they have managed to keep their accounts in the black is because they’ve been paying workers under the odds. Be under no illusion these types of businesses stay solvent on the misery of their workers.

Be you a business owner or an employee the primary reason for going to work is to be able to earn enough money to live a reasonably comfortable life.

And if a company is only able to stay afloat by paying less than this amount, then it shouldn’t be in business, because such an operation is being subsidised by its workforce, who are effectively being paid for less than 100 per cent of their labour.

You could argue such workers are part-time slaves.

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In almost all cases loss-making companies should be allowed to go out of business. That’s the Darwinism of the capitalist system under which we operate, and the way we believe our economy best allocates resources.

A company robbing its workforce of 20 per cent of their money, just to stay afloat, is no more efficient than one paying proper wages, but which is unable to make its product at a competitive price.

They are both the same, and yet only the ethical one is going broke as far as the accountants are concerned.

So I believe The National Living Wage is a wonderful innovation that will force people to run proper businesses, by not exploiting workers. And if that means some companies must close then we’re most likely all better off in the long run.

Probably, in truth, what it means in many cases is that those getting rich from their workers labour, as a result of not paying decent money, will just have to share a bit more of it with their lower paid workers.

Will lots of businesses go broke as a result? I don’t think so!

With the changes now in place, here are four ways to navigate the Living Wage and auto-enrolment.

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