How government subsidises big business

This week there was a twitter storm over Tesco offering a “job” for no wages. Tesco quickly moved to explain that it was not a “job” but a “work trial” but still no wages.

People were naturally shocked yet it appears to have gone unnoticed that week in week out vastly profitable large chains of supermarkets are already greatly subsidised by the general public to help with one of their major overheads, staffing costs.  This is because many of their employees are paid only the minimum wage. And because the current minimum wage is not a living wage, nearly everyone on it has to claim tax credits to be able to make ends meet. Those tax credits are funded by the taxpayer , by me and you.

So the public purse has to subsidise the low paid employees of many of our household name large stores and fast food outlets so they make their high profits rather than paying a living wage.

I believe that everyone should be paid a decent wage for a day’s work. It is a simple vision based on fairness and my belief that the national minimum wage needs to be replaced by a realistic living wage. The national minimum wage at the moment is not enough for workers, and especially those with children, to live on. Because of this we have big levels of state subsidy through working and child tax credits to bump up the incomes of people in low-paying jobs. I am not against tax credits, but I think more people need to understand that in many sectors the taxpayer is subsidising the wage bill of some of the biggest employers.

If you work for full time for NMW then your annual salary works is about £13,603 before tax and £11,676 after tax. There are various scenarios in which this worker and his or her partner will try to make ends meet, but the most common require some level of state subsidy to make up for the fact that the national minimum wage is not enough to live on.

We need a national living wage to put an end to this deeply unfair situation where we are all subsidising poverty pay and the profits of big companies. The living wage is currently calculated at £7.20 an hour outside London and £8.30 in London to allow a worker to provide their family with the essentials of life. It should be adopted sooner rather than later. It is not too much to ask that workers at the bottom of the income ladder should at least be able to make ends meet.

I realise that there will be many who object to what I am saying. They will say I am anti-business. I am not. But I am anti-exploitation, and if you are a business that depends on cheap labour whilst making massive profits for your shareholders, then there should be a mechanism whereby the numbers of minimum wage jobs are reported to HMRC and a profit levy is charged via the tax system to refund some of the subsidy. There is an argument for helping small firms or those who provide a public necessary service, but I really do not believe that supermarkets and retail giants, who are making billions a year, deserve or warrant state subsidy.

People will say I am anti-jobs. Nonsense. I would ask you to consider the proposition that the next time one of these firms press releases that they are creating 5,000 jobs, what they really mean is they are creating increased profits whilst you and I pay part of the staffing cost for those 5,000 jobs. If you are operating a business in a modern European democracy, then the people working for you and helping make  you that profit should surely be earning enough to be able to live in that modern European democracy without relying on state benefits.

People will say I am anti-free market on the basis that if employers are forced to pay decent wages, they will go out of business. But we don’t really have a free market when companies need to be subsidised by the benefits system, and where institutions such as banks are not allowed to fail because of the effect on the UK economy. Or when private companies, contracted by Governments to provide services, fail and have to be propped up financially, to ensure essential services are protected. Companies taking the profit without ever bearing the risk. Hardly a free or fair market.

I personally think that profitable employers who can’t afford to pay living wages or who depend on cheap labour are not the business model we should be building the recovery on.

We need a proper, clear, informed discussion about this and the public needs to understand the level to which these companies are helped by public funds. Let’s stop calling them “wealth creators” and start calling them state subsidised industries. If we are serious about making work pay then the first step is getting those making the profits to pay the wage bill of their own workers. The workers, who are often the true unsung wealth creators.

Teresa Pearce is the Labour MP for Erith and Thamesmead

More from LabourList