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The National Minimum Wage

Sep 25, 2012

The National Minimum Wage increases on October 1st and we’re faced with our usual annual dilemma: do we increase our prices or not?

This year (2012) the increase is 1.8%.  That means that, on average, we’ll have to increase our prices by 1.2% to cover the extra wages, holiday pay and other payroll costs.

Not a big increase and the vast majority of our customers will accept it.  But we only need one or two to decide to go elsewhere and we’ll be worse off than if we’d done nothing.

So maybe we should swallow the increase.  Except that, because margins are so tight in our industry, the additional costs will mean a 5% reduction in profits.

As I said: a dilemma.

Not that problems like ours will be foremost in the minds of people earning minimum wage.  For a 40 hour week they’re currently earning just £12, 646 a year.  On which, outrageously, they pay tax and national insurance.

Compare that with the 2011 average wage of £26,200 and you’ll realise how difficult life is for them, especially in London.

After the October 1st increase they’ll get an extra £4.40 per week, less tax and NI of course.  No wonder they can only get by with the help of working tax credits, housing benefits and so on.

And the London Living Wage isn’t that generous.  It’s currently set at £8.30 per hour or £17,264 a year.  Still not a fortune but a bit better, I guess.  Some companies and organisations in London insist that their suppliers and contractors pay the Living Wage and are prepared to pay the additional cost.  The vast majority aren't.  After all, it would mean an increase of 25% in the price they pay for cleaning, for example.

So the country continues to pay billions of pounds in benefits to subsidise low pay.