March 2016

Someone’s Gonna Have to Pay

The “National Living Wage” will have a disproportionate effect on pubs

FROM THE beginning of April, the government will be introducing a “National Living Wage” of £7.20 per hour, which will progressively rise to £9 by 2020. This has been widely welcomed as a way of reducing in-work poverty, and some have claimed that it doesn’t go far enough. However, several pub operators, most notably Wetherspoon’s, have warned that it is likely to affect their profits. This might be viewed as a demonstration of corporate greed, but isn’t it preferable that they accept a reduction in profits rather than seeking to recoup the loss through cutting staff or increasing prices?

Raising the level of the minimum wage doesn’t conjure money out of nowhere – it has to be paid for through one or more of:

  • Customers, through higher prices
  • Employees, through reduced hours, job losses and restriction of fringe benefits
  • Business owners, through reduction of profits and dividends
Big companies such as Wetherspoon’s may be able to take it in their stride with little impact on their business. But it must be remembered that most pub businesses are not run by managers, but by individual tenants, lessees and freeholders. They will have much less scope to adjust to paying higher wages, and may well see their own income suffer. And most licensees are not exactly making a fortune in the first place.

It is sometimes argued that the increased costs of a National Living Wage will be redistri­buted through the economy, and thus stimulate demand. However, the costs will be mostly borne by labour-intensive businesses such as pubs, whereas the benefits will be spread across the board. It’s also not widely appreciated that many minimum wage recipients are second earners in a household, or people such as the partially retired who already have another source of income. Economists estimate that well over half the benefits of an increased minimum wage will accrue to households in the top half of income distribution.

Across the economy as a whole, this may well be a beneficial policy. But it can’t be denied that it will have a damaging impact on many pub businesses that are already struggling.


Cutting the Strings

Paying charities from public funds to lobby the government makes no sense

IN THE PAST, I have pointed out that many so-called charities are in reality “sock-puppets”, which take government funds and then use them to lobby the government to take further action on their chosen cause. Alcohol Concern and similar anti-drink groups are prime examples of this. It’s very noticeable how all of them demand further control and restriction, rather than any kind of liberalisation.

The government have now at last addressed this issue, with Cabinet Office minister Matthew Hancock announcing that charities will no longer be able to spend any funds received from the public purse on lobbying activities. Predictably, some have complained that this represents a restriction on freedom of speech, but charities are still free to espouse whatever cause they want so long as they use money received from voluntary donations. This is a major step forward for transparency and a level playing field in public debate, and I’d say one of the best measures taken by the current government.

2 comments:

  1. A decent wage for the bar staff is probably the only thing I wouldn't object to paying an extra 10p a pint for.

    ReplyDelete
    Replies
    1. But how many other customers would take the same view?

      Delete

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