The case for the living wage is an easy one for politicians of any stripe, Sarah Gordon, business editor of the Financial Times, noted in her article the other week.
They don’t have to pay for it. Unlike small businesses that she argues can ill afford a pay rise for the poorest. She notes that large companies will have the flexibility to make choices over where the costs of the minimum wage will be stuck. But businesses that employ fewer than 10 staff will be harder hit.
“Trading the longer-lasting benefits of responsible design for the short-term ones of political surprise was a mistake,” she writes. A mistake by George Osborne, the Chancellor of the Exchequer, that will cost small business owners and “those who work for them”!
At a trade event last week I was chatting to two retailers. One said the margins were getting so poor that he was getting out and into property development. The other said that he was constantly having to find things to sell that his multiple competition did not. His parents, he added, had run nine shops with pretty much the same effort that it was taking him to run one.
This is an important point. After 20 years of continuous change, local shops are much more effective than the shops run by their parents. Everyone knows this because everyone is happier shopping local more frequently. But too many people take it for granted.
I was nudged on this point when reading Seth Godin’s blog on “Taking it personally”. Godin, a marketing expert, was in a shop that only sells children’s books. The store was empty and he asked the assistant, “Do you know where I can find Yertle the Turtle?”
The assistant walked over to a computer, typed a few keystrokes and said, “I don’t think we have it, do you know who the author is?”
Stunned silence followed and Godin went to look for himself. He found three copies.
What did this assistant think his job was? asked Godin. All stores staffed by people like
him were doomed. The assistant’s job was to “take it personally, to be interested, to notice, to care, to add more value than a website can.”
The time when local shops in the UK could provide poor service have long gone. You may still find it but only in failing businesses. Staff are expected to know something about the products that they sell and to be enthusiastic about serving shoppers.
This has been driven by intense competition and it is expensive in terms of effort and in time and in money. Effort that the shop owner has to put into choosing who to employ and how to develop them. Time that it takes to get people up to speed; to keep them up to speed. And money to pay for them.
The current minimum wage is £6.50 and that is worth 60% of the median wage in terms of people who are employed by “micro” businesses, those with 10 employees or fewer. The median wage is the wage earned by the person in the middle and is lower than the average wage.
Given the intense pressure on small shops from competition, it is reasonable to conclude that few owners are making super-profits. If smaller businesses are paying less than bigger companies and this is likely because their profits are lower.
Gordon’s idea that “smaller businesses should be exempted from the NLW” is a good idea. The Government should take heed of it.