The Government recently announced that the minimum wage is rising by 12p an hour for adults to £6.31 an hour. So someone putting in a 40-hour week would earn £252.40 gross. Many people living on such low wages are forced to rely on state benefits to survive.

Many companies are sitting out the economic storm by building up cash reserves, cutting employee numbers, reducing cost and resisting pay increases. There is general consensus that the gap between rich and poor is widening, especially with the Government’s current focus on reducing spend on benefits.

Ian Birrell, writing in The Independent on the 16th April 2013 (http://www.independent.co.uk/voices/comment/we-subsidise-firms-that-keep-workers-in-poverty-8573960.html) believes
“While it is delusional to think that inequality can be eliminated, there is something very wrong when a heavily indebted nation takes taxes from hard-pressed families to effectively subsidise firms that underpay their workforces. But this is precisely what is happening with the complex, bureaucratic and backfiring means-tested tax credits system used to top up the pay of poorer people.”
I wonder what the real cost is to a business that predominantly pays employees the minimum wage? If you factor in low morale, lower productivity, higher rates of absenteeism and certainly more turnover of staff with the associated costs of recruitment and training, then the case looks stronger for paying a Living Wage.

As Ian Birrell says “Better pay reduces expensive staff turnover and raises productivity; it also ensures that extra money swirls around the economy. Already, many bigger companies pay the Living Wage, with low wages more commonly found in sectors that cannot move abroad such as catering, hotels and retail …”

The first retail boss to guarantee the Living Wage in London was Mark Constantine, founder of the Lush cosmetics chain. It cost £300,000 a year – but he was inspired by staff telling him that they had to take other jobs to ensure they could live and afford childcare in the capital. “You are not lifting people into some nirvana,” he told me. “You are just taking them out of misery.” This is not just a better business model, smart politics and more sensible for the nation – it is also morally right.

So what would you do as the CEO of a business? Take the short term view of pleasing shareholders by focusing on the bottom line through strict cost control of the wage bill? Or would you take the more courageous – Conscious Leader – path and opt to pay employees a Living Wage knowing that this will impact your bottom line in the longer term by creating a happier, loyal, engaged and more productive workforce?
If you factor in the added benefits to family, community and society you will probably be able to builder a stronger business case to support your decision in response to any disgruntled, short-term focused shareholder facing a reduced yearly dividend.

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