Taxpayers spend £11bn to top up low wages paid by UK companiesResearch published last week by Citizens UK found that companies in the UK are paying their workers so little that the taxpayer has to top up wages to the tune of £11bn a year. The four big supermarkets (Tesco, Asda, Sainsburys and Morrisons) alone are costing just under £1bn a year in tax credits and extra benefits payments.
This is a direct transfer from the rest of society to some of the largest businesses in the country. To put the figure in perspective, the total cost of benefit fraud last year was just £1bn. Corporate scrounging costs 11 times that.
Worse, this is a direct subsidy for poverty pay. If supermarkets and other low-paying employers know they can secure work even at derisory wages, since pay will be topped up by the state, they have no incentive to offer higher wages.
None of this makes sense. We are all, in effect, paying a huge sum of money so that we can continue to underpay the 22% of workers who are earning below the Living Wage – the level at which it is possible to live without government subsidies. The only possible beneficiaries are business owners.