Why we should introduce tax relief for corporations that pay the National Living Wage to people aged 18-24

From April 2016, a new National Living Wage of £7.20 an hour for those aged 25 and over will be introduced. This will rise to over £9 an hour by 2020. This National Living Wage alleges to be enough to suffice for the cost of living in England, however, much controversy has ensued as to whether this is actually the case. Regardless, in this article, I will operate on the premise that it is, in fact, enough to pay the bills in England, although I acknowledge that this may not be the case. I feel that it is ludicrous to only give a National Living Wage to people above 25, and that the government needs to think of young workers as well, as they work just as hard, if not harder. The idea that I am proposing in this article is some form of tax relief for corporations that pay the National Living Wage to people aged 18-24, which will incentivise corporations to pay this National Living Wage to them, ensuring, at the very least, a better standard of living for their young employees, and perhaps even some disposable income so they can pay for a small amount of “luxuries”. My first point to back up this argument is that it incentivises corporations.

We must face the facts. The large majority of corporations are not morally altruistic, and some could not care less about the financial wellbeing of their young employees. For these corporations, financial gain is all that matters, and as long as they have no incentive to implement the National Living Wage for these people, they will not. This mindset, that has been built up through generations of self-serving directors and executives, is not going to change any time soon. Although this is not the idealistic outlook, we must conform to it so long as corporations remain the way they are. For this reason, when tax relief is introduced for these corporations, they perhaps might consider implementing the National Living Wage for people aged 18-24 for some sort of financial reward, in addition to the benevolent image that will come across if they introduce the wage. This financial incentive perhaps may not sway all of these large scale corporations, but I am confident that it will ensure that at least some are swayed, which leads to a better standard of living for at least a small subset of people.

One major problem that was cited by many with regards to the National Living Wage for people aged 18-24 was the problem of redundancies. If corporations pay a higher wage to them, this logically means, assuming financially orientated behaviour, that there will be redundancies in order to cut costs for these corporations. For me, I find this to be grossly unfair to the workers who perhaps will be made redundant by the inclusion of the National Living Wage, and for this reason, we need to make sure that the same number of redundancies will not happen, at the cost of a subset receiving a substantially higher wage. In order for this to happen, the net profit after tax of these corporations has to be increased. Because of the reduced tax that these corporations now have to pay, they do not have to cause so many redundancies because their net profit will remain at a similar level, and this means that more people have a better standard of living, and can actually pay the bills, instead of earning short of their expenses for the majority of the time.

Finally, the introduction of this tax relief may sway corporations to: a), stay in the UK, and b) come to the UK. What I am proposing here is a “reverse-France”, in a sense, with lower corporation tax perhaps being another incentive for corporations to put their headquarters in the UK. The logical conclusion which stems from more corporations being in the UK, is that more young workers will be needed by these corporations, and therefore more young workers will be paid the National Living Wage, increasing the standard of living for these workers while cementing the UK’s status as a global hub for the biggest and best corporations. As stated before, financial gain is almost everything for these corporations, and, in my opinion, they would jump at the chance to come to the UK, a G8 economy with low taxes so that net profits remain high. As seen in France in recent years, corporations are not shy to leave countries that they think are taxing them too much, and the UK can capitalise on this by introducing this tax relief.

One may argue, at this point, that the government will receive less revenue in tax from these corporations, however I counter that with the point that, if more corporations are paying tax in the UK, then that means the government will in fact be receiving substantially more from tax than before. The tax relief given to corporations that pay the National Living Wage will pale in comparison to the new revenue earned by more corporations relocating to the UK, which means that this comes full circle, again, with the government then being able to spend more on public infrastructure (whether they would actually do this or not, I do not know). Therefore, the standard of living for all will increase because of the tax relief for corporations that pay the National Living Wage.

I must stress that, this is simply an idea of mine, and, as with any idea, that it is not guaranteed to work if implemented, however, I believe that it does have a strong likelihood of working for the reasons outlined above.

By Shrey Srivastava

A finance and economics enthusiast, and someone who wants to share his views with the world.


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