Income Support for Business?

I have an idea.

What if, instead of governments supporting people working on low wages through income support paid directly to individuals, it was paid to businesses?

I think most people would agree that work and pay should align to the following basic principles:

• A full time job should pay enough for you to pay all your bills and have some left over for savings / leisure.
• Work should pay more than being on benefits.

8.4 million people were claiming Universal Credit in the UK in January 2025. Of these, 50% have “no work requirements”, they don’t need to be seeking a job to retain their benefits. These include those on pension credit, full-time students, those unable to work due to ill health or disability, lone parents with children under one-year old, and carers of severely disabled people.

Only 12% of Universal Credit claimants are not in work or searching for work, which leave 38% who are working as well as claiming benefits. There aren’t the statistics to show how many of these people are in part-time work compared to full-time work.

However, it does seem clear that taxpayer funded benefits are supplementing wages. And the beneficiaries are not the individuals. They are the businesses who don’t currently need to pay their staff sufficient wages to live. Many of these businesses are multi-national corporations who make huge profits and pay their CEOs and shareholders millions of pounds. And I don’t think that’s right.

The quickest and easiest way to rebalance this would be to significantly increase the minimum wage. As I previously suggested, an hourly minimum wage should reflect the cost of living plus a bit more. We have normalised working 40 hours a week and still struggling. We’ve normalised life being a “struggle” when it really doesn’t need to be.

(I will talk about how we should be looking at a 4-day week in another post).

There are always a few concerns when you talk about increasing the minimum wage:

1. Inflation. Will increasing everyone’s wages lead to increased prices?
2. How do we support small businesses cannot afford to pay higher wages?

With regard to inflation, there is little evidence of basic wage increases leading to increases in prices. In fact, increases in minimum wage are normally in response to inflation, rather than a driver of it. My proposal actually means that the basic rate of total income doesn’t rise significantly. We’re just shifting the bill from taxpayers to employers.

So to the cost of this bill on businesses. While I broadly agree that, “if you can’t afford to pay your employees a wage they can comfortably live on, you don’t have a viable business,” I also know that starting and growing a small business is really, really hard, and staff are expensive, even at the current minimum wage. I propose a means-tested benefit that gets paid directly to new, small and developing businesses.

Yes, a benefit.

Not a loan.

Not a grant.

A regular supplement that is paid to businesses to support their ability to stay afloat while employing staff. A means-tested benefit that is not available to businesses making a certain level of profit.

I think this would have quite a lot of positive outcomes:

• Encourage businesses to employ more staff, especially young and inexperienced people who are new to the job market.
• More people in work = more people paying income tax.
• More people in work also means there is more money in people’s pockets. This gets re-invested into the economy as people spend the money with many of the small businesses that are employing them.
• This in turn enables businesses to grow faster. The expectation would be that the government funded help would be far more short-term than current income support paid to an individual.
• The financial support means that businesses can keep their prices affordable, which also leads to growth.
• Redistributes wealth as multi-national corporations and businesses making millions in profit can no longer rely on government-paid benefits to supplement their low wages. Profits are paid to employees in their wages, rather than shareholders who contribute little to the productivity of the business.

What do you think?