It's time to abolish the wage packet

Pages6-8
Publication Date01 Jan 1981
DOIhttps://doi.org/10.1108/eb057160
SubjectEconomics,Information & knowledge management,Management science & operations
It's
time
to
abolish
the
wage
packet
THE GOVERNMENT'S 'Think Tank' is recommending
that employers abolish the weekly wage packet. This view
is rapidly gaining ground in political circles. The Think
Tank the Government's Central Policy Review Staff -
was instructed in the summer to look into the matter of how
wage's were being paid in Britain, and the social and politi-
cal consequences of the preponderance of wages paid
directly in cash.
The Tank has completed its deliberations and will be
reporting to the Government any time now. The report will
probably be published soon as a consultative document.
Informed opinion was predicting (at the time of writing)
that it will recommend that steps be taken to encourage
large employers of manual workers to offer suitable
inducements to employees both to accept payment of
wages at intervals longer than a week, and also to agree to
receiving them by bank credit.
No compulsion
It is thought unlikely that compulsion will be advocated
but new legislation is not ruled out. The possibility of
prohibiting the payment in cash of wages exceeding a stated
sum is one of the options that is widely canvassed. Such a
law would be similar to the act passed by the French parli-
ament in 1978, which was designed to eliminate discrimina-
tion between blue collar workers and salaried employees
by methods of payment of wages.
The costs to the economy of the extensive use of cash for
the payment of wages are very high. These costs are almost
all borne by employers, and ultimately paid for by the
consumer of goods and services.
A recent example was highlighted in the annual report of
the audit of local government accounts, issued by the
Department of the Environment last month. It stated than
an annual savings of more than £20 million could be made if
all local council workers were paid monthly by cheque or
direct bank credit. It urged a switch to such methods of
payment.
Lagging behind
Over half of the non-manual workers in the UK (includ-
ing virtually all salary earners) draw their pay through the
banking system, mostly by bank giro direct into their per-
sonal bank accounts. But over three-quarters of all manual
workers still get paid weekly in cash. In this respect it
appears that the UK is lagging behind most other western
countries.
In France virtually all employees, manual and non-
manual, are paid once a month, most of them by bank giro.
It is, in fact, now, illegal in France for any increment of pay
exceeding the rate of 2,500 francs a month (call it £250) to
be made in cash.
In Denmark only 10 per cent of employees continue to
be paid in cash. And even these, for the most part, are not
paid weekly. Most manual workers draw pay fortnightly,
and non-manual workers monthly.
In Holland 90 per cent of employees are paid monthly
through the banking system. In the USA only 1 per cent
continue to draw weekly cash wages.
EVERYBODY GAINS
EXCEPT THE CRIMINALS
IT MIGHT be thought remarkable that
Britain, long considered to possess the
most sophisticated method of money
transmission in the world, should still in
1981 be paying 55 per cent of all emp-
loyees in cash instead of bank credit. In
France, by contrast, it is reported that 96
per cent of employees have their pay cre-
dited direct to bank accounts, and in
Canada 95 per cent. Are British banks
dragging their feet?
Well, somebody is but not necessarily
the banks. Paying wages by bank credit
will impose extra bank costs if the wages
are immediately drawn from the banks for
spending in the shops in
cash.
That merely
transfers the function of the company pay
office to the bank counters.
Using cash
is
expensive. It is not, on the
face of it, expensive to the individual in
fact it's cheap. But in terms of
costs
to the
country,
all
of
which
must be recovered in
final
prices,
it is a costly business.
Everybody except the criminal stands to
gain from a diminution in the use of cash.
So the
first
thing
is
to encourage the use of
payment methods other than cash. Che-
que cards have gone a long way towards
this end and nobody could accuse the
banks of dragging their feet on that score.
But credit cards such as Access and Barc-
laycard are even better than cheques,
especially from the cardholder's point of
view,
since the use of
a
card can reduce his
bank charges.
Reduced costs
Retailers have to pay a commission to
the credit card company on each transac-
tion. For some retailers the savings in
reduced costs of cash do not match this
commission but when the expansion of
6 INDUSTRIAL MANAGEMENT + DATA SYSTEMS

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