Last Friday a big business committed an apparently radical act. It offered to pay staff more. Lidl is a cut-price retailer, but from next month it will do something classier than even the poshest chains – and guarantee all its 17,000 employees at least a full living wage. Around 9,000 staff will be bounced up to a minimum of £8.20 an hour, or £9.35 in London. For them, the pay rise is worth an average of £1,200 a year.

It sounds simple: it poses a serious challenge to the British model of doing business. Waitrose famously divvies out bonuses among workers – but it doesn’t promise those on the shop floor a living wage. Nor does Marks & Spencer, Tesco, Asda, Sainsbury’s … or any of the major supermarkets. Wherever you buy your groceries, you are almost certainly getting them from staff earning somewhere around the legal minimum wage of £6.50 an hour. The same applies when you go to a pub, eat in a chain restaurant, or stay in a hotel.

Lidl to pay 9,000 staff the full living wage Read more

One of the prevailing ideas of our time is that workers need not be paid enough to live on. Of course, few put it so crudely. When asked why they don’t pay staff more, company bosses talk about financial viability or summon up the spectre of 1970s-style inflation. But whatever the euphemism, the net result is the same: more households scraping by on poverty wages and having to depend on the public for top-ups.

David Cameron rightly points out that more Britons are in work than ever before. What he never mentions is a series of figures kept by the Office for National Statistics showing the proportion of working-age households taking more from the state in benefits, health and education than they pay back in taxes. In 1979, when Thatcher went into Downing Street, that figure stood at 27.6%: under Major and Blair, Brown and Cameron it has kept rising – to, at the last count in 2012-13, 37.9%.

The past 30 years have been an extraordinary bonanza for big British employers: they have seen the biggest economic booms in the country’s history and ever lower corporate-tax rates. They have responded by failing to pay their staff’s way, relying on taxpayers for a handout. Those lucky men and women in the swanky boardrooms have taken and taken from the taxpayer – and then had the front to lecture voters about the need to cut public spending and bring down government borrowing.

The same tactics have been on display since spring, when George Osborne announced he would jack up the minimum wage next year, and every year thereafter. The result has been a series of baleful warnings. A series of high street names – from JD Wetherspoon to Manpower and Costa Coffee – have sprung forward to warn that pubs will shut, recruiters won’t hire and the price of a flat white will shoot up. The lobby group for big business, the CBI, has hissed that the chancellor is taking a huge “gamble” that could force its members to cut jobs.

They pose as forecasts, but read as threats: don’t raise wages – or the high street gets it. And it must be said that the CBI has a consistent track record on wages. Consistently wrong, that is. Here it is in 1995, arguing “that even a low minimum wage would reduce job opportunities and create major problems for wage structures in a wide range of companies”. When New Labour did introduce a minimum wage in 1999, there were no such job losses. Every year that the minimum wage rose, the CBI would issue grave warnings that workers would be the ones to suffer. With admirable reliability, its warnings were always wrong.

Writing at the end of 2006, David Metcalf, a professor of industrial relations at the LSE and an expert on labour markets, cited over 25 British studies of its impact. “The conclusions are clear-cut – the minimum wage has not had an adverse impact on jobs … Those workplaces with a high fraction of low-wage workers in 1998 have had similar employment growth to workplaces with just a few, or no, low-paid employees.”

Even while the purveyors of corporate guff would have you believe that more money to those at the bottom is a disaster, they’ll claim that extra cash to those at the top is just deserts. Take Andy Harrison, the boss of the company that’s parent to Costa Coffee and Premier Inns, who claims that a higher minimum wage represents a “substantial cost increase”. How then would he describe the £4.5m total pay package that he took last year?

CBI warnings pose as forecasts but read as threats; don’t raise wages or the high street gets it

However superb Harrison’s management skills, he is earning more than 343 full-time workers on the minimum wage – and even Superman wasn’t that productive. His employer, Whitbread, claims the wage rise will cost it somewhere between £15m and £20m . That sounds high, until you look at the annual report and work out that Harrison and his four executive directors between them took £13.7m out of the company last year. It must be a fine balance – paying thousands of staff a little more or awarding millions to a tiny clique in a boardroom – but it’s the woman behind the counter and her colleagues who’ve lost out.

Money has to come from somewhere: on that the bosses and I agree. If a business pays low-wage employees more, it must take the cash from higher-paid staff; or from profits; or from customers in the form of higher prices. Or even perhaps by working harder. If Harrison and his ilk are such amazing managers worthy of massive salaries, then a small rise in staff salaries ought to be a golden opportunity to show off their skills, and keep the business growing regardless.

But this runs counter to the British way of doing big business: think short term, meet the targets required to get your bonus, and do no investment or research and development along the way. Oh, and always treat the staff as an overhead rather than the people who actually earn the revenue – because when a customer goes into a coffee shop or a hotel they deal with the minimum-wage staff, not the finance director.

Yet Lidl’s example tells you that it can be done. The supermarket admits that moving its staff to a much more generous pay scale will cost £9m – which it can manage out of a £4bn turnover. In the end this has little to do with economics and much more to do with politics. For 30 years shareholders and their agents, the chief executives, have held the balance of power. Perhaps that may be about to change.