Three changes for 2018
I was thinking about some relatively easy changes that businesses can make in 2018 that help people either avoid poverty or help them get out of poverty.
I wonder what would be on your list?
If you really value your employees and customers please act on the following - it would be so refreshing:
1. Balanceitup
Make 2018 the year you bias pay rises towards the lower paid through a Balanceitup approach. The pay round will cost the employer no extra. Everybody gets something but the lowest paid get more proportionally. This rise is far more meaningful for them due to rise in the costs they face compared to someone who is well paid. Details of the scheme can be found in a previous blog here.
2. Restrict credit card debt increasing
In August 2017, Citizens Advice reported that 1 in 5 people struggling with debts has seen their credit card limit automatically increased. In April 2017 the FCA estimated that there are four million credit card accounts in what they call long-term, persistent debt. For those paying minimum payments, the debt can take years to pay off. A £500 debt on Barclaycard at 18.9% will take 12 years and 8 months to pay off and cost £538 in interest. The minimum in this instance would be £12.50. If you just increased this to £15, the debt will take 3 years and 10 months and cost £189 in interest.
If you belong to a financial institution, why not make the following changes:
a) All credit card statements should make it clear the consequences of only paying the minimum. “If you only pay the minimum amount, it will take X years to repay your current balance and will cost you £Y in interest.”.
b) Minimum payments should be at least 3% of the balance or twice whatever the monthly interest is on the outstanding debt – whatever is greater.
c) At the moment unsolicited credit limit increases are opt-out. This should be switched to opt-in and only applied based on affordability tests and repayment history e.g. not offered to people paying minimums.
d) People with potential problem credit card debt i.e. paying minimums for 6 months should be contacted and referred to help services.
e) New credit cards should only be given to people with existing cards based on affordability tests.
3. Pro-poor products and services
You've probably heard the assertion that 'the poor pay more for goods and services'. An immediate example you might think of is bulk buying. In an earlier blog I identified one such example - a large 65 wash pack of Daz washing powder in Tesco's was £7.00 - £1.66 per kg. A small 10 wash pack was £2.00 - £3.08 per kg. That's 86% more per kg. Which pack do you think is more affordable to those experiencing poverty? In order to seemingly address this, supermarkets have introduced 'basic' and 'premium' ranges alongside branded products. The message is this - the poor get inferior quality products. This is not restricted to fast moving consumer goods but one could see it for example in pre-pay electricity and gas pricing which the Government capped from April 2017 - see blog here.
For your company, why not review if your pricing is biased against the poor and change your strategy.
Here's some ideas to start you off:
a) Vary pricing to be lower in areas of deprivation. Maps exist of these across the UK.
b) Stop cash machines charging in areas of deprivation.
c) The Centre for Social Justice identified five pathways to poverty some time ago. These are; family breakdown, educational failure, worklessness and dependency, addiction and serious personal debt. Subsidise a service that addresses one or more of these in deprived areas. These could be relational counselling, parenting, early years development, schools, skills training, rehabilitation, debt advice agencies, etc.
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It was hard to chose 3 foci but I feel if I listed more it would dilute the impact.
Now I've started you thinking, I hope you can help change your organisation's policies and more importantly change people's lives.
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