Robert Ashton’s area has a working group trying to create a ‘living wage city’, but its lack of understanding of the realities of running a business is making his blood boil.

Sometimes knowing what someone else is thinking just makes you angry. Well, that was my initial response. I was listening to a self-confessed academic presenting some very sound arguments for local adoption of the living wage. He's someone I've not known long, but have quickly come to respect. He's thoughtful, compassionate and committed to positive social change. But something he said, undoubtedly in all innocence, made my blood boil.

Let me give you some context. I've been invited to join a small group of people exploring how my local city, Norwich, can become a 'living wage city'. Once this blog goes live, I might not be asked back, although actually I rather hope I am. There's a union man, a retired senior local civil servant, a Parliamentary candidate, a city councillor and a few others passionate about equality and fair play.

My mission, if I choose to accept it, is to help the group influence the business community. After all, people will only receive the living wage if their employer agrees to pay it. Oh and the living wage, in case you didn't know, is currently £7.65 per hour outside London. That's just £1.34 more than minimum wage. That's no big deal to big hitters, but for the low paid, it's enough to make a significant difference to lifestyle; especially for families.

National research results are compelling. Firms paying the living wage enjoy, on average, 18 per cent lower staff turnover, and 25 per cent lower levels of absenteeism. But then they also have higher wage costs. Now we get to the statistic that got me going; almost walking out of the meeting if I'm honest.

There is no evidence to suggest that paying the living wage has made any businesses go bust. However there is evidence that suggests that paying higher wages means lower profits for shareholders to enjoy. The suggestion that reducing profitability to a more 'realistic level' was right, illustrated in a flash the chasm of misunderstanding that exists between those campaigning for fairer pay and those whose behaviours they were seeking to change.

To me, as an entrepreneur, people who take personal financial risks to establish an enterprise have every right to enjoy the resulting profits. Nobody has the right to tell them what that profit should be. Moreover, anyone who tries, however well intentioned, will soon find the door slammed in their face. And we'd have very few of those major grantmaking trusts if people hadn't made huge fortunes in the past, then chosen to endow them to the benefit of us all.

Presented another way, the story can, I think, deliver a quite different result. You see in reality, the business owner paying low wages can make a very interesting choice. If they accept that paying higher wages reduces profit, then consequently it will reduce their tax bill too. Given the choice between giving money to your staff or the taxman, only the hardest-hearted boss will choose to pay the taxman.

Get off the moral high ground

Now interestingly, there is also evidence that shows how paying people above minimum wage reduces the level of benefits claims. In other words, if employers paid higher wages and less tax, government would see its spend on benefits fall, by around, I suspect, the amount that business tax take would fall.

I hope that someone somewhere has done these tax/wage calculations. I like the idea of the 'living wage' argument being presented as a cost and tax-saving opportunity, rather than as a moral argument.  Moral arguments are of course important, but for most people, their wallet is closer to the outside world than their heart.

The new economy we're building is very different to the one that fell off a cliff in 2007. But for it to be more fair, equal and inclusive than the one before, we need to be subtle. So there's your penny's worth for thought today. Now tell me if I'm on the right track.