One way to cut the debt – raise the minimum wage

• To read Merryn’s response to your many comments on this article, see Here’s why we must raise the minimum wage.

Back in 2010 I suggested what must have sounded like a slightly odd idea. If we really want to cut the budget deficit and perhaps one day the national debt, I said, we must consider raising the minimum wage.

As I put it three years ago, “the current minimum wage is not a living wage”. Pretty much everyone on it has to have their income topped up by the state (via tax credits and so on). That means the taxpayer has to subsidise the bottom-of-the-pay-rung employees at our supermarkets and fast-food outlets.

And that, in turn, means we are subsidising our supermarkets and fast-food outlets. They keep their profits high, in part, by paying low wages. That’s something they can only get away with because the welfare state picks up the slack. The profits then go to their shareholders, and the taxpayer gets left to top up the wages. We effectively take on what should be their payroll costs.

Instead of allowing this to keep happening, I wondered, why don’t we “make the companies pay living wages, stop the state subsidies and cut the benefits bill in the process”? I also wondered if raising the minimum wage might help us all out slightly by cutting long term unemployment: “I wouldn’t give up my housing allowance and benefits to take an unsecure job on £5.80 an hour. But I might for £7.50 an hour”.

I thought this was all rather brilliant. However, as with most of the columns I write that I really like, it wasn’t exactly picked up with enthusiasm by the political establishment. So I was pleased to see that the Sunday Times had a look at the issue of welfare workers in last weekend’s edition.

 

As Nicholas Hellen points out, everyone is very keen to talk about what non-workers should or shouldn’t get in benefits, but there is very little discussion about the fact that around seven million (yes, seven million) people – the ones we describe as strivers – are getting their wages heavily topped up by the taxpayer, thanks to the fact that “ successive governments have concluded that our vast and willing workforce is simply not capable of earning enough money to support an acceptable standard of living”.

So much so that it is possible to have your income “more than doubled” by various benefits even if you are in full time work. If you are, for example a single parent in London working full time on the minimum wage, you will have your income topped up from £941 a month to £1,924. And if you are a two parent family (one working 35 hours and one working 15) with three children, you will get it topped up from £1,345 to £2,100. Total cost to the taxpayer? £30bn-plus.

It is time to talk about this properly. Working people shouldn’t have to be state supported. So either the state is paying out too much, or employers are paying much, much too little.

Which brings me back to my original point. Why don’t we raise the minimum wage and make at least some of the problem go away?

• To read Merryn’s response to your many comments on this article, see
Here’s why we must raise the minimum wage

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182 Responses

  1. 17/01/2013, David Evans wrote

    e Government seems unable to tackle this, though they indicate willingness. Lower prices for family homes will boost real incomes, save the tax-payer masses on Housing Benefit bills.

    Further if some companies could not afford to pay a living wage they will go bankrupt and their jobs be lost, nobody will win, Government and workers will lose.

    To give a living wage to a couple with three chidren means single people doing that job for the same company will be very well off, only a benefit system linked to working permits salary can be tailored need.

  2. 17/01/2013, GFL wrote

    It’s very popular talking about supermarket’s record profits as a case for increasing minimum wage, but most minimum wage employers are small business which are by no means making record profits – how low does ones profits have to fall before he/she packs it in? Setting up a new business is already very risky – how many more business would go to the wall if the cost of labour kept going up? Ultimately increasing the welfare bill and the unemployment rate.

    Also, if you increase the cost of labour all you do is encourage machines to replace humans. I believe there is a fully self service Tesco in Northampton

    The wage of an employee has to broadly reflect the amount of value he/she is adding, if there is a big enough disconnect – the position is generally closed.

    This is a fairly interesting article…

    http://www.acton.org/pub/commentary/2011/07/06/minimum-wage-law-backfires-american-samoa

  3. 17/01/2013, FC wrote

    Tampering with the price of things is why we are in this mess. Forcing up the price of labour is the fastest way to inflate the price of things, such that we’ll all end up not being able to afford things again, just with more zeroes.

  4. 17/01/2013, nick wrote

    Or turn the question around, why isn’t the current minimum wage a living wage?

    Answer: because rents are so high.

    Why are rents so high? Because a) a large proportion of low end housing stock has been bought in order to let, meaning there is no alternative to renting for a large minority of the population, b) the government is propping them up by paying ridiculous amounts of housing benefit to private landlords and/or c) they need to be in order for private landlords to pay their mortgage interest. Take your pick.

    Politicians reading this may want to note that the renter/owner split is largely along a fixed age line (I’d say about early/mid-30s currently) and those on the wrong side are an increasing proportion of the voting population.

  5. 17/01/2013, Romford Dave wrote

    We’re paying out too little I’d guess, if I was pushed on the matter, but that’s more to do with maintaining differentials between skillsets rather than some low brow desire to keep people down.

    The paradox of the minimum wage is by increasing it, everything becomes that more expensive, requiring an increased minimum wage to get by.

    A targeted deflation on essential costs offers more hope to those at the bottom, paid for by a lot less focus on boosting asset prices of those above.

    Or maybe a mixture of both?

    Of course then there’s always wriggle room to wriggle out, and fingering blame elsewhere.

  6. 17/01/2013, Barkingmad wrote

    Of course if you increase the minimum wage it will cost UK jobs as they move abroad and those not unemployed people will then be claiming benefits.

    It will also increase the cost of goods and services – perhaps making them more expensive – so you could end up paying people more to find much of that is eroded by increased prices.

    A higher minimum wage would also further encourage immigration from countries with lower wages.

  7. 17/01/2013, Barkingmad wrote

    Also as prices would rise, jobs would be lost – not only would there be more people claiming benefits but there would be pressure on those benefits to rise more to negate the effect of increased cost of living caused by raising the minimum wage.

  8. 17/01/2013, Merryn wrote

    The idea is gaining support. Here’s Jeremy Warner on it
    http://www.telegraph.co.uk/comment/9808681/A-living-wage-or-a-much-higher-minimum-wage-is-worth-paying.html

  9. 17/01/2013, Barkingmad wrote

    How about looking at this a different way – cut / eliminate employers NI so it makes it cheaper to employ labour. This would create jobs / reduce the risk of jobs going overseas. Those jobs created mean less benefits paid out to pay for the loss of the employers NI.

    Reducing the costs of employing labour would mean businesses could afford to pay more or if taking away that cost meant they made extra profits that money would come back (in part) via corporate taxes, tax on dividends etc.

    Increasing costs to businesses would also make us less competitive – harder to export – more likely to import (even) more.

  10. 17/01/2013, Critic Al Rick wrote

    From an economy standpoint it’s best to see the UK as a single business – UKplc competing with the rest of the World.

    A business does not become more competitive by increasing wages (unless there’s a suitable increase in efficiency i.e. output/manhour – huh!).

    A business does become more competitive by decreasing overheads (so long as efficiency holds up). One way of decreasing overheads is by reducing wages/salaries; of those who can afford it.

    This would not only improve competitiveness but make home produced goods and services cheaper negating the need for tax credits, etc. A lot of taxation is effectively subsidising extravagent remunerations.

    But it won’t happen. The UK is on a financial suicide mission driven the greed of selfish individuals supported by a rigged playing-field. And it’s not just in the UK.

  11. 18/01/2013, Rob Smith wrote

    This just increases tax revenues for government to misappropriate plus it will increase costs for smaller businesses resulting in job losses.

    A far better idea is to drastically cut income tax, putting more money in people’s pockets.

    Poorer families would benefit paying less for their gas and electricity instead of extortionate rates of prepaid meters.

    People talk a lot about smaller issues but let’s talk about big ones like;

    When are we going to stop spending billions following America into wars in their desire to police the world?

    When are we going to stand up to the financiers and stop the printing press eroding away the pound?

    We’d save hundreds of billions just protecting our boarders and airspace and saying no to huge bailouts and some foreign aid.

    All the money we save could start reducing our deficit and tackling many issues like, the explosion of food banks all over the UK.

    Tough decisions need to be made but clearly our politicians are not up to it.

  12. 18/01/2013, Boris MacDonut wrote

    Absoultely yes, yes, yes. Best idea you’ve mooted in a while Merryn. The trade off is the abolition of Employer Nics of course.
    There is indeed a psychological and financial point at which those who turn down work will bite….I believe it is in the region of £8 an hour. At the current minimum wage with up to 12% Employer Nics the overall cost to industry is about the same but you cut out the Byzantine administration of the DWP and offer a carrot too.

  13. 18/01/2013, Diogenes wrote

    @David Evans. I spit feathers every time I see well-intentioned rubbish like “Part of the problem for workers and their employers is the scarcity price of housing, the Government seems unable to tackle this, though they indicate willingness.” The government is actively and deliberately stuffing a true market primarily by keeping interest rates artificially low and also by the housing benefit racket. Next time someone says “housing ladder” to me………. Zombies are here

  14. 18/01/2013, CarlJ wrote

    For completeness, here’s the free market approach (the one we will never see): get rid of both minimum wage and taxpayer subsidies. No-one can afford to be a shelf stacker in London at current wage levels without subsidy, ergo London will lose all its supermarkets. This will make it less desirable so people will sell up and leave, pushing down property prices to the point where supermarkets can find willing shelf stackers.

  15. 18/01/2013, Boris MacDonut wrote

    #14 CarlJ. I fear they’d just use illegals and children. Do you realise how many pubs and restaurants use 15 and 16 year old waitresses on £3.50 to £5.00 an hour. No Nics to pay. The minimum wage of £6.09 only applies to over 21′s. The free market finds a way, we are talking about protecting the vulnerable and making the system more efficient.

  16. 18/01/2013, Tory Boy wrote

    Increasing minimum wage has a couple of nice side effects:

    * It will reduce migration. (If legally enforced)
    * It removes people from the benefit system entirely.

  17. 18/01/2013, Michael Van Clarke wrote

    The more tax money the Government sucks out of business the more pressure on wages. Average total tax take relative to turnover is now around 50%. It’s an endlessly vicious spiral that cries out for simplification. First thing would be to stop taxing minimum wage workers. If the Government assesses a living income at £20,000 a year then that should be the single person’s tax free allowance. All the tens of thousands of Government workers employed shuffling money to and fro can then be employed doing something useful for society.

  18. 18/01/2013, Neil Cleere wrote

    As a small manufacturing business owner in the South East I believe we should increase minimum wage to over £7.00/hour. I find it hard to get labour at these rates but my competitors in other regions have no problem so in actual fact it would help some with a more level playing field. However, I believe that minimum wage should be pegged to tax free pay. Basically, if you are on minimum wage you pay no tax. The higher earners woul have to pay for this. Get rid of these benefits for the employed because it is an incentive to only work on reduced hours. About 12% of my workforce will not work full time because it affects their benefits . Talk about a disincentive to work!

  19. 18/01/2013, Yossarian wrote

    Some of my staff are paid above the minimum wage, but below the so called living wage. If I have to pay them more my costs inevitably rise and my prices go up meaning probable difficulties for the business in tough trading conditions.

    However, if there was a trade off with, for example, a reduction in the amount of VAT we pay on the flat rate scheme, then I would be generally in favour of the idea. Reduction in employers NI won’t work for me as all staff part time and pay very little anyway.

  20. 18/01/2013, Barkingmad wrote

    Often agree that increasing the personal allowance may be sensible as seems little point taking money from someone to just give it back as benefits which then cost more due to administration etc.

    Increasing the personal allowance is effectively paying those current minimum wage earners more – i.e. they are taxed less – so they are better off without it costing the companies more (directly).

  21. 18/01/2013, Barkingmad wrote

    “Reduction in employers NI won’t work for me as all staff part time and pay very little anyway.”

    It still increases the cost of employment and therefore costs jobs in the economy as a whole.

  22. 18/01/2013, Barkingmad wrote

    “As a small manufacturing business owner in the South East I believe we should increase minimum wage to over £7.00/hour. I find it hard to get labour at these rates but my competitors in other regions have no problem.”

    Does not sound very efficient / fair – perhaps my company’s competitors should have their costs artificially increased because some of my costs are higher?

  23. 18/01/2013, Idont believeit wrote

    Merryn, Shame on you.I never thought I would hear you of all people mouthing socialist nonesense. Markets are the correct judges of wage rates as with everything else.Its that simple.No if’s no but’s. The mess people notice in their lives comes from the corruption of politicians spending tax payers money on utterly unproductive ventures.A minimum wage condemns people to eternal poverty.Why would anyone wish that on anyone else.Well politicians would in the hope of creating the scam that they are indispensable and you Merryn have swallowed their rubbish hook line and sinker.Go to the bottom of the class and start you economic lessons again please.

  24. 18/01/2013, alec wrote

    The real problem is high housing costs which is the government’s only policy to win the next election. They will do anything to keep the property bubble inflated through zero interest rates,” funding for lending” (from the tax payer as well as the ongoing bank bail out), robbing savers both with low interest rates and high inflation. No wonder there are calls for a higher minimum wage. The answer is clear, very much lower property prices. Unfortunately the government will not let the market work.

  25. 18/01/2013, Boris MacDonut wrote

    #23 Your name should be Idon’t understandit .,Merryn is talking about letting the free market decide. She is advocating removing the artificial wage subsidies handed to the likes of Tesco by topping up too low wages with benefits. It is ironically an amount almost equal to that taken in Employer Nics.

  26. 18/01/2013, chrisgg wrote

    Companies will always put shareholders and profits before employees that why so many employ only Agency workers…
    Minimum wages keep all of us poor as its the legal benchmark not the moral one..If you cant pay good wages you shouldnt be allowed to run a business…but unfortunately the Government arent bothered or bright enough to figure this out. Amazing that MPs want a 32% pay rise themselves tho

  27. 18/01/2013, Barkingmad wrote

    @Boris – you said “Merryn is talking about letting the free market decide” – not really sure how having a minimum wage is ‘letting the free market decide’ – if that were the case we would have no minimum wage?

    As I said earlier there seems little point paying a wage only to have it topped up by benefits but think raising the personal allowance / scrapping employer NI may be a better way to take people out of tax and benefits than artificially increasing the cost(s) of labour which would cost jobs rather than create them.

  28. 18/01/2013, Barkingmad wrote

    @chrisgg – “If you cant pay good wages you shouldnt be allowed to run a business…but unfortunately the Government arent bothered or bright enough to figure this out.”

    Guess you have to ask yourself is it better for the person (and the country as a whole) to have a lower paid job or no job? Is it better someone earns £800 a month and gets topped up by another £800 in benefits or that the state had to give them £1600 for not working?

  29. 18/01/2013, Idont believeit wrote

    Boris, I cant let you get away with that equal amount of nonesense. Start from basics please.There should be no minimum wage. Punto. End of story.Tinkering is just playing the foolish socialist game. Its about time people in the UK understood that simple fact and acted accordingly.Their lives would improve immeasurably and they would have the opportunity to live with a decent standard of living determined by their efforts.

  30. 18/01/2013, Boris MacDonut wrote

    #29 Sorry ,I can’t let you get away with that. How is it nonsense, tinkering or a game to try and protect the most vulnerable? Of course there should be a minimum wage, precisely because big business has few morals and cannot be trusted even to put beef in a beefburger. I’m afraid it is far from the end of the story when you have the liokes of me to contend with. I hope you get my Punto.
    #27 B Mad. I accept a min’ wage is a bit of interfering but surely it is taking away the subsidies that is crucial. Low paid job or no job….most would opt for no job.

  31. 18/01/2013, Barkingmad wrote

    @Boris – “Low paid job or no job….most would opt for no job.” – some individuals would but it’s hardly good for everyone else / the country?

    The problem (as I said earlier) is if you push up minimum wages it will cost jobs (more people claiming benefits) and push up prices – affecting everyone – especially the lower income earners who spend a higher proportion of their income and specifically on things like food.

    Pushing up prices means you have to pay more benefits as a result – so you end up increasing the minimum wage again to compensate – chasing your tail.

  32. 18/01/2013, Barkingmad wrote

    I should have said:

    “…it will cost jobs (PLUS more people claiming benefits)…”

  33. 18/01/2013, Barkingmad wrote

    Boris – your approach is all ‘carrot’ – pay people a bit more and they will get a job – but the paradox there is paying more would cost the jobs you want them to take. Think some people may need a bit of ‘stick’ as well – i.e. some benefits should not be open ended, more checking to ensure people are actually entitled to them and making people train / retrain or take a job after a period of time.

    Get more people into jobs – you have less benefits to pay out – can afford to increase the personal allowance / reduce tax rates, scrap employers NI – or the same in reverse.

  34. 18/01/2013, Orb wrote

    Merryn @8, could you be listening with your lips? The headline was intriguing enough to see how such a proposal might work. The contributors make several really valid points: disproportionate housing costs driven by government, the greater dependence of smaller businesses on cheap labour, the disincentivisation of lower profits, a drive towards machines replacing labour or industry export, interference in the free (wages) market, immigration exacerbation, link to increased living cost etc.

    The best way to pay down debt is to acually PAY it! What did labour do with the boom years windfall? Blow it on inefficient government! What have the con-dems done since vowing to address the deficit? Moved the goalposts & added MORE debt!

    (cont…..)

  35. 18/01/2013, Orb wrote

    (cont….)

    Do you seriously think anything will change regardless of who’s in Downing? If they wanted to raise income proportionately, they would cut income and company tax and revise VAT. Everybody would have to pay that. But since when has a feudal political establishment ever been interested in equality? Rob @11 is spot on!

    (contributions have been rolling in fast!)

  36. 18/01/2013, Despondent wrote

    Lots of interesting comments! The biggest problem with getting people off benefit (of all types) is having jobs for them to do, regardless of the wage actually paid. The loss of jobs rot started with the Tory Handbag Lady demolishing UK plc as a manufacturing place, and thinking that the Financial Services “Industry” (sic) would be a valid replacement. The old saying that half the world cannot live by doing the other half’s washing is very true. The paper shufflers of the banking world etc produce nothing tangible and are responsible for most of the current mess because of their over arching greed. ALL of our income can only come ultimately from the sweat of the working man’s brow producing goods for sale! NOT printing pound notes to buy time – it will not work in the long term.

  37. 18/01/2013, Martin wrote

    Another socialistic nonsense from Mrs Webb, supported by, no wonder, Boris Mac20%horsemeat Donut.
    Just out of curiosity, how much would you raise the minimum wage? To £7.50? Yes. Why not £7.69? Good idea… How about £8? Wait, I guess £9 will do. Or no, we should call for a public inquiry, yes that’s the best idea. Give a bell to Ed The Left, he’ll take care of it.

  38. 18/01/2013, Boris MacDonut wrote

    #38 Martin. How very rude and pointless. I have siad what i think Min’ wage should be, £8 an hour. FYI I am also keen on a maximum wage.

  39. 18/01/2013, Romford Dave wrote

    #36 You can trace the start of the rot back to at least a decade before the dame de fer came to power.

    Perhaps even earlier, given that the post war boom came to an end in tandem with skirt lengths getting shorter. Makes you wonder if skirt lengths weren’t the QE of the day, with desperate bankers seeking out new lengths to stimulate the economy?

    A re-run of the seventies seems to be the best we can hope for, winters of discontent, 3 day weeks, improbable cop shows and a multitude of bad hair days.

    Punk rock, glam rock, suicide hard rock.

    God, now I know how Billy Joel felt.

  40. 18/01/2013, Barkingmad wrote

    @Boris – maximum wage is basically a cap on earnings – how about 100% tax on anyone earning over 50k and watch all the high earners leave the country taking jobs and businesses and the tax they would have paid with them. How exactly would you do it – a maximum hourly rate or maximum monthly / annual income?

    Also minimum wage – do you not consider raising it would cost jobs and actually push up costs for businesses with a knock on effect on prices in the shops. That would create inflation / increase the cost of living so then we would need to raise the minimum wage again – round and round we go.

  41. 18/01/2013, Romford Dave wrote

    16 x minimum wage as a maximum has been suggested by some, seems as good a ratio to most I guess.

    Who’s going to play the part of the entrepreneur in this new Valhalla, once the real ones call it a day?

  42. 18/01/2013, Neil Cleere wrote

    I certainly believe in a minimum wage system even though I am an employer. I am an out and out capitalist and I hate big government but our lowest paid members of society need protection from unscrupulous employers. I would be in favour of an increase in minimum wage and that would make it a level playing field for us employers. As I said earlier I am fed up with a significant percentage of my staff that will only work par time because if they worked full time their working benefits would be cut. Most employers I know have the same problem. Fundamentally I disagree with all of these working credits because it creates problems elsewhere. Remember the special tax allowance the government had for people with mortgages? It only allowed prices to rise higher in thebpropert market. Big message to a government, butt out and let supply and demand drivers set prices.

  43. 18/01/2013, Martin wrote

    stic/communist regime took over. The country could not compete in industry, science, healthcare, quality of life, nothing. Miserable life for citizens, except for the few on the top, the government. Half empty shelves in shops. Queues for meat, queues for toilet tissue. Queues for everything. And I mean queues outside shops, not behind cash registers. It always ends up the same way when you start meddling with economy and re-distributing wealth. No exemptions.
    My question for you, Boris: why not £8.39?

  44. 18/01/2013, Boris MacDonut wrote

    #43 Martin. Oh East Germany. As I said around £8 an hour ,so indeed why not £8.39? Psychologically £8 is a lot more than £7.98.
    #40 B Mad. I think 40 times the lowest paid worker or 20 times the average has been suggested. Certainly when these rates pertained in the USA (1955 to 1970)growth and equality was never higher.

  45. 18/01/2013, kiss wrote

    Minimum wage on 40 hour week approx 12k means tax & nic of approx £1ooo, why does someone on a so .called minimum wage pay tax it seems ridiculous to me to then potentially have to claim it back via tax credits as it isnt enough to live on! two layers of state bureaucracy could be eliminated by simply aligning min wage with personal allowance. Abolish tax credits, abolish family allowance while their at it, up personal alowances. The minimum wage could be kept low if everything we do wasnt taxed so heavily?

  46. 19/01/2013, craig wrote

    Agree completely with Idontbelieveit and the other free marketeers, the only way to do this is leave it to the market to decide. We need to send some ships over to Africa and get our selves a few thousand slaves. No tax, no wages, no paperwork, no red tape, just cheap goods in Tescos. Win win and all thanks to the free market.

  47. 19/01/2013, Iain wrote

    Cannot tell whether Merryn’s idea is good or bad but one thing is sure without end consumer demand there is going to no growth. And it will remain like that till the vast majority of us below or around the national average wage have some discretionary income to spend.Raising minimum wages may allow people to feel more confident and to start consuming again.

  48. 19/01/2013, Barkingmad wrote

    @Boris “I think 40 times the lowest paid worker or 20 times the average has been suggested.”

    1. How would that actually work – based on hourly rate, monthly pay, what about dividends, bonuses and ‘perks’ which may not be related to an hourly rate. Do you not think people would (fairly easily) just find ways around it – so (and critically) is it workable?

    2. If we said minimum wage resulted in around £12k per year – 40x times that is almost £500k per year – realistically that is already so high it’s only like to affect a very small number of people. Would those people affected not just ‘work less’, find legal (or other ways around it) or consider moving elsewhere?

  49. 19/01/2013, richard wrote

    Single male home owner take home pay £1400 and what benefits does this person receive?? absolutely nothing. Why should these people subsidise the rest?? balanced and fair is what these people require.

  50. 19/01/2013, Romford Dave wrote

    Since 1970, its the growth in income for 0.01% of the population that has distorted the ratio for the highest and the lowest income percentiles in the US. For the other 99.99%, its remained pretty much constant all the way back to the end of the WW2.

    Ironically, it’s China that has enjoyed the greatest growth, coinciding with a discard of the communist doctrine of narrowing income bands, in direct contrast to the US experience.

    Neither approach seems acceptable given the rabid consumption of Earths resources in feeding their growth.

    It’s hard to believe that capping the remuneration of a little over 31.5 thousand Americans will solve the ills of the world, given the downside risk of everyone and his dog insisting that anything between 35 & 40 is a reasonable multiple for establishing their own level of pay.

    It’s excess that needs to be addressed, not by introducing arbitrary caps but by strong electorates removing those that facilitate such excesses.

  51. 19/01/2013, Boris MacDonut wrote

    #45 Kiss. Min wage for an over 21 is £12,700pa on a 40 hr week. If they pay no pension they would pay £540 tax and £590 Nics and the Employer another £780. It is closer to £1900 of near pointless tax and admin’.
    #48 B Mad. I said others suggested not me .I would go for 50 times the lowest paid with an £8 hour minimum that is an hourly rate of £400 max or £900,000pa before pension. Only about 60,000 Brits earn over £900,000 If half of them leave would we miss them? The raison d’etre of tax is not to keep the uber rich resident here.

  52. 19/01/2013, Stuart wrote

    it appears that the Labour Party are considering greater protection for tenants, to make sure protection works on length of tenancy they will have to prevent price hikes in rent being used to move tenants on, this is just common sense. When these rent controls are introduced we will get a rapid exit of private landlords as their pension package would have just been undermined. Housing will again be a place to live and less of an investment.

  53. 19/01/2013, John D wrote

    Increasing the minimum wage as suggested is fraught with difficulties as pointed out by other correspondents. Surely a better way would be to stop the Goverment recycling money buy dramatically increasing the tax thresholds. It’s preposerous for Goverments to tax poor people and then give them the money back through tax credits and benefits. They creation and constant expansion of the ‘client state’ is at the centre of our benefit culture and will ultimately undermine democracy and civil obedience as Goverments constantly promise ever more than they can afford to give to get into power.

  54. 19/01/2013, Martin wrote

    To Boris and to everyone in favor of minimal wage.
    Why not to regulate prices of food, rents, houses, cars, etc.? If you want to regulate A you need to regulate B as well, otherwise it doesn’t make any sense. If you put a cap on minimal wage, I am sure that the nasty, greedy corporates and capitalists will raise their prices to make up for the loss on wages. So to slap them over their wrists, you must, I repeat, you must regulate!
    After careful thinking I now firmly believe that a minimal wage should be £8.69. Anyone’s got different idea? Why not email me at ibelieve@freemarket.huh. All emails will be carefully deleted ASAP.

  55. 19/01/2013, Romford Dave wrote

    If there’s 60 thousand people earning incomes in excess of £900k Boris, 52 thousand have yet to tell HMRC about it according to this piece of data: -

    http://www.hmrc.gov.uk/statistics/tax-statistics/table2-5.pdf

    Although in fairness, they’ve got till the end of the month to get their self assessment forms back and declare their good fortune.

    At an average tax take of over a £1million a pop, Mr Osborne is in for a very pleasant surprise with his multi billion pound windfall.

  56. 19/01/2013, John Cooper wrote

    The “living wage” is socialist twaddle. The reason why people cannot survive on the minimum wage is because Government takes so much money off them in the form of tax (not just Income Tax, but VAT, excise duties etc) then tries to give it back to them in the form of ridiculous “tax credits”.
    One historian wrote, referring to Edwardian England, that the average law abiding lower to middle class man could go through life and his only contact with the State would be the Post Office. Since then socialism has created gargantuan government which is a hungry monster that needs feeding; hence the idiotically high taxes and the whole nonsensical debate about tax aviodance.
    the answer is to cut back the size of the State radically (especially benefits for working age people) and give the money back in the form of deep tax cuts.

  57. 19/01/2013, Robert wrote

    I.e. “the real minimum wage is zero: unemployment” Thomas Sowell

    Google Thomas Sowell on ‘minimum wage’ or ‘living wage’ in fact if you folks responding positively to Ms Somerset Webb’s ludicrous ‘idea’ and spouting so much utter utter rubbish trying to justify it, really want to get angry (please yes!) Google him on ‘gun control’… Go on, do it, it’ll make my day just knowing you might…

    :0)

  58. 19/01/2013, Boris MacDonut wrote

    The problem with simply raising personal allowances is it benefits the rich too.
    #54 Martin. I don’t get it. Why should everything else be regulated? We have a 30mph speed limit but don’t tell people which cars to drive.
    #55 Romford Dave. Hilarious. How can there be only 8,000 people in the UK earning over £900,000? There are 800 just in the professional football leagues and we are told annually how the City has at least 10,000. I guess many have “gone abroad” already……so we can’t miss them if they’ve already gone.

  59. 19/01/2013, Romford Dave wrote

    The figures are quite an eye-opener Boris, I agree.

    Makes you think doesn’t it, with all the powers at the disposal of HMRC in pursuing those under declaring income, there are still those able to minimise their income (we assume legally) and stay off the radar.

    Suggesting that any maximum wage would have little impact except punish those 8 thousand civic minded higher earners, with the resultant dent in the 8 billion pounds they were putting into the coffers before they lost the urge to give unto others what they don’t give unto you.

    It may make a few people happier I guess, for a while anyway, or at least until their tax bills were increased or benefits reduced to compensate for the loss of revenue at the higher end.

  60. 19/01/2013, Mike wrote

    Good idea.

  61. 19/01/2013, Romford Dave wrote

    Apart from making provision for actively pursuing the estimated 52,ooo high earning tax cheaters, a loss to no one, should they decide to move abroad permanently; if its equality you seek, I would suggest that tax and NI thresholds should be raised and harmonised at a level equal to that deemed a living wage.

    The abolition of higher rate tax and the upper cap on NI.

    All other forms of income made liable to tax & NI at the same rate as those under PAYE, including savings, pensions, dividends, capital gains and all forms of welfare benefit payments.

    That’s a more equitable regime that puts everyone in it together.

  62. 19/01/2013, Boris MacDonut wrote

    #59 R Dave. Then we may as well keep the high tax. I think you suggest doing away with it as it only catches a few. No. It is the message sent that is more important. It puts the ball firmly in the court of the uber rich. They have the moral dilemma of do the right thing or seek to avoid and evade and then justify what they do. The rest of us would rather they don’t even seek to call themselves British. Like most tof the F1 champions, who are Monagasque.
    #61 Dave . I agree NI and tax thresholds should be raised and harmonised but higher rates should be ratcheted up to send a clear message. If you are not prepared to pay liberally you are not welcome. Many tax avoidance schemes are designed to dodge tax at just 12%. These greedy people dodge at whatever the level, even 4% stamp duty.

  63. 19/01/2013, RP wrote

    Housing Market comment Spot On! Landlords traditionally take up the less attractive surplus stock. Landlords, typically 60 year old millionaires, are hoovering up all of the 1 and 2 bedroom First Buyer properties. No problem with hard working people supplementing or hedging their pension with a rental property or even two – but these guys are buying up dozens. I know 3 guys who each have 20+ properties. Its out of whack, its destroying lives of millions of hardworking people in their 20′s and 30′s – and it’s being fuelled by DHSS housing benefits. The only 25y.o. who can genuinely afford rent are the unemployed or the mega rich. I say tax multiple house owners until their eyes bleed – it wont crash the market, it will result in redistribution of the housing stock and allow 25 year olds to get on the ladder.

  64. 19/01/2013, Martin wrote

    “Reduced employment opportunities is one effect of minimum wage legislation. The minimum wage law has imposed incalculable harm on the disadvantaged members of our society. The only moral thing to do is to repeal it.” — Walter Williams

    Now please stop posting nonsense here about wages, earning caps and new miraculous taxes for the top xx, just go and do something useful instead of trying to meddle with economy.

    Boris, has the word sarcasm ever crossed your mind?

  65. 19/01/2013, Barkingmad wrote

    @Boris – “Only about 60,000 Brits earn over £900,000 If half of them leave would we miss them?”

    I’d imagine we would with the top 1% of income earners paying over 12.5% of all the income tax – I’ll admit the figures I have do not drill down to the top 0.1% or whatever those 30,000 Brits would be – but I would suspect it would be at least 3% which is about the same amount of income tax paid by the bottom 10% of earners.

    Also that is just income tax – suspect their contribution to the total tax revenue of the country is far greater than 3% when you add up employment they (and their businesses) create, the money they spend and invest etc. etc.

    Also £900k is already so far removed from what most people earn it may as well be £2m or £5m for that matter. Lastly hope you are not a football fan as suspect that would affect probably a big chunk of the Premiership football players.

  66. 19/01/2013, Barkingmad wrote

    @Boris – you say “The problem with simply raising personal allowances is it benefits the rich too.”

    How – you lose it at incomes over £100k? Yes people earning up to £100k would benefit but they have already lost their child allowances and if you are that determined you could always make it £90k when they lose their personal allowance.

  67. 19/01/2013, Daisy wrote

    I agree. It is time to reduce the cost of housing for everyone. Rent controls, longer and securer tenancies for tenants and remove all the tax breaks for landlords. Increase the level of capital gains for landlords. Possibly even restrict who can purchase property in this country and the number of properies that can be purchased. Merrin, I still like your article. The logic makes sense to me.

  68. 19/01/2013, Romford Dave wrote

    ce limits on those with ambition, talent or good fortune for it serves no purpose than to replace one persons meanness with another’s.

    Equality is either equal or Orwellian equal and we all know how the latter played out.

  69. 19/01/2013, Boris MacDonut wrote

    #64 Martin. Has the word wrong ever crossed your mind?
    #66 B Mad. Not sure of your definition of rich. A salary of £90,000pa over say 40 years would give someone £2.5million.
    #68 Dave. I love it, you actually said talent….brilliant.

  70. 19/01/2013, Barkingmad wrote

    @Borus – I’m not sure of many people who earn 90k per year for 40 years – I was just suggesting a way to remove any benefit introduced by increasing the personal allowance.

    Where we may differ is I want to encourage people at all income levels to work / reduce benefits paid out and increase taxes paid in – i.e. it should always be better off to work than not, people should be encouraged to work (rather than being long term unemployed) and working harder / more should be rewarded not just taxed more.

  71. 19/01/2013, Barkingmad wrote

    Rather than increasing the minimum wage which would cost jobs / put up prices and in turn erode the benefit you gave them with the higher wage – it seems better to take lower earners out of income tax so they have less need of benefits and have more in their pocket.

    If people then have more money to spend – they will – which would help growth, create jobs and ultimately much of the money spent will come back to the tax man via various taxes like VAT and company profits.

    If we reduced or got rid of employers NI it would also reduce the cost of employment for companies – therefore further creating jobs and reducing benefits paid out. Growth and fuller employment should be the goal and increased tax revenues earned as a result benefit everyone.

  72. 19/01/2013, Aff wrote

    The government setting the minimum wage is just the same goverment meddling in anything else. Politicians cannot improve the work of the market forces, and to try to do so invites disaster further down the track. Why do you think we have this debt crisis today? Do you think we have anything resemblimg free markets today? If you say yes to that then frankly you deserve everything that is coming. Government is the most dangerous superstition than mankind is cursed with. Its time for individuals to start taking responsibility for their own lives and stop expecting the nanny state to pander to them. Sorry for being so blunt. I just wish people would wake up and take responsibility

  73. 19/01/2013, Boris MacDonut wrote

    #70&71 B Mad. We have come full circle. I agree with you here. Folk should be encouraged to work. Tax should be reduced form the poorer ones and Employers Nics is an insidious and disincentivising drag on industry. I have said as much several times before.
    A doctor qualifying at age 25 and working to 65 would earn an average of £90k per year. £60k in the earlier years and £120 k in the later years. There are 250,000 medical doctors in the UK.

  74. 19/01/2013, Martin wrote

    Boris, please elaborate on that doctors wage, I didn’t get the point.

  75. 19/01/2013, Robert wrote

    Aff
    You make some GREAT points and you’re not being blunt at all. I find so much in many of the comments above (not yours) so utterly depressing. Our once great country now has so many, seemingly intelligent, people believing this rubbish, the ‘superstition’ as you quite rightly put it, that government is the solution to this and many other ‘problems’ not the very cause of them. This idea that if we could just get some better, nicer, smarter people, in charge, the world will be a better place and all these ‘problems’ will be fixed. The reality  is there are no solutions to these problems, there are only, in the real world, trade offs. Legally stealing money from ANY section of the population and handing it out to another section is still stealing, calling it ‘redistribution’ doesn’t make it any less immoral. In this particular case the ‘solution’ of redistribution is supposed to solve the ‘problem’ of the unfair distribution of income or wealth is the first place. It never does.

  76. 20/01/2013, Tony Hart wrote

    The huge problem facing UK is that we are hopelessly uncompetitive. We have a huge trade deficit and owe some £250 billion to the ROW. Sooner or later, we will be forced to lower our wages, unless the Far East and BRICs increase theirs. Our GDP per head is something like 3 times those of the developing countries.
    In addition, work is disappearing, due to the internet (look at HMV and Jessops).
    The result of increasing the minimum wage will be a huge increase in unemployment.
    By the way, holiday pay of around 12.07% has to be paid on top of the minimum wage.

  77. 20/01/2013, sonia wrote

    sonia,

    On the continent most people rent.

    council tax is calculated on earned income. About 3%
    Even band A – can make
    the difference between able to afford to rent or not.

  78. 20/01/2013, Idontbelieveit wrote

    Robert is totally correct.Nobody seems to have analysed Merryns suggestion so far correctly except the free marketeers.Who pays for the current top up for the min wage… the taxpayer. Who will pay if you eliminate the subsidy from the taxpayer and double the min wage… well it wont be Tesco.As tescos profits decline through higher wage costs prices will increase and the Taxpayer will be paying yet again.There are no free lunches in economics.You cant tax your way to wealth only to poverty.Merryn should have seen through this scam straight away and because she didnt she declares herself to be a closeted socialist like the majority of the UK who seem to think government is some sort of wealth machine when in reality as Robert has said its nothing BUT the problem.

  79. 20/01/2013, Boris Macdonut wrote

    #74 Martin. Trainee doctors of whom there are 70,000 earn £26,000 plus a 40% allowance that increases pay to £37,000. After 5 years they get £45,000 and 40% more. GP’s ,of whom there are 50,000 get an average £110,000. The typical GP is inpractice for 28 years. 28 x £110,000 and say 12 years at £43,000 averages £90,000 for 40 years .They pay 33.5% tax and Nics so keep £2.4million over 40 years. Funnily enough that makes you rich.

  80. 20/01/2013, Martin wrote

    Boris, I still didn’t get the point. Did you mean that doctors earn too much? Or too little? Or that they are milking the system? Or that they should be on minimal wage?
    If you think they get rich too easily then why didn’t you become one of them?

  81. 20/01/2013, Brad wrote

    You have omitted a 3rd possibility that hasn’t even occurred to you; that living standards are falling. Your words are typical of the mindset of political left; that there is a set ‘decent’ standard of living, and if anyone working doesn’t meet with that subjective understanding employers must be to blame. There are people all over the world working harder and yet have a standard of living far below ours. Could it match our levels by simply demanding that their govts mandate a minimum wage set at the equiv. of £7ph. It wouldn’t work there, and it wouldn’t work here. It doesn’t even occur to many that the massive state spending by a bloated government, enormous levels of waste, shocking levels of misallocation of resources, a runaway welfare state, high levels of govt. debt, an artificially low interest rate, a recourse to money printing etc. might have something to do with it. No, people are struggling, so employers just need to pay more. It’s a laughable childlike solution.

  82. 20/01/2013, Boris MacDonut wrote

    #80 Martin. You need to look back to #66. I am citing a large group of workers on an average £90,000 as B Mad is telling me that raising personal allowances does not hit those earning over (what is £118,000 now). I am taking issue with B Mad by stating it is very possible to earn under £100,000 and still be rich. Most doctors come from families that are either already doctors or are already rich, it is a double whammy argument as regards toffs. Before anyone responds with uber Tory rhetoric,can I remind people that children of the top quintile are 35 times more likely to become doctors than those of the bottom quintile. Martin you need to go and read something useful rather than slag off those of us who know a bit about what we are describing.

  83. 20/01/2013, Boris MacDonut wrote

    #81 Brad .Your argument is holed below the waterline. Living standards are rising and have been for about 300 years, and that is good. But you seem to say because the average standard of living is much lower worldwide, then we should have a negative aspiration for our own poor. We should only provide a world average for them, thus saving tax demands on the already rich, but ignoring the average standard expected in our own country where it is easy to be left behind or excluded while still being ” better off” than someone in India. I must admit it is a new argument from the greedy classes,but I will work tirelessly to counter it, as it is so blatantly wrong.

  84. 20/01/2013, Brad wrote

    Boris. I sense that you were looking for an ankle to bite before you read my post. It’s difficult to express your views with such a tight character limit, which is why you may be reading more into it and putting extra words into my mouth. Either that or you’ve totally misunderstood.

    I believe we should have a much greater aspiration for those on the lower end of the pay scale, but that aspiration cannot be met through men in suits simply dictating what the minimum rate of pay should be. Oh if it were that easy..

    I’m arguing in favour of the free market, individual liberty and responsibility, smaller govt., lower taxes.

    And you?

  85. 20/01/2013, Brad wrote

    “…it is easy to be left behind or excluded”

    That’s always expressed in the passive voice. If we put it into the active voice we need a subject.

    Who’s doing the ‘excluding’ and ‘leaving behind’?

    So much of it is being done but it’s never quite clear who’s doing it.

    ‘John Bloke has been left behind by ______’

    ‘______ has excluded John Bloke.’

  86. 20/01/2013, Critic Al Rick wrote

    Quote Boris:
    “Living standards (in the UK) are rising…”

    A lot of people seem to consider the World owes them a living; some people seem to consider the World owes them an exceptionally good living. Well, the World owes noone a thing; you should have to strive to make a living; not parasite off of others as is commonplace.

    Living standards in the West will decline as Western currencies decline relative to those of countries not in the West. Not before the UK has achieved a consistent Balance of Payments Surplus will that decline halt; not until the UK is paying its way in the World.

    I’ve told you before: UKplc has been visibly rotting since the early 80s. We, as a whole, have parasited off TROTW, asset stripped, and are now plundering the Middle Classes, of which some are not parasites.

    Average living standards in the UK have to fall. What also needs to fall is the threshold that is inappropriately deemed the poverty line; also see my post @10.

  87. 20/01/2013, Boris MacDonut wrote

    #87 Well we,ve never tried a genuine decent minimum, wage so there’s nothing to lose. Whereas we have tried living without it and endured child labour, TB, illiteracy and life expectancy of 45.
    #88 Rick. The clearest signal of increased living standard/quality of life is the rise from 68 to 80 in life expectancy between1980 and 2010. “Rotting from within”, get a perspective for goodness sake. Living standrards will NOT decline, but those elswewhere may catch up a bit.

  88. 20/01/2013, Critic Al Rick wrote

    at least, of cancer treatments for the over 70s to cease. Seems eminently sensible to me – in the circumstances. Not to mention the proliferation of self-abuse.

    The UK, the West, as a whole has been living a fantasy for at least the last 3 decades. Now the chickens are coming home to roost.

  89. 20/01/2013, LefTurn wrote

    Ed Milliband has been advocating the idea of a Living Wage for some time now. Good to see Merryn getting on board.
    How about rent control, taxing Foreign corporates, penalising employers of cheap immigrant labour, etc etc. There is plenty of scope to reduce the tax burden.

  90. 20/01/2013, Barkingmad wrote

    @LefTurn – “There is plenty of scope to reduce the tax burden.”

    Or increase it if a higher minimum wage costs jobs / increased unemployment, increases prices both in the shops and for our companies trying to compete with these ‘foreign corporates’ etc.

    You would not need to penalise anyone in the UK as many of the lower paid jobs would move abroad.

  91. 20/01/2013, Barkingmad wrote

    @Boris – “Well we,ve never tried a genuine decent minimum, wage so there’s nothing to lose. Whereas we have tried living without it and endured child labour, TB, illiteracy and life expectancy of 45″

    Can you genuinely claim a minimum wage is solely or at least primarily responsible for stamping out child labour, TB, illiteracy and increasing life expectancy?

    … and as for having ‘nothing to lose’ – my guess is we would lose a lot of jobs abroad and find our companies become less competitive as their costs rise. Those lost jobs will end up increasing the benefits burden, lower tax receipts and more tax to pay by now fewer people.

    Sounds like quite a lot to lose!

  92. 20/01/2013, Romford Dave wrote

    Since the minimum wage was launched back in April 1999, we’ve experienced 2 stock market crashes, a credit crunch, the war on terror, 9/11, 7/7, QE, zero interest rates, devaluation of the pound, rising retirement ages, reduced annuity rates, benefit cuts, job losses, above inflation energy price increases, above inflation public transport fare increases and an ever increasing pile of public debt.

    It’s probably stretching the truth to suggest the minimum wage had much to do with the events that followed its launch, so why would anyone think it had anything to do with eradicating what went before?

  93. 20/01/2013, Boris MacDonut wrote

    #94 & 95. I have not suggested that a minimum wage eradicated TB etc. I am saying the free market ,given full rein, led to misery for many. I believe you would allow that to return in your mistaken quest for financial “efficinecy”.
    #91 Rick. “Living a fantasy for three decades”. Some fantasy,I’d have thought a whole generation would justify calling it reality and whatever you are advocating is the dreamland. Go back 30 yeasr and ask yourself if you’d rather live there……..and be honest……the answer is always no.

  94. 20/01/2013, Critic Al Rick wrote

    Boris, you appear to have missed the bit: “Now the chickens are coming home to roost.”

    The UK will be spending at least the next 30 years, probably much, much longer, paying for the Parasite’s Fantasy.

    Are you sure you’re not employed by the Govt as a propaganda machine on these boards?

  95. 20/01/2013, Ellen wrote

    There are a few commentators who blame the high cost of housing (alec@24 and Daisy@67 ) as a major hurdle for our economy.

    And Al @89 rightly points out that we have to become more competitive globally.

    But there is a real problem with large numbers of companies, like NIKE, who want to produce in a cheap labour economy but market in a high income economy. Even the US government outsource secretarial services to India while they create the conditions for American workers to have to earn much more money in order to survive.

    I do support a living wage but measures also need to be put in place to make it difficult to feed off one economy while employing cheap labour from another. That can be done in a number of ways – reducing essential costs like housing and introducing import quotas and tariffs two more obvious ones.

  96. 20/01/2013, Boris MacDonut wrote

    A lot of low wage jobs simply can’t be outsourced. Think waitressing or hospital porters.
    It is a great shame that when Merryn comes up with a very good idea it is met with a chorus os disapproval. Mainly from the ones who regularly tell us to maximise revenue you need to reduce the tax on the rich .
    But here is Merryn saying to reduce benefits we need to increase the pay of the poor and reduce the tax on them and it rankles ,I can only assume it is because it is aimed at helping folk that the usual suspects have little time for.

  97. 20/01/2013, Critic Al Rick wrote

    Ellen, I feel we both know what’s wrong and what it would take to correct the situation but I fear TPTB are so well entrenched and the masses so short-sighted nothing will stop the eventual creation of a Totalitarian One World Govt. So-called Democracy is powerless.

    And as for the UK…

  98. 20/01/2013, Ellen wrote

    @Al. Everywhere I go, I see companies trying to get out of employing local labour. In supermarkets, they are all about self check outs. When you have to deal with Sky, utilities or virtually anyone, you first negotiate your way round voice recognition ‘troubleshoot’ and, if you’re lucky, end up talking to someone in a call centre in India who call themselves Ellen or Al (or even Boris). As time moves on, emerging markets are gaining ground on the more professional area and getting them outsourced also. Take a look at accounting online services.

    We are being left wide open to being eaten alive by global economics and nobody in parliament wants to represent the interests of those who live, work and pay taxes in the UK. We are still expected to bear the crippling costs associated with an economy that insists on living inside an outdated bubble.

    Boris, I do not understand what you are saying in No 99 (above).

  99. 20/01/2013, Boris MacDonut wrote

    #101 Ellen. A waiter can’t phone from Manila and deliver your foie gras. We don’t need to compete with the Phillippines etc, just be better than them. How many Nobel prizes have Filipino’s won?
    The higher minimum wage idea is the best to come out of MW in a while,it is just the sort of debate that is needed. Stop griping on about top rate tax and posh kids uni’ fees and look after the little people.

  100. 20/01/2013, Aff wrote

    I’m starting to see it now, the government could declare a new higher minimum wage and abolish poverty. Its a great idea. Can’t fail. Maybe if we print gazillions of pounds we can make everyone be billionairres. Imagine that all of us billionaires. Its up to the government to do this for us.

  101. 20/01/2013, Aff wrote

    Critic Al Rick I’ve sometimes pondered wether Boris is paid for his comments here. Must be raking it in if its paid on a per comment basis

  102. 21/01/2013, Critic Al Rick wrote

    Ellen, you’re right that we’re in a bubble economy compared to emerging economies. And the UK is not alone in this respect.

    You’re right HPs are far too high in nominal terms. I think Boris is correct that there won’t be a HP crash in nominal terms. The HP bubble is being propped-up as much as is possible but meanwhile, slowly but surely the economy bubble is being deflated as the GBP, Western currencies, become weaker against currencies of the emerging economies. In the meantime we import inflation.

    I don’t see a HP crash in nominal terms, nor do I see a HP crash in real terms, not even if we got significant wage inflation because that would effectively act to devalue the GBP even further, stoking up the imported costs of living.

    I fear it’s all going to end very badly. I can’t help but consider this will be the result of conspiracy rather than incompetence.

  103. 21/01/2013, Critic Al Rick wrote

    Boris & Aff

    Raising the Minimum Wage is like treating the symptoms rather than the cause. But then ain’t that typical of short-sightedness?

  104. 21/01/2013, Barkingmad wrote

    @Boris – “A waiter can’t phone from Manila and deliver your foie gras. We don’t need to compete with the Phillippines etc, just be better than them.”

    Some minimum wage jobs would not be lost but many others would or employers may employ fewer people – are those people whose jobs are lost better off? If wages rise prices will rise – so they may not be as well off as you hoped – hey but let’s just solve that by increasing the minimum wage again?

  105. 21/01/2013, Barkingmad wrote

    Seems people ‘like’ the idea of increasing minimum wages even if would cause harm (lower growth, loss of jobs, high prices, more benefits paid out, reduced competitiveness etc.) – just because it ‘sounds’ like a good thing to do.

    It’s usually the same people who would never accept reducing tax rates if (by growth, people working more, less evasion etc.) it actually increased tax receipts – which surely is a good thing for everyone.

    But guess we could just keep printing and borrowing money and not worry about ever being able to pay it back.

  106. 21/01/2013, Romford Dave wrote

    Boris just because something sounds like a good idea doesn’t always mean it is and just because there are those disagree with your vision of paradise, doesn’t make them indifferent to the plight of the poor either.

    Your rhetoric blinds you to the reality of implementing an endless succession of ideas from those who’ve never been in the position of having to implement them.

    Focusing only on the bigger picture ignores the fact its actually a mosaic of smaller ones. A good example is your suggestion to scrap employers NI to pay for an increase in minimum wage. It sounds laudable given that it’s cost neutral (according to you), which is excellent news for larger employers along with smaller firms with highly paid staff who’ll find themselves net beneficiaries of your plan, whereas any SME with lower paid staff and who generates less employers NI and will lose out.

  107. 21/01/2013, Romford Dave wrote

    Cont ~

    Doesn’t sound too promising for those companies, does it.

    Perhaps benefit payments for SME’s instead, to keep them afloat?

    More zombies, more central planning, more ending in tears as it always does.

    It’s also worth noting that Merryn didn’t propose cutting taxes, Rob did @ 11, whilst Michael @ 17 suggested increasing the threshholds to match that of the wage.

  108. 21/01/2013, Ellen wrote

    @Boris. I doubt you are interested in the well being of anyone but yourself. You are a fully fledged Bourgeois only concerned with preservation of your own wealth, which I suspect is tied up with property, at anybody elses expense. This, you have demonstrated time and again in many of your posts.

    I have never made objections to raising the minimum wage but recognise that, idle Bourgeoisie parasites, will raise rents and/ or move work overseas if other measures are not also looked at. These include bringing down the cost of living for working people, including housing, so we are better able to compete globally. We also need to look at ways of making it more difficult to import goods and services that can be provided here – through trade barriers, if necessary.

  109. 21/01/2013, Boffy wrote

    Merryn is absolutely right. When Winston Churchill introduced the first Minimum Wage in 1909, he did it using precisely those terms that the good employers had to be protected from the bad, underpaying employers. Tax Credits, Housing Benefits are subsidies/welfarism for the bad employers. Society does not owe those employers a living. If these zombies can’t survive without this welfare they should go, and their capital be freed for use by those who can use it better.

    Big employers will not leave the country because they mostly already pay higher wages, and will benefit from a leaner economy that would result. David Ricardo, pointed out that only when wages rise above a certain level do capitalists have an incentive to invest in machines. After the introduction of the Factory Acts, and Ten Hour Day, that is what happened. British industry became much more efficient and profitable as a result. Time to end the Thatcherite low wage/high debt model now.

  110. 21/01/2013, Boffy wrote

    Incidentally, for similar reasons we should end the welfarism for the zombie firms provided by low interest rates too. Scrap all the measures to prop up house prices, raise interest rates so people have an incentive to save, and get some return, then house prices will crater, that will provide an incentive for those hoarding land to release it, which will reduce the costs of new build housing. That creates the conditions for rising demand as happened with the house price crash in the US, and creates the conditions where new build prices are lower, making building more profitable.

    Without that Nick Boles attempts to raise the amount of new build is doomed.

  111. 21/01/2013, Barkingmad wrote

    “raise interest rates”

    Do you really want to do that and snuff out whatever minimal growth we have – cause huge repossessions and hardship as mortgages get more expensive, negative equity for millions of home owners, decrease investment, increase the cost of borrowing for companies (sending some of them under and costing jobs) and have the exchange rate shift to make imports (even) cheaper and exports more expensive?

  112. 21/01/2013, Barkingmad wrote

    “reduce the costs of new build housing”

    So you make the land cheaper but then no-one can borrow the money to finance the build – well done. What you miss is house prices in the US may have fallen but that was not accompanied by increasing interest rates.

  113. 21/01/2013, manjushri wrote

    I am a small business with 3 staff and I pay over £8.00 an hour to staff who have some skill but most people around here only pay the minimum.I want staff who are not going to off because they have a sick child or have social security income.It is appalling that so many employers pay so little and it is plain wrong to have a state top up wages.There are many reasons why it is wrong to top have a system of top-up,one is that it distorts the housing market and actually creates homelessness for young people.It also means that we have many young people who have been brought into this world by parents who are unable to care for them .If people cant afford to have children why does the tax sytem have to top-up?There are many employers around me whom I know can easily afford to pay £8.00 an hour but will not.

  114. 21/01/2013, Robin wrote

    A phenomenon of minimum wage is that it encourages employers to have employees who are classified as part-time. This means they pay less and escape the law. Meanwhile the employee works fewer hours and then has to take two jobs. The end result is that the employees are earning the same as they used to but with fewer protections.

    I am not arguing against this measure. I argue that its method of enforcement must take into account the multiple work scenario. This solution is administratively costly. The simpler method is to remove other classifications of workers. Have a minimum wage for someone who works even a single hour in a week.

    Also in a broader context. The industrialists can only earn what the consumers can pay for, while they consumers can only spend what they earn. This is a cycle; which has been ignored in our society. If businesses pay more as a whole, they will all earn more as a result.

  115. 21/01/2013, Boris MacDonut wrote

    #112&113 Boffy. Well said.
    #109 R Dave. HMRC takes £37billion pa in Employer’s Nics and pays out £31 billion in tax credits. Raising the minimum wage for the 8% who receive it by £2 an hour would raise £4billion in tax and business would save nearly £2 billion in admin costs,hey presto ….cost neutral.
    #111 Ellen.You are not listening just being rude. I said we do not need to compete globally,except in the heads of bean counters.
    #117 Employers pay Nics once an employee earns £109 a week, at Min wage that is just 18 hours.

  116. 21/01/2013, Barkingmad wrote

    @Boris – “Raising the minimum wage for the 8% who receive it by £2 an hour would raise £4billion in tax and business would save nearly £2 billion in admin costs,hey presto ….cost neutral.”

    Cost neutral – perhaps if you choose to only look at that cost. What about the jobs it would cost which then get converted into benefit claimants and the increased prices in the shops which erode much of the benefit they would gain?

    Also must have missed this trick but why should raising the minimum wage save £2bn in admin costs for businesses – fewer staff to employ I suppose!

  117. 21/01/2013, Barkingmad wrote

    @Boris – you say “I said we do not need to compete globally,except in the heads of bean counters.”

    Can you actually justify that statement – if we do not need to compete globally does anyone need to compete domestically either or should we just keep printing money and borrowing money… until no one will trust we can repay.

    If we do not ‘compete’ what of all the jobs we would lose when no one wants our goods and services as they are too expensive / uncompetitive?

  118. 21/01/2013, Critic Al Rick wrote

    Raising the Minimum Wage is treating a symptom not the cause. Essentially, the cause is a corrupted playing-field.

    Essentially, the reason for having to subsidise the lower paid is because of the greed of fat cats; they, via the corrupted playing-field, are effectively robbing off most of the none fat cats. And its deemed legal, legalised theft.

    Period.

    @ Boris

    Please explain why you consider “we (as a country) do not need to compete globally, except in the heads of bean counters”.

  119. 21/01/2013, Romford Dave wrote

    @ Robin Minimum hourly wage rates are the same, whether for full time or part time staff, even if part time consists of a single hour.

    http://www.nidirect.gov.uk/the-national-minimum-wage-rates

    It’s more a phenomenon of reducing employers NI costs if it’s the employers choice, there are also occasions where welfare benefits eligibility is the focus of the employees if its their choice.

    Another phenomenon a small employer risks falling foul of, is the 5 or more employees cacophany of legislative calls on his business if he chooses the part time worker route to dine with Odin.

  120. 21/01/2013, Tony Hart wrote

    @Boris #102 ‘We don’t need to compete with the Phillippines etc, just be better than them.’
    Please would you elaborate on this. We have an increasing trade deficit, so would being ‘better’ than ROW eliminate that deficit? If so, how? Can we always be ‘better’ than ROW or do we risk the guys who make things better emigrating to Thailand or Philippines or even China?

  121. 21/01/2013, Romford Dave wrote

    Boris – I’m guessing that’s back of a fag packet you’re using given that total NIC receipts were over £101B, but accepting it’s cost neutral, how does that help the businesses most affected, excluding those operating in the field of nursing and foi gras, who presumably wouldn’t be once the ranks of nouveau riche pig out on fois gras until they’re sick, thus boosting demand of both professions.

    It sounds to me as if it will reduce even further the tax contributions of three well known global corporate tax avoiders if they don’t have to stump up employers NI either.

    What sort of solution is that?

  122. 21/01/2013, Boris MacDonut wrote

    #120 B mad. Only you could suggest 3 million people getting an extra 30% take home pay would kill jobs. Surely they will spend the extra creating demand and ….jobs. As Rick tells you the problem is the rich snaffling too much. 100 people need 100 baths abnd 100 washung machines.However rich a bloke is he still onlyneeds a couple of each, certainly not 100 of each.
    #122 Rick. Because we are already develpoed, civilised and educated. Where does China go to buy it’s Scotch Whisky other than here? Where do the Taiwanese get their Mulberry handbags?We compete on quality ,not price.

  123. 21/01/2013, Critic Al Rick wrote

    Boris, yes that we do agree on – the grossly unfair distribution of financial rewards.

    But even if THE ‘cake’ were distributed fairly (as on an uncorrupted playing-field) the UK as a country, all else remaining equal, would still have a Balance of Payments Deficit; i.e. THE ‘cake’ doesn’t exist, it’s fantasy.

    We’ve survived the past 30 years c/o increased debt, asset stripping, and now effective plundering of the Middle Classes (particularly those of the Truly Private Sector).

    You say we don’t need to be competitive because we’re already developed, civilised and educated. Now that smacks of complacency! We have rotting infrastructure and an educated Zombie culture. As the screw tightens, it’s only a matter of time before the thin veneer (because that’s all it is) of civility gives way.

    If we’re not in this position c/o conspiracy then we’re in it c/o your esteemed academics (the ones I label commonsense morons).

  124. 21/01/2013, Boffy wrote

    This is not interfering with the price of labour. The real price of labour includes the subsidy that the State is providing to these small, inefficient zombie employers. The real price of labour as with every other commodity is its price of production. No capitalist would produce a commodity to sell, for long, unless they could recover its cost of production plus the average profit. Workers selling their commodity – labour-power – are no different. That is why the other way of achieving this would be to reduce the costs workers face of producing their labour-power. But, the opposite is happening currently e.g. housing costs.

  125. 21/01/2013, Boffy wrote

    The argument that raising the minimum wage would increase prices is also wrong. Wages are only a small portion of total costs, and as happened in the 19th Century when that argument was raised along with the argument about profits, loss of jobs etc. it was disproved, because employers introduced more efficient methods of production that actually reduced costs, and prices, and led to increased output, jobs, and profits!

  126. 21/01/2013, Boffy wrote

    @Barking#114. The manipulation of interest rates by money printing is not stimulating the economy. Its pushing on a string without there being demand in the economy, and that has been snuffed out by austerity and fear. Low interest rates have simply caused a huge bubble in asset prices, one of which in property is making it unaffordable for many people.

    Arguing for lower interest rates to keep the Pound low is just old fashioned Protectionism. It always acts as a form of Corporate Welfarism that protects inefficient companies, and allows them to avoid becoming more efficient. Its the add on to protecting them with low wages.

  127. 21/01/2013, Boffy wrote

    @barkingmad #115.

    The reason people cannot afford to buy houses is not interest rates – if it is then they are in really deep do-do at these rates! The real problem is the price of the houses, which mean that even a modest 20% deposit is out of reach for many. House prices need to fall by about 8o% (and given current overvaluation and the amount they have corrected by in the past they will). Then a 20% deposit or more will be within the reach of many who today cannot afford.

    As land prices fall, the cost of new build will fall, and will underpin the virtuous circle of falling house prices.

  128. 21/01/2013, Boffy wrote

    services and sell them in exchange for those low value goods produced by low paid workers elsewhere. That is what Britain did in the 19th Century, when it was forced to abandon the low wage, low efficiency model because of the Factory Acts, falling supplies of labour and more effective Trades Unions.

    The Thatcherite, small shopkeeper mentality worked for a time in the 1980′s, but undermined the economy. We need to concentrate on the efficient, higher value, higher paying companies, and sectors.

  129. 21/01/2013, Boffy wrote

    @barkingmad #120.

    The vast sums of money paid out in Benefits and other transfers to make up for the fact that some employers pay wages below Benefit levels, and some Landlords are able to charge excorbitant rents does not come out of thin air. Its paid largely by all those other workers whose employers pay more reasonable wages, and thereby diminishes their spending capacity.

    If they no longer had to subsidise these bad employers, and profiteering landlords, they would have additional money to spend raising aggregate demand, and possibly needing lower top line wages themselves with lower taxes to pay. That means their better paying employer would have more money to invest in more sustainable jobs that do not rely on various forms of protectionism.

  130. 21/01/2013, Critic Al Rick wrote

    Boffy, we could compete with low wage economies and become more self-sufficient thereby improving Balance of Payments.

    Goods could be produced with approximately zero labour cost – to UKplc. One person employed at Minimum Wages + Tax Credits (or whatever) would be approximately negated by one less person on unemployment benefits.

    That’s the trouble; this country has no real leadership, it is a conglomerate of selfish factions with no ‘joined-up’ thinking.

  131. 21/01/2013, Romford Dave wrote

    Interesting choice of competitor Boffy, being as Germany doesn’t currently have any minimum wage legislation, although in fairness that should change with the proposals Angela Merkel is currently pushing, neither does Austria or any of the Scandiavian countries.

    Focusing on slashing inflated asset prices and cutting the costs of essential everyday purchases is a more effective and sensible way of achieving equality, along with offering some sort of future for babies being born today.

  132. 21/01/2013, Critic Al Rick wrote

    Boffy, it’s not necessarily a case of good employers and bad employers – the good ones paying good wages, the bad ones paying poor wages.

    It’s more a case of ‘good’ employers being the ones being advantaged by the corrupt playing-field, and the ‘bad’ employers being the ones disadvantaged by the corrupt plaing-field.

    If you’re in a cartel and can’t pay good wages then you’re a bad employer.

  133. 21/01/2013, Barkingmad wrote

    @Boris – “Only you could suggest 3 million people getting an extra 30% take home pay would kill jobs. Surely they will spend the extra creating demand and ….jobs.”

    Clearly you have solved the problem – keep increasing the minimum wage 30% per year – all that extra spending will keep creating jobs and we’re all saved.

    However, back in the real world – increasing the minimum wage 30% would cost a lot of jobs as they move abroad, get automated etc. – the jobs that cannot move abroad would increase costs for UK companies potentially pushing them out of business and increasing prices for all in the shops.

  134. 21/01/2013, Barkingmad wrote

    (continued)

    It is unlikely to create much extra demand as many / most of those people were almost certainly having their incomes topped up with benefits – so when you factor in higher prices they could be worse off.

    So yes it will cost jobs, the people who keep their jobs may not be better off, the taxpayer may have to pay them less benefits but the ones that lose their jobs will have to be paid much more.

  135. 21/01/2013, Barkingmad wrote

    @Boffy – “The vast sums of money paid out in Benefits and other transfers to make up for the fact that some employers pay wages below Benefit levels”

    Perhaps that is also a symptom of benefits being open ended, claimed fraudulently and even too high – i.e. you should always be better off by working and it should be an expectation that if you can genuinely work you should – not expect everyone out to pay for you.

    I don’t see it as efficient to top up wages with benefits – I would rather see people better off by taking them out of tax (increasing the personal allowance) rather than just artificially increasing minimum wages with the knock on effects of it costing jobs and pushing prices up!

  136. 21/01/2013, Barkingmad wrote

    nt impact.

    Think Boris quoted 8% of people in the UK are paid minimum wage – if you were to pay them 30% more it is going to cost some their jobs (pushing them 100% onto benefits) and would increase costs for all UK businesses making them less able to compete. If most are getting topped-up by benefits anyway they may not even be any better off – possibly worse off if costs of products / services they buy increase.

  137. 21/01/2013, Boffy wrote

    @RomfordDave#135,

    Germany and Scandinavian economies have tended to have a high wage, high value model, so a Minimum Wage as such isn’t needed. One other reason is that they tend to have high levels of Unemployment Benefit, as well as better systems of Health and Social Care, so unless employers pay reasonable wages they cannot get workers.

    In fact, we have already benefited from low prices for commodities, as they have been imported from China. But, money printing in the US, UK etc. has also pushed through into Chinese and other global inflation rates, so the days of cheap imports are also coming to an end, as Chinese wages rise.

  138. 21/01/2013, Boffy wrote

    @CriticalRick,

    I’d say it is the bad employers who pay low wages who are being privileged, as a result of being protected with artifically low interest rates, and low wages.

  139. 21/01/2013, Boffy wrote

    @barkingmad #139,

    But, reducing tax for people whose earnings are barely Minimum Wage is not going to bring them up to a Living Wage. In fact, reducing tax currently means they lose Housing benefit, Council Tax Benefit and so on. people definitely should be better off working than not working – that should apply to the Royal Family, and others who do not work too – and the way to achieve that is via people being paid a Living Wage.

    I don’t see how you can argue for artificially keeping interest rates and the pound low, and asset prices thereby artificially high on the one hand, and yet oppose a Minimum Wage as artificial on the other!

  140. 21/01/2013, Boffy wrote

    @Barkingmad#140,

    Not at all. In the 19th century, the earthenware manufacturers made this argument, claiming they could not comply with the Factory Acts. In fact, when they had to they did. They introduced new more efficient methods, which resulted in their costs falling, their output rising, and their profits rising. That meant they could actually employ more workers. henry Ford did the same thing.

    By contrast, the hand loom workers dragged on for years in starvation trying to compete with the power loom. They were kept alive by payments from Poor Relief that allowed them to continue working as self employed weavers. Many starved to death, and in the end the power loom triumphed anyway.

    There is plenty of scope to improve efficiency in farming and other industries, and thereby employ more workers on decent wages without prices rising.

  141. 21/01/2013, Barkingmad wrote

    Giving them a higher hourly rate or taking them out of tax would both cost them benefits but the higher hourly rate could cost them their job!

    I also see increased minimum wage increasing prices and the cost of living (for everyone) so unless the increase took them out of top-up benefits they are no better off and if prices did rise actually worse off.

  142. 21/01/2013, Barkingmad wrote

    @Boffy – so can I assume you are in favour of people losing their jobs and be replaced by robots / machines? In this day I think it’s more likely for many of these jobs to simply move abroad – when our minimum wage is so much higher than people can earn in China etc. (although their cost of living is lower) there will be a migration of jobs and artificially forcing wages higher will just accelerate that.

  143. 21/01/2013, Romford Dave wrote

    They do indeed have higher UB Boffy, but structured so that the level of income diminishes the longer it is claimed. A stark contrast to the cradle to grave welfare offered in the UK that actually increases the longer one signs on.

    In Germany, a job offer that needs upto 3 hours travel to actually perform is considered suitable and if refused, UB is suspended for 12 weeks.

    I’d actually welcome the pursuing of a high wage, high value economic model here in the UK, one that rewards those that play an active role, yet compassionate enough to provide a safety net rather than a fur lined hammock to while away the hours till the next suitable job comes along.

    But I digress, repeated studies into NMW conclude that whilst it has successfully improved the incomes of the lowest paid, matching it with the living wage, where the living wage is constructed of answers to questions around how much would you like to earn, would negatively impact on jobs in the UK economy.

  144. 21/01/2013, Critic Al Rick wrote

    Quote Boffy:

    “I’d say it is the bad employers who pay low wages who are being privileged, as a result of being protected with artificially low interest rates, and low wages.”

    Where to start!

    1) You’re over-generalising.

    2) Do you consider an employer who is paying good wages and who is being privileged by being unfairly advantaged by a corrupt playing-field and taxation system (i.e. operating as part of a pseudo cartel) as being a good empoyer?

    3) Do you consider an SME employer disadvantaged by having to effectively subsidise the inefficiences, extravagances and/or high wages of his cartelian suppliers/monopolistic state to be a bad employer because if he paid his staff any more he’d be out of business?

    4) Do you consider that artificially low interest rates are primarily aimed at privileging employers per se?

  145. 21/01/2013, Boffy wrote

    @Rick#148,

    1) No more than most people do in discussing Benefits.
    2) Yes. I don’t know what you mean by unfair playing field/cartel. Most analysis shows that where very large firms exist, competition is actually intensified, though it tends to concentrate on improving quality.
    3) Yes. Society doesn’t owe such small employers a living. If they can’t pay their workers a decent wage and stay in business, better they make way for someone who can, and allow their capital to be better employed.
    4) No. They primarily benefit the zombie employers, because large companies can raise money internally, can sell shares, and borrow in Capital markets. They are also a political sop to some Tory voters, who deceive themselves into believing that a higher house price means they are better off.

  146. 21/01/2013, Boffy wrote

    @barkingmad#145

    But it hasn’t cost jobs in Germany! Introducing more efficient methods, machines etc. means costs, and prices fall not rise. It means output can rise, resulting in a higher volume of profits, which means more capital accumulation, meaning more jobs, and more sustainable, better paying jobs.

    The argument about moving abroad was made in the 19th Century, and yet although wages in much of Europe were more than 50% lower than in Britain, and working conditions also worse, British costs and prices were lower, because more machinery was used. That meant Britain could sell more products on the world market, and employ more people.

    Moreover, Capital can move to those areas where Britain has a comparative advantage. I haven’t noticed sky high bankers wages forcing banks to relocate overseas. On the contrary, we are told we have to have sky high wages so they will stay here!!

  147. 21/01/2013, Boffy wrote

    @RomfordDave#147,

    But, if people were paid higher wages, and there were sufficient jobs available as in Germany, there would be less reason for anyone to not take up such jobs when offered. The problem in Britain is that the jobs pay crap wages, and even then there is not enough of them.

    We have a poorly educated and trained workforce, one reason for which is that those same badly paying employers expect someone else to meet the costs of education and training of workers, and for them to simply pick them up.

  148. 21/01/2013, Barkingmad wrote

    @Boffy – are you sure Germany even has a minimum wage for all employees before you use it to try and prove your point?

  149. 21/01/2013, Romford Dave wrote

    You might want to research the German model a little more Boffy before holding them up as an example to those making the clarion call for an increase in NMW.

    http://www.nytimes.com/2012/09/25/business/global/the-trade-off-that-created-germanys-job-miracle.html?pagewanted=all

    The thing is have they made the right call?

    If they have, we in the UK can look forward to being the rainy equivalent of Zimbabwe.

  150. 21/01/2013, Critic Al Rick wrote

    Quote Boffy:
    A) “I don’t know what you mean by unfair playing field/cartel. Most analysis shows that where large firms exist, competition is actually intensified…”

    Well, in a World where big business, etc controls Govts what else would you expect ‘official’ analysis to show?

    B) “… if they can’t pay their workers a decent wage and stay in business, better they make way for someone who can…”

    Well, that’s a recipe for wiping out whole swathes of many service industries to say the least.

    C) “No, they (artificially low interest rates) primarily benefit the zombie employers…”

    Well, I would beg to differ – they primarily benefit the zombie banks. If enough of their clients went bust so would they.

  151. 22/01/2013, JT wrote

    “A waiter can’t phone from Manila and deliver your foie gras.”

    Why not Boris? You seem to have very narrow horizons.

    We already have video conferencing and virtual meetings. Before long you will find that all sorts of other things can and will be done remotely.

    And even for work which has to be done locally, there is an increasing trend for companies to use cheaper, overseas staff, often by physically flying them in from India for temporary assignments. There is an army of Indian young people, all degree educated and speaking excellent English, falling over themselves to get this sort of work. They are extremely hard working, bright, highly driven, and cheap. It is simply blinkered to suggest we can continue to subsidise the labour market without any consequent impact.

  152. 22/01/2013, Boffy wrote

    When Winston Churchill introduced the first Minimum Wage in 1909, he said,

    “It is a national evil that any class of Her Majesty’s subjects should receive less than a living wage in return for their utmost exertions… where you have what we call sweated trades, you have no organisation, no parity of bargaining, the good employer is undercut by the bad and the bad by the worst; the worker, whose whole livelihood depends upon the industry, is undersold by the worker who only takes up the trade as a second string… where these conditions prevail you have not a condition of progress, but a condition of progressive degeneration.”

  153. 22/01/2013, Boffy wrote

    cont’d.

    That is also in line with the ideas of Classical Liberalism. Hayek, for example in “The Road To Serfdom” argues that a civilised society like Britain can well afford to set Minimum Standards for things like Income, as well as regulations on the way factories act e.g. pollution controls. The only condition he says, is that these limits and regulations should not be arbitrary, they should affect each firm in the same way. A Minimum Wage set at a level to guarantee that workers can live and produce the next generation of workers in a civilised manner is not arbitrary, and affects each employer equally.

  154. 22/01/2013, Boffy wrote

    @barkingmad#152

    The only reason I was quoting Germany is because it has a high wage/high value model as opposed to the Thatcherite, small shopkeeper model in Britain. The argument is about whether the answer to reducing the level of Benefits is by increasing wage levels. Whether that is done by Minimum Wage legislation to break a vicious circle, or whether such legislation is not necessary because a high wage model already exists is irrelevant. Germany proves, you can have high wages, and a high social wage, combined with high levels of investment, productivity and growth, which means high levels of employment, and low levels of Benefits payments.

  155. 22/01/2013, Boffy wrote

    @Rick#154.

    A) Not just “official” analysis. In the 1980′s, for example, economists associated with the “Conference of Socialist Economists” – i.e. mostly Marxists who have previously had a big downer on Monopolies – found that in fact, the rise of big multinational companies had lifted competion to new heights. It is one reason there has been such leaps in technology, and quality of products combined with reductions in real prices. Oligopolies try to boost their profits by innovation to reduce costs of production.

    B) or for current owners to go bust, and new more efficient ones to take over the Capital on the cheap and make a go of it.

    C) The banks would be nationalised, but the zombie companies won’t be.

  156. 22/01/2013, Boffy wrote

    There is also a simple answer to the jobs going overseas argument besides the empirical evidence against it. There is about £800 billion in workers pension funds in Britain. A basic aspect of bourgeois property law is that owners should be able to control and dispose of their property, but when it comes to their Pension Funds, workers and the middle class are deprived of this right. Under current law it belongs not to the workers and middle classes who have paid their money in, but to the company that is its custodian. Control over it, lies not with the contributors, but with Pension Fund managers i.e. the Banks.

  157. 22/01/2013, Boffy wrote

    cont’d
    According to Panorama a couple of years ago, two-thirds of contributions disappear in Commissions, and kick-backs to the Fund managers and others involved in the scam. That is why private pensions in the UK are so appalling compared to other countries. The workers at the Mondragon Co-ops in Spain, for example, receive an average pension of around £13,000 p.a. compared to the £3,000 that a Public sector worker gets in the UK. Yet the Mondragon Co-op has twice as much income coming into it, as it pays out in Benefits!

    If workers and the middle classes who paid into these schemes had ownership and control over them, they could ensure that investments did not go out of the country. There would be every reason to invest them here to ensure that you had a job tomorrow.

  158. 22/01/2013, Critic Al Rick wrote

    Boffy

    On the one hand you quite rightly denigrate Banks (Pension Fund Managers) for effectively purloining (my word) the Pension Funds of Workers and the Middle Class.

    On the other hand you portray Banks (and other large corporations) as innovators and improvers of efficiency thereby cutting costs to their clients.

    Don’t you consider these two portrayals of Banks (as an example) to be in conflict? One being out of character with the other?

    I would suggest that any innovations and efficiency improvements made by such institutions as Banks are primarily intended for the benefit of the Banks and not their clients/customers. Any benefits to clients/customers being purely incidental. Now the two portrayals are not in conflict!

  159. 22/01/2013, Boffy wrote

    @rick#162

    Not at all. Very big companies as i said basically gave up competing on price many years ago, because price wars destroy profits. Paul Sweezy demonstrated that with his “Kinked Deman Curve”, and Liberal Micro Economists like David Laidlaw confirm it with reference to empirical data. Central banks were introduced to pump money into the system to stop generalised falls in nominal price levels for that reason.

    They seek to gain market share on the basis of innovation, as well as advertising and marketing to exaggerate those differences. They seek to maximise profits by innovation to reduce their costs. Being innovative in the way you seek to get customers to part with their money by hook or by crook is wholly consistent with that!

  160. 22/01/2013, Critic Al Rick wrote

    Boffy

    If the Banks can be so profitable via innocent innovation then why do they stoop so low as to pillage Pension Funds?

    I’ll suggest an answer:

    Their innovatve skills are aimed, by fair means or foul, to fleece their clients – one aspect of rip-off Britain.

    You say: “very big companies… basically gave up competing on price many years ago..”.

    I wouldn’t dispute that. I’d suggest that coincided with their (aided and abetted by puppet politicians) corrupting of the playing field, making survival much harder for those businesses which do have to compete on price and which consequentially can’t afford to pay decent wages.

    It’s a poor do if a member of a cartel can’t pay decent wages. The playing-field is rigged; Central Banks are all part and parcel of the rigging.

  161. 22/01/2013, Kiss wrote

    The mw is tosh, it is purchasing power of your£ that counts.
    If it were £20 an hour no one would be any better off, everything would just go up in price, the price of a house to the price of a pint is a function of earnings.
    There isnt a golden bullet just points of view mine for what its worth…
    Hmrc Pay’s everyone >21 years old 7500 per annum tax free.
    imagine what a vote winner that would be a cheque from that tax man once a month. No more means testing.
    forget allowances, nil rate bands, 30% flat rate tax.
    Abolish all benefits and state pensions.
    30% is a good deal in a g8 country. GB would soon boom.
    Just think of all those lovely tax inspectors and highly paid tax accountants,lawyers and pointless bureaucrats who wouldnt be wasting their time on loopholes.
    Singapore boomed on the back of low simple taxes. If you have a strong economy mw will become an irrelevance there would be more jobs than people to fill them, supply & demand…

  162. 23/01/2013, Boffy wrote

    @Rick#160

    The two things are not self-excluding. Its not a corruption of the playing field, its the natural way the capitalist playing field has developed over the last 200 years. Big firms get bigger, and get more power to go with it. I don’t see any point in trying to turn back the clock, because it would be impossible, and the process would only reassert itself. It would mean replacing currently efficient, and innovative methods with less efficient methods, and a general lowering in living standards.

  163. 23/01/2013, Boffy wrote

    cont’d

    This has happened before. In the 19th century after the French Revolution. Land was redistributed to peasants. They were encouraged to borrow to improve their farms and increase production. Food supply rose and prices fell just as interest rates and taxes rose. They replaed paying rent to Landlords with interest to banks, became impoverished, and their farms bought up by capitalist farmers. A similar thing happened with small businesses in Britain. Its a quick way of bigger capital acquiring lots of small capitals.

    The same fate awaits all those small capitals, and people encouraged to go into BTL, or lend to their kids to buy inflated property. Its a quick way of depriving the small capitalists, the middle classes, and workers who have built up savings of their wealth. Unfortunately, they fall for it every time, and mistake their paper and property wealth for real wealth.

  164. 23/01/2013, Boffy wrote

    @kiss#161

    Prices are NOT a function of earnings. They are a function of the Value of Money relative to the Value of the Commodities being circulated, or in a paper money economy, the amount of paper money token printed relative to the value of money. If wages go up, that can simply mean that profits go down. Demand for wage goods rises, raising their prices, but demand for capital goods, and luxury goods bought out of profits falls, so their prices fall, such that the overall price level remains unchanged.

    The consequence will also be that Capital will seek to reduce costs and replace labour, so as it always has, it will introduce more machines, seek more efficient methods, so as to replace labour. As productivity rises, costs per unit, and thereby prices in general fall, total output rises, and frequently, total profits rise, such that Capital expands enough to also then employ more labour, although the labour-output ratio falls.

  165. 23/01/2013, Boffy wrote

    ll. Prices of wage goods will fall back to their original levels and Capital/luxury goods rise back to theirs as supply adjusts. More Fiestas get built and fewer Rolls Royces.

    If HMRC gave everyone £7500, that is essentially no different than if they gave everyone nothing. Each person’s payment cancels out everyone else’s. Employers would simply reduce wages accordingly. Its the same as the silly idea of the fuel escalator.

  166. 23/01/2013, Boffy wrote

    The comparison with the French peasants is apt to property. There is 50% more property per head today than there was in the 1970′s. The so called housing shortage is nothing of the kind. The data simply shows that largely due to 30 years of falling interest rates, and the private debt/home ownership culture encouraged by Thatcherism there was a huge increase in single occupancy homes.

    The limit to that has come as prices have risen to a level where that is no longer possible, and today’s young people are once again living with parents for longer. In fact, there is huge over supply of housing. 1 million empty homes, around 350,000 planning approvals waiting to be built, and a look down any road shows huge numbers of houses that have been up for sale for more than a year. That’s why selling prices are already down by around 30%, and in some cases much more.

  167. 23/01/2013, Boffy wrote

    cont’d

    Large numbers of Poles are likely to be going home as the UK economy tanks, meanwhile many retired people like me will be looking to buy houses in Spain or Ireland, where prices have already crashed 60% i.e. there is no such thing now as a UK only property market.

    At the same time in the last couple of months UK Gilts have risen by around 30%, and likely to rise further given the uncertainty Cameron has now created. So, whatever the BOE does, interest rates will rise. Those who have bet the farm on property will lose their shirt to mix metaphors. That may well affect banks, which is why the BOE has been trying to protect them, but in the end the banks will get bailed out.

  168. 23/01/2013, Kiss wrote

    Boffy 165
    The idea of the 7500 is to replace the hundreds of different benefits and allowances in one simple step and remove a huge slice of state cost to the taxpayer in admin reducing the nat. debt. giving everyone 7500 isn’t the same as giving nothing as this replaces existing benefits state pensions etc it simply levels the playing field but gives everyone a minimum income, they cant live on nothing.
    For those that can work or want to their is clear simple incremental benefit from doing so. For those that have bothered to plan and save for retirement there is no disincentive to having done so due to lost benefit entitlement.
    If employers reduced wages that would would make our goods & services cheaper and exports more competitive and the balance of payments might actually turn positive possibly reducing the nat debt?wage costs are really driven by supply and demand. The greater the demand the more likely wages are to rise

  169. 23/01/2013, Critic Al Rick wrote

    @162.

    Quote Boffy (1):

    ” … it’s the natural way the capitalist playing-field has developed over the last 200 years.”

    The corrupted playing-field is the result of crony capitalism over recent decades. Maybe crony capitalism is the natural outcome of capitalism.

    Quote Boffy (2):

    “trying to turn back the clock… (would result in)… a general lowering of living standards.

    I wouldn’t necessarily disagree, but I will say that going forward with the status quo will result in an even greater general lowering of living standards as these powerful parasitic corporations suck the life-blood out of their hosts.

    We have probably passed the point of no return; but one day, history having a habit of rhyming, the pendulum will swing the other way; if the human race should survive long enough.

  170. 24/01/2013, Boffy wrote

    @kiss#168

    Giving everyone £7500 is indeed exactly the same as giving everyone nothing. Its a bit like if my house is currently valued at £100,000 and so is yours, we instead decide to value both our houses as £200,000 (which is pretty much what the property bubble amounts to.) We can both still exchange our houses, but in reality the relative value of each has changed not one jot. Adam Smith explained this more than 200 years ago to show that profits cannot arise by everyone charging prices above costs. Each cancels the other out in aggregate.

    Employers benefiting from workers wages being subsidised by £7500 could all simply transfer the saving to their profits rather than lower prices! So, in the end it would result in the Government simply subsidising private profits, which is precisely the problem with things like Child Tax Credit, Housing benefit etc.

  171. 24/01/2013, Boffy wrote

    Moreover, where do you think the £7500 comes from? It has to be raised in taxes from someone, or else comes from money printing, which simply means it is absorbed in higher money prices, as money is devalued!

    Actually, wages in the end are determined by the cost of producing the labour-power required. In the short term, wages fluctuate according to supply and demand, but Capital is able to affect both the demand and supply of labour. It raises demand as capital expands, but it also raises supply, by raising productivity.

  172. 24/01/2013, Boffy wrote

    @Rick#169

    I couldn’t disagree more. We are in the first part of a 25 year Kondratiev Long Wave Boom that began in 1999. Of all the goods and services produced in the whole of human history, 25% have been produced in the last decade! World GDP and capital Formation has doubled in the last 10 years, the global working-class population has grown by 30%, as peasants in China and elsewhere have been brought into the modern world. The application of science is making more and more products available, at lower and lower prices, and higher and higher levels of quality, as it also brings about new productive techniques.

    If the politicians in Europe would abandon their stupid austerity measures, and do what Britain did in 1700 when debt to GDP rose steadily to 250%, as it provided the basis for the needed capital accumulation. We could end the temporary local difficulty.

  173. 24/01/2013, Boris MacDonut wrote

    #172 Boffy. Your appearance on this thread is much appreciated. You have summarisesd reality so eloquently. I agree whole heartedly and am pleased to have someone who echoes my thoughts rather than seeks to deride them.
    Our politicians must be brave, ignore the miser inspired chorus from the Daily Mail, Telegraph et al and start borrowing and spending like we did in both the industrial revolution and the wars of the twentieth century. People need to get a grip on demographics and more importantly on just how huge and diverse the world economy has become in the last 15 to 20 years.
    So what if government debt is at 75% of GDP. How many take out mortgages of only 75% of income?

  174. 24/01/2013, JT wrote

    If our debt to GDP ratio was only 75%, this argument might have some merit. It isn’t and so it doesn’t.

  175. 24/01/2013, Critic Al Rick wrote

    @ 172. Boffy

    Do you know you sometimes remind of someone else on these threads? A certain Boris.

    He also appears to consider we can have ad infinitum growth from a finite planet.

    I look forward to reading your future comments.

  176. 24/01/2013, Critic Al Rick wrote

    @ 174. JT

    To complement your comment and in response to Boris’ final paragraph, I would say that whereas the mortgage holder has a positive income with which to pay his mortgage repayments out of, UKplc has an analogous negative income (Balance of Payments Deficit).

  177. 24/01/2013, JT wrote

    CAR

    Yup, you’re right. It’s interesting isn’t it how the Left like to portray government finances like a mortgage? Even though a mortgage eventually buys you a valuable asset whereas our national debt is mostly just previous consumption (responsibility for which we’re merrily loading onto future generations).

    It also amuses me that some believe spend, spend, spend is still the answer, when in fact that’s exactly what UKplc has been doing for years – consistently spending way more than we earn, even during years of economic boom when Blair and Brown were running the show.

    These people have no interest in anything other than preserving their own free lunch. Disgraceful.

  178. 24/01/2013, Boris MacDonut wrote

    #177 JT. Nonsense. UK Government assets total at least £1,700 billion.
    #174 JT. Nonsense. I said Government Debt. I was careful to exclude corporate and bank debt. Personal debt is at about 90% of GDP. Corporate debt is largely franked by the huge cash holdings that big business accrued while NOT paying a decent living wage to it’s staff.
    #176 Rick . Hilarious, Balance of Payments deficit. Do you live in the 1970′s?

  179. 24/01/2013, Critic Al Rick wrote

    JT

    These people don’t seem to understand the terminology:
    `zero sum game’. Impractical.

    Boris

    Re. Balance of Payments Defict

    Matthew Lynn has done an excellent article (as he often does) dated 17 Jan on ‘UK economy’ (subscriber only) entitled:

    ‘Permanent QE will hammer sterling and impoverish Britain’

    In reply to your query: No, contrary to your fantasaical notions I live in the present, trying to live in the Sensible Domain as much as is practicably possible as opposed to the Fantasy Domain, you know – the one harbouring all of the Zombies and Parasites.

    People really should be acclimatising themselves to a long general decline in living standards; the Govt should be annually redefining ‘poverty’ to suit.

    This is what adds up; not trying to perpetuate Growth.

  180. 24/01/2013, Boris MacDonut wrote

    only live to 79 instead of 82. Maybe we won’t be able to stay at school until we are 21 and be forced out to work at 18 or 19. Some may even make do with one car,one meal out per week and only one holiday a year. Be afraid people Rick’s reckoning is upon us.

  181. 24/01/2013, Critic Al Rick wrote

    Boris

    It will be up to the individual how (s)he balances his/her diminishing disposable income as the costs of imported essentials continue to rise, as the relative value of GBP slides.

    And the Govt should organise its ‘housekeeping’ in an analogous fashion.

    What needs to occur is a vast net emigration, including 3 million Public Sector personnel, to leave a level of population needing a net zero import of foodstuffs; get the basics right.

    Oh but of course, “Britain is a rich country and doesn’t need farmers”. Stupid cow!

  182. 05/04/2013, DCD wrote

    To offset the increased cost of a “Living Wage” to employers I would propose a pro rata reduction in Corporation Tax and in Business Rates. It would then amount to a zero sum exercise. Not only that but a reduction, or even a cancellation of corporation tax, would attract considerable inward investment that would further boost employment and the economy.

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