Exactly four years ago I popped a short blogpost up on our website. In it I ran down some of the things we would do if, like George Osborne, we had just announced that halving the budget deficit was a non-negotiable part of government policy.
We said we would cap all public-sector salaries at £175,000; we would cut all non-means-tested benefits; and we would make our taxes flatter, less complicated and hence less avoidable.
None of that was particularly contrarian at the time. But our final point was: we said we would instantly raise the minimum wage by at least 30%.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The minimum wage has long failed to be a living wage; pretty much everyone on it has to have their income topped up by the taxpayer via the state (tax credits, housing benefit, child benefit, etc).This doesn't make any sense.
Many of our big firms keep their profits high in large part by paying low wages, something they only get away with because the welfare state picks up the slack.The taxpayer effectively subsidises corporate profits by paying part of everyone's wage bill. It then watches those profits go to the shareholders and hopes (often in vain, given the levels of corporate tax avoidance) to get some of them back in tax to cover the original cost. It was and is a ridiculous system.
Change it, we said, and we could give the long-term unemployed an incentive to take jobs, increase the country's consumption (the poor spend more of their income than the rich) and, crucially, cut the benefits bill.
Not all of you agreed with this. It doesn't make for a free market, you said. What about the firms that can't afford to pay higher wages? How can we compete with foreign labour if we price ourselves too high?
I didn't have much patience with any of that. We already can't compete with foreign labour, and I'm far from convinced that working to have the cheapest labour in the world is a useful ambition for a developed country.
We've also long since abandoned the idea that free markets in labour are a good thing and without entirely dismantling the welfare state, there's no way back from that.
As for those who can't afford higher wages? If you operate in a developed country, but can't afford to pay your workers enough for them to live in a developed country, are you a business? Or a state-subsidised make-work scheme?
Quite.
Now here's the good news: it looks like Osborne has been catching up with the idea. According to Rachel Sylvester writing in The Times, not only has the government had analysis done that shows that even a 50p per hour rise would save £1bn a year in welfare, but they might soon announce just such a rise. That's nice.
But if 50p saves £1bn, why not make it £1 an hour? Or £1.50? Please post your outraged comments below.
-
Parental contributions to kids' university living costs could reach £14,000 a yearParents helping kids with university living costs face contributions of up to £14,000 per year, according to a report from HEPI and TechnologyOne.
-
Rightmove: property asking prices hit record highNews Rising demand for top of the ladder home is boosting asking prices, Rightmove research shows. Is now a good time to sell a property?
-
Inflation may be slipping but there is still plenty of misery aheadEditor's letter Inflation may be a little lower than last month as the prices of petrol and diesel fall back, but it remains structural and long-term, says Merryn Somerset Webb. And there are no painless solutions.
-
Beat the cost of living crisis – go on holidayEditor's letter As inflation rages, energy bills soar and the pound tanks, what’s a good way to save money this winter? Go on holiday, says Merryn Somerset Webb.
-
How capitalism has been undermined by poor governanceEditor's letter Capitalism’s “ruthless efficiency” has been undermined by poor governance, a lack of competition and central banks’ over-enthusiastic money printing, says Andrew Van Sickle.
-
Don't be scared by economic forecastingEditor's letter The Bank of England warned last week the UK will tip into recession this year. But predictions about stockmarkets, earnings or macroeconomic trends can be safely ignored, says Andrew Van Sickle.
-
The biggest change in the last 17 years – the death of the “Greenspan put”Editor's letter Since I joined MoneyWeek 17 years ago, says John Stepek, we’ve seen a global financial crisis, a eurozone sovereign debt crisis , several Chinese growth scares, a global pandemic, and a land war in Europe. But the biggest change is the death of the “Greenspan put”.
-
The wolf returns to the eurozone’s doorEditor's letter The eurozone’s intrinsic flaws have been exposed again as investors’ fears about Italy’s ability to pay its debt sends bond yields soaring.
-
Things won't just return to normal – that's not how inflation worksEditor's letter You might think that, if inflation is indeed “transitory”, we just need to wait and everything will return to “normal”. But this is a grave misunderstanding of how inflation works, says John Stepek.
-
The public may have reached its limit for tax risesEditor's letter The UK tax burden is now at a 70-year high. And, while there may be some reason to hold off on cuts right now, taxes are too high because the state tries to do too much. Perhaps it should do less, says Merryn Somerset Webb.
