Cover of MoneyWeek magazine issue no 441

Safe money

26 June 2009 / Issue 441

Why it's time to buy defensives... PLUS:

  • Where This American healthcare stock is too cheap – buy it now
  • Brown's dishonesty on cuts will cost us all
  • How the Wombles made me a million


Small pay slips are a big issue

The credit bubble has long drawn attention away from the pathetically low level of wages – and painfully slow rate of growth in average earnings – across Britain. As long as almost anyone could get a mortgage, and the low-paid could supplement their incomes with wallets full of credit cards, and the strong pound and the rise of Chinese manufacturing meant ongoing product price deflation, low pay remained a non-issue. It shouldn’t stay that way.

There are a million points that could be made on this. But here are two. First, low wages are very costly for the taxpayer. It is barely possible for one person to live on £12,000, and not really possible to raise a family on it. So the taxpayer, via the benefits system, ends up subsidising employees of the likes of Asda and McDonald’s (effectively subsidising their profits). That doesn’t seem right.

But perhaps more crucial is the fact that a nation of low earners, outside of a credit bubble, is not a nation of consumers.

• Read the full editor’s letter here: Small pay slips are a big issue