Does the welfare system encourage companies to pay low wages? Does the tax credit system encourage people to only work part time? Do people work the tax credit system to work the minimum hours for the maximum overall income? To what extent do welfare and low pay interplay? All uncomfortable questions.
All questions the taxpayer rather deserves answers to.
We've looked at this several times in the past see our articles here and here. Look at the numbers and you would think that most people on low wages would be crazy to work what most of us would consider a full week working tax credit payments kick in at 16 hours a week and 30 hours a week so unless you are earning a reasonable hourly wage, working more than that makes little sense.
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
This, we have suggested several times, probably explains why so many people in the UK work part time, why our unemployment rate is so low, how companies get away with paying such low wages and, of course, why productivity is so low.
We were interested, then, to see last week that McDonalds had introduced new fixed hours contracts for employees who want to take them up. Anyone who does can choose the number of hours they commit to every week. And those hours? Four hours a week, 16 hours a week or 30 hours a week.
Anyone want to argue now that both employers and workers aren't gaming the welfare system?
-
A junior ISA could turn your child’s pocket money into thousands of poundsPersuading your child to put their pocket money in a junior ISA might be difficult, but the pennies could quickly grow into pounds – and teach them a valuable lesson about money
-
Cost of Christmas dinner jumps 6.5% as grocery price inflation rises againThe average Christmas dinner for four now costs £32.57 as grocery price inflation increases - but what does it mean for interest rates?
-
Beating inflation takes more luck than skill – but are we about to get lucky?Opinion The US Federal Reserve managed to beat inflation in the 1980s. But much of that was down to pure luck. Thankfully, says Merryn Somerset Webb, the Bank of England may be about to get lucky.
-
Rishi Sunak can’t fix all our problems – so why try?Opinion Rishi Sunak’s Spring Statement is an attempt to plaster over problems the chancellor can’t fix. So should he even bother trying, asks Merryn Somerset Webb?
-
Young people are becoming a scarce resource – we should value them more highlyOpinion In the last two years adults have been bizarrely unkind to children and young people. That doesn’t bode well for the future, says Merryn Somerset Webb.
-
Ask for a pay rise – everyone else isOpinion As inflation bites and the labour market remains tight, many of the nation's employees are asking for a pay rise. Merryn Somerset Webb explains why you should do that too.
-
Why central banks should stick to controlling inflationOpinion The world’s central bankers are stepping out of their traditional roles and becoming much more political. That’s a mistake, says Merryn Somerset Webb.
-
How St Ives became St Tropez as the recovery drives prices sky highOpinion Merryn Somerset Webb finds herself at the epicentre of Britain’s V-shaped recovery as pent-up demand flows straight into Cornwall’s restaurants and beaches.
-
The real problem of Universal Basic Income (UBI)Merryn's Blog April employment numbers showed 75 per cent fewer people in the US returned to employment compared to expectations. Merryn Somerset-Webb explains how excessive government support is causing a shortage of labour.
-
Why an ageing population is not necessarily the disaster many people think it isOpinion We’ve got used to the idea that an ageing population is a bad thing. But that’s not necessarily true, says Merryn Somerset Webb.
