Every now and then, a blog post really gets your attention. When they do, they are almost always about tax dodging or house prices. Sometimes gold does it too. But that's about it. Good news, then, that we have a new subject that everyone wants to have a say on:welfare to workers.
I first wrote on this several years ago, but I picked it up again late last week as the issue of the £22bn-odd of benefits we pay to people in work came up again. My suggestion (see below)of an increase in the minimum wage as one way to deal with the problem (the higher the wages, the fewer benefits have to be paid out) hasn't been 100% popular.
The idea is "socialist nonsense". I have missed the point that it is the market that sets wages any government action is unnecessary interference. Any rise in wages will cause mass unemployment. A higher minimum wage will just mean large corporations classifying workers as part-time or freelance, and encourage our nation's "idle bourgeois parasites" to move their businesses overseas. Small businesses couldn't cope, etc, etc.
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
A lot of these arguments are perfectly good, as is the one about the problem not beingwages but ratherhouse prices. There is a view that it isn't wages that have to go up but the cost of living that has to come down. House prices are a flashpoint for a lot of you (as they are for us).
If only the government would let house prices fall, you say, someone on the minimum wage might not need regular state top ups to his salary to support himself. The same goes for the prices of utilities, which we in the UK seem to always end up paying more for than the Europeans and Americans.
But whatever you think about the gap between basic pay and the cost of a basic standard of living in the UK, the key point is that we admit there is a problem.
It might be because our government focuses on almost nothing but keeping house prices up. It might be because our crappy currency means that we constantly import inflation. It might be because our tax system is all wrong (see my postson the location tax). It might be because the incentive schemes our big corporate managers work under push them to cut wages and staff before anything else (see my post onAndrew Smithers' view). Or it might just be a symptom of the fact that Western living standards are beginning a long and nasty fall.
But either way, the key point is that our economy is not able to produce jobs that pay wages that support families without the taxpayer stepping into help. That is surely telling us that something in the UK is very, very wrong.
It seems to me that whatever is causing the problem, the net effect is that the taxpayer (or the non-subsidised tax payer at least) is being forced to pay a good part of what should be the payroll costs of the world's big corporations. We can deal with this in a few ways.
We can force companies to raise wages by cutting all benefits to workers right away. That would make it pretty hard for them to get any workers (unemployment benefits would be better), but even if they could get them, I think it would force up wages pretty quickly: would you shop in Tesco if it was clear that every shelf-stacker was slowly starving to death or spending every night sleeping in a tent in the carpark? Me neither.
Still, as short and sharp a solution as abolishing welfare in work in one go might be, I can't see it happening (nor would I wish the social consequences on anyone).
I also can't see what Ferdinand Mount in the Evening Standard suggests happening. He gets the arguments for a rising national minimum wage, but isn't so sure we need to enforce it via the state. Instead, he calls for a "gradual cultural shift" in which "companies work out the solution between their accountants and their consciences", and in which the general public shows their preferences by shopping at stores "well known for paying a living wage".Pipedream.
What else? We could lobby the government to let house prices fall or to support rather than force down the pound. But we know they won't. We can try and force companies to change the way they pay their management. But that's very hard and just as much a fiddle with the free market as anything else. So that takes us to our usual end point.
We've pointed out and eliminated all the impossible (politically or otherwise) solutions to this problem. And we are left with the possible. As far as I can see, that's a rise in the minimum wage. I don't much like it either. But there it is.
-
Ofgem proposes new energy tariffs with low or no standing changesStanding charges have invited public backlash as households battle high energy bills
-
Google shares bounce on Gemini 2.0 launchGoogle has launched the latest version of its Gemini AI platform, and markets have responded positively. Is it time to buy Google shares?
-
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.
