Public - Private Pay Gap - Public Is £80 Per Week More

[PopGun]

Wages in the UK are way above the global average. There is no way you can say that wages aren't high enough in the UK. What you can say, is that the cost of living is very high in the UK.

Competition is global now. You can't take your ball home, now that the other teams are starting to compete well. The only way the problems of poverty will be solved in the UK is by:

1. Reducing the cost of living.

2. Weathering the reduction in wages, while the developing world catches up.

You can't secure high wages* by legislation and attempts to do so will push out business to cheaper locations, speeding up the very decline in wealth which you propose to solve. If the jobs can't be outsourced, they will seek additional mechanisation (which will become more cost effective, relative to higher wage demands) and some businesses will just become too uneconomical to remain in business at all (with further loss of jobs).

What you can do is start clamping down on the rental drain** throughout our economy. We already have near zero rates, reducing the rent sought on money. With falling property prices (substantial in some areas of the UK) and pressure on wages, there is pressure on property rental rates too - to sustain this path, I would like to see a land value tax of some sort, but at least it is heading in the right direction.

Additionally, with the value of Sterling falling, we are becoming more competitive without wage cuts even being needed. It may make resources more expensive, but they are still comparatively cheap compared to said costs to those in the developed world (not many big, flash cars there).

The global economy is showing signs of starting to rebalance. China recently reported a trade deficit over a period (month, I think). Sections of the UK economy are starting to benefit from cheaper (due to fall in Sterling) exports. As the UK (and the developed world in general) is saturated in debt, there really is no choice in this - if China et al resist, the developed world will print more. It won't end well for the developing world if that route is continued down (they have a pile of promises and we have a pile of goods - which is best?).

As the gap between the developed and developing world decreases, the real wages in the former will decrease and the latter will increase. The smaller the imbalance gets, the more sustainable it will be and fewer jobs will leave developed shores for cheaper labour.

It seems that some people want to some how stop the tide going out (after the credit waves came in). It won't work and I'm surprised that people even suggest it is worth trying. However, the losses of the cash rich will help fund the rebalancing and ultimately, business and therefore employees, will benefit from being able to compete better in the global economy.

* Without easy credit and increased benefits, I doubt NMW would have been seen as a success. Implementing a 'living wage' seems like another attempt to legislate wealth, which will also fail and result in more unemployment. It won't stop well meaning socialists from suggesting it though.

** If there were ever an angle for a political party 'for the people', it would be one based around Georgism - free market foundations, with attempts by the rich to extract rent minimised. The Tory base is too wealthy (with plenty of land/property owners) to want the latter, with Labour too obsessed with socialist meddling to consider the former. There is a third way though, which would help our young and our economy in general, should any party embrace it and be able to communicate it.

We had a great chance of rebalancing the system only a few years ago. Unfortunately tptb decided to bail out crony/casino capitalist bankers instead!!

Sure communism doesn't work, but until we overcome these pesky cycles and their artificial/fake booms capitalism will always be doomed to chase its own tail.

[Traktion]

Good points, but a lot of what is considered private enterprise in Britain is actually rentierism. Like the banks who graciously let us use their money for exchange at a heavy annual interest rate. Like the large landowners. Like commercial property owners. Like the very wealthy who bid against each other for capital, then build in to the cost of the service the return on investment. Like so many BTL empire owners/Tory supporters

The time of the bankers wielding so much power is probably nearing an end. They have benefited from the huge growth of credit, but now we are at saturation point, their opportunities will be limited. In much the same way as HPI was a one time windfall (smaller cycles accepted) for the baby boomers, this opportunity is unlikely to present itself again. I would expect both banking and property rental to become pretty boring again... I doubt there is enough steam for another mini housing boom, with us at the end of a 30+ year (larger than 2000s) cycle.

The central banks have almost completed their job. They have shepherded the base rate down to zero, while keeping inflation under some sort of control (although clearly, they messed up over the last decade and let credit expand too quickly). Now rates in the developed world are there, we can expect the developing world to arrive there too in due course. Arguably, they will get there much quicker than we did, as otherwise the carry trade will see their assets balloon in price, until they too are at credit saturation point and no more easy yield can be sought from the developed world.

IMO, this will be good for the world as a whole. While some will resist and argue that there shouldn't be so much debt, I think they may be misunderstanding the role of credit. If everything essentially carries no yield without risk, with any credit costing near zero to maintain, you would likely end up with an interesting economy, where:

1. Everyone uses what they need, for the period they need it.

2. There is little opportunity to extract rent.

For 1, at credit saturation point, 'owning' something takes on a different meaning. You become the keeper of said items, but ultimately you just service the (then small) cost of credit, rather than buying the items outright. As this increase in liquidity gives more mobility and therefore choices, this would represent a good thing - we would all have less chance of being stranded where we don't want to be, both economically and physically.

Unconvinced? Consider this - Why buy tools when you can rent them cheaply for the time you need them? Expanding further, why make or maintain more tools than is needed to perform the jobs required? Clearly, everyone owning said tools and mostly leaving them in the garage isn't optimal use of resources.

For 2, as the yield in such an economy would tend to zero too, there would be little point in anyone attempting to buy said assets outright, other than to park some capital without risking a large loss.

Expanding the above example, why would you buy a load of tools which would remain unused in your garage? If there are already enough tools being rented out at low cost, then short of parking your money in your own tools as an asset (yielding little), there would be little point in doing so. In short, buying the tools may maintain your wealth and be useful in the future, but it won't be a lucrative way to extract rent.

Its not that easy to seperate out rentier behaviour from open free markets. Politically it is extremely hard to roll back to, because the rentiers get the most money and use that money to stop change from happening.

Markets by their nature force out rentier behaviour. Usually, only way you can extract rental yield, is by being able to undercut the costs of your competitors and then profit from the difference. Post gold standard, credit growth has allowed those with assets to gain, by their increased value, due to the increased liquidity in markets, leading to more freely available credit. This was a one off gain and can't be repeated, now that we have reached (or are near) credit saturation point (broad money isn't growing now, if not contracting).

In short, the rentiers are fighting a losing battle to find yield. The yield on lending is now low, as most people are unable (read: are saturated in debt) to borrow more. This is reflected in property prices, which are now falling back from going beyond saturation point (i.e. bubble mania).

A land value tax would only be needed to stop the cornering of the land with property market. As there is little yield left in said market, I do wonder whether it is needed in the short/medium term anyway though; if there is little yield, there is little incentive.

At some point the average person would be better off if the state just seized control of all these things and cut the rentiers out of the picture.

I don't think that is a good route to go down. Where would you draw the line? At what point do you confiscate someone's business and what sort of ethical ground do you think this would be walking on? If you take the line that it is 'fair' and/or the 'right thing to do', I would say the ground would be very shaky indeed.

[Traktion]

We had a great chance of rebalancing the system only a few years ago. Unfortunately tptb decided to bail out crony/casino capitalist bankers instead!!

Sure communism doesn't work, but until we overcome these pesky cycles and their artificial/fake booms capitalism will always be doomed to chase its own tail.

Patience, Mr Gun, patience. Rebalancing is inevitable.

The wheels are in motion and there isn't a man in the world who can stop it. Not central bankers, not politicians, not business men. The market levels, whether TPTB like it or not.

Booms and busts are a consequence of people chasing yield. You can't stop that, but the market will always head towards balance (EDIT) eradicating yield. Yield will always be eroded through time and competition. The very imbalance of wealth, which gives those in the developed world their yield, is shrinking as market mechanics dictates; the opening up of the global markets lead to yield being found in the developing world, which is now shrinking as competition hots up.

I have noticed a tendency for people* to only see what is presented in the short term future, rather than gaining perspective by stepping back to view both history and the longer term future in full. Often what is really happening is what has happened many times before, but on a different scale.

As an interesting question and thought game: What will happen after the yield from globalisation has tended to zero?

EDIT: * Myself included, until I learned enough to gain more perspective. I am glad there have been people here and elsewhere to learn from - the Internet is a wonderful thing on many levels.

Edited March 18, 2011 by Traktion

[Bloo Loo]

Good points, but a lot of what is considered private enterprise in Britain is actually rentierism. Like the banks who graciously let us use their money for exchange at a heavy annual interest rate. Like the large landowners. Like commercial property owners. Like the very wealthy who bid against each other for capital, then build in to the cost of the service the return on investment. Like so many BTL empire owners/Tory supporters

Its not that easy to seperate out rentier behaviour from open free markets. Politically it is extremely hard to roll back to, because the rentiers get the most money and use that money to stop change from happening.

At some point the average person would be better off if the state just seized control of all these things and cut the rentiers out of the picture.

Not hard to roll back if you let it bust....no cash in the cash machines means no rent.

[Bloo Loo]

Give me some of what you're smoking.

No, I will pay for it as it is so damn cloud 9.

when I was a kid, the local Bobby normally resident in the Front office of his police station, would do a 1 hour cycling proficiency bit with us kids...we got a badge when we passed.

Mostly done on the playground...learning to signal, stop and not swerve everywhere.

We already have resources...Its just that yer Government mentality insists on every resource being in its place and specialised. Jobsworthism by POLICY.

[PopGun]

Patience, Mr Gun, patience. Rebalancing is inevitable.

The wheels are in motion and there isn't a man in the world who can stop it. Not central bankers, not politicians, not business men. The market levels, whether TPTB like it or not.

Booms and busts are a consequence of people chasing yield. You can't stop that, but the market will always head towards balance (EDIT) eradicating yield. Yield will always be eroded through time and competition. The very imbalance of wealth, which gives those in the developed world their yield, is shrinking as market mechanics dictates; the opening up of the global markets lead to yield being found in the developing world, which is now shrinking as competition hots up.

I have noticed a tendency for people* to only see what is presented in the short term future, rather than gaining perspective by stepping back to view both history and the longer term future in full. Often what is really happening is what has happened many times before, but on a different scale.

As an interesting question and thought game: What will happen after the yield from globalisation has tended to zero?

EDIT: * Myself included, until I learned enough to gain more perspective. I am glad there have been people here and elsewhere to learn from - the Internet is a wonderful thing on many levels.

I do like the idea of the self correcting market that no one can out run, i'm just too cynical to let myself believe it would ever be allowed to happen. Expecting a HPC over ten years hasn't helped.

Edited March 18, 2011 by PopGun

[888]

when I was a kid, the local Bobby normally resident in the Front office of his police station, would do a 1 hour cycling proficiency bit with us kids...we got a badge when we passed.

Mostly done on the playground...learning to signal, stop and not swerve everywhere.

We already have resources...Its just that yer Government mentality insists on every resource being in its place and specialised. Jobsworthism by POLICY.

Someone already has this job. It's called your parents.

Do we need a specialist to each us to eat, drink, bath etc...

Typical labour nonsense to justify an existance of a non-job. Instead we degrade our educational system and produce 10,000s of below par graduates who have no chance of competing in the global enconomy, and they all think they are talented and creative without ever doing a single days of hard work.

I say let the fires burn and see where we end up in 5 yrs time. More middle class pushed back to the low classes in their gettos and the elite getting further out of reach.