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Low Pay Is Damaging The Uk Economy And Holding Back Growth

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http://www.theguardian.com/business/economics-blog/2013/aug/20/low-pay-damaging-uk-economy

Across the United States, co-ordinated walkouts against low pay have spread from the giant retail chain Walmart to fast-food outlets and upmarket retailers. Outside branches of McDonald's, workers have chanted the slogan - "supersize our wages" – in a campaign for $15 an hour, more than double the federal minimum wage.

With a quarter of its workers on low pay, the US sits at the top of the global low paid league table of wealthy nations. Second in that table is the United Kingdom with over a fifth on low pay, almost double the figure in the 1970s.

The spread of low pay is rooted in an economic gospel that a higher share of the cake should be taken by profits. Aided by a sustained re-direction of bargaining power in favour of big companies, the wage share has nosedived in both countries, while the profit share has soared.

Or alternatively big corporations lower prices so low paid workers can afford to buy?

Currently it appears the big corporations want low pay, big profits and hope the low paid take on lots of debt to buy the stuff they provide.

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Or alternatively big corporations lower prices so low paid workers can afford to buy?

Currently it appears the big corporations want low pay, big profits and hope the low paid take on lots of debt to buy the stuff they provide.

The low paid can only spend less.....they can't take on lots of debt unless they rescind on that debt, the big corporations have no interest in the consequences of unpaid debt after it has been spent with them, that's someone else's/societies problem.......pay low wages and earn profitable money from money that will never be repaid. win.win for them. ;)

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This is the biggest crisis facing this country.Low wages and cost of living shooting up.

The truth is all productivity growth over the last 30 years has gone direct to the owners of capital,none to the labour.

Most of those billions are sat on balance sheets doing nothing.

Brown decided the way to deal with this he would tax the financial sectors bumper profits and give it out to those workers in tax credits.It was the failure of the left to tackle low pay even though they had a huge mandate.Brown didn't regulate the city because he needed the profits to pay for tax credits to prop up poverty wages.In a way low wages caused the crisis.

The idea that a supposed left wing government would wave through poverty wages from big employers and replace earnings with benefits is incredible but that's what they did.

With the BOE printing almost free capital workers are still being ground down even from this low level.

The best way forward for low paid labour is to remove themselves from the system.Cash work,allotments etc.However as ever the cost of shelter and the debt connected to it keeps them toiling.

Wages/cost of living should be the biggest concern at the next election.The fact the government prefer to stoke more HPI shows the sort of shower we have in power.

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This is the biggest crisis facing this country.Low wages and cost of living shooting up.

The truth is all productivity growth over the last 30 years has gone direct to the owners of capital,none to the labour.

Most of those billions are sat on balance sheets doing nothing.

This

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This is the biggest crisis facing this country.Low wages and cost of living shooting up.

The truth is all productivity growth over the last 30 years has gone direct to the owners of capital,none to the labour.

Most of those billions are sat on balance sheets doing nothing.

Brown decided the way to deal with this he would tax the financial sectors bumper profits and give it out to those workers in tax credits.It was the failure of the left to tackle low pay even though they had a huge mandate.Brown didn't regulate the city because he needed the profits to pay for tax credits to prop up poverty wages.In a way low wages caused the crisis.

The idea that a supposed left wing government would wave through poverty wages from big employers and replace earnings with benefits is incredible but that's what they did.

With the BOE printing almost free capital workers are still being ground down even from this low level.

The best way forward for low paid labour is to remove themselves from the system.Cash work,allotments etc.However as ever the cost of shelter and the debt connected to it keeps them toiling.

Wages/cost of living should be the biggest concern at the next election.The fact the government prefer to stoke more HPI shows the sort of shower we have in power.

Amen to that.

Funny that Labour have now started campaigning on "the cost of living crisis" as they put it. The problem they have is one of credibility.

That said, if Labour announced a large-scale social house building program, I think it would be met with general approval and do their chances at the next election no harm at all overall.

I understand why Miliband is saying as little as possible at present, less rope to be hanged with later on, but a large social housebuilding programme would be met with overall approval I think. But, is it something he cares about? Labour's instinct is to maintain poverty via benefits rather than eradicate it via lower costs of living. Hugely misguided imo, but seems to be baked in over many years.

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This

No, it's just just the biggest threat to home-owners and betrays their very fragile expectations of what their hyperinflated homes are worth.

Say hello to HPC 2.0.

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No, it's just just the biggest threat to home-owners and betrays their very fragile expectations of what their hyperinflated homes are worth.

Say hello to HPC 2.0.

Bring it...

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Amen to that.

Funny that Labour have now started campaigning on "the cost of living crisis" as they put it. The problem they have is one of credibility.

That said, if Labour announced a large-scale social house building program, I think it would be met with general approval and do their chances at the next election no harm at all overall.

I understand why Miliband is saying as little as possible at present, less rope to be hanged with later on, but a large social housebuilding programme would be met with overall approval I think. But, is it something he cares about? Labour's instinct is to maintain poverty via benefits rather than eradicate it via lower costs of living. Hugely misguided imo, but seems to be baked in over many years.

Labours instinct is to increase wages inline with productivity growth and to increase none working age benefits,pensions for instance.

Even going into the election of Blair this as still the case but Brown and Balls were the ones who changed this.The truth is it was far easier to tax finance profits and give in cash benefits than tackle low pay.

The left need to rediscover who they are and Miliband has a chance.I think the lack of credibility is very well deserved and is a big problem for them.

However like you said the housing situation is an open goal for them.

Labour should see the two pronged attack is needed.Mass social house building with very affordable rents and the removal of tax credits to stop paying employers wages for them so wages will grow.

The idea that housing benefit is making private property landlords rich should be poison to the left.That money should be going into state housing owned by the taxpayer.

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Couldn't agree more. I work for a company that has announced record profits in 3 of the last 5 years, yet has announced redundancies and pay freezes in the same period. I haven't had a pay-rise in line with RPI in that entire period.

It's a disgrace.

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What do you mean currently? It has been the UK economic model for 30 years.

A devious policy formulated by the babies of that time. The boomers ensuring that those young adults regret the decisions they made when they were in utero.

That'll learn 'em.

Edited by 7 Year Itch

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That's right - they all said, if we get out of here together we can push the prices of assets up to unbelievable levels and then sell them to the ones following on after us.

'They' being the gen Y-ers, not the boomers in my example :P

Not sure how CVM can make statements like 'its a 30 year + issue' and not take any responsibility for it and placing blame on younger generations for carrying on. There has been too much conditioning going on

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'They' being the gen Y-ers, not the boomers in my example :P

Not sure how CVM can make statements like 'its a 30 year + issue' and not take any responsibility for it and placing blame on younger generations for carrying on. There has been too much conditioning going on

It mainly happened by stealth.Workers in most companies who were unionised fought so temp staff got the same wages/pensions etc.Of course in the end employers went hardball.New workers get x y z lower but it will protect what you get.Slowly people already at said companies accepted to protect their own wages/pensions.

The wage costs for most large companies are a very small % of costs and even then most is made up of the higher waged.Most large companies could easily increase their lower end wages from NMW to around £9 an hour and probably knock profits by 1%-5%.They don't because government has created a jobs and benefit system where they don't need to.

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Low wages by itself is not the problem. Low wages with access to easy credit (credit cards + payday loans), that's the problem. Look in any shopping mall. You can't even walk, but I am pretty sure half of the crowd is on some sort of benefits.

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A devious policy formulated by the babies of that time. The boomers ensuring that those young adults regret the decisions they made when they were in utero.

That'll learn 'em.

carousel anyone?

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Low wages by itself is not the problem. Low wages with access to easy credit (credit cards + payday loans), that's the problem. Look in any shopping mall. You can't even walk, but I am pretty sure half of the crowd is on some sort of benefits.

You seem to think they are unlinked, they are not, and are both the same thing.

If you have low wages the productivity-purchasing power circle must still be squared. There must still exist some way for the extra goods resulting from increased productivity to be purchased.

The only way that can be done if wages do not rise with productivity is via increased household and personal debt.

If individuals do not take on that debt then the economy will grind to a halt. This is what happened post 2008.

Unfortunately for us the gov decided to take on debt on our behalf because citizens nolonger wished to, and has now engaged in trying to pump up the housing bubble some more, to encourage us to take on this debt that is needed to square the productivity-purchasing power circle.

What it should have done is use the time provided by quantitive easing to force rebalancing, internally to reduce reliance on debt as a means to fuel consumption and make it more wage based, and to also externally rebalance against our merchantalist trade partners, so that we export more. It has done neither.

These problems have all occurred in the past and were part and parcel of the great depression. We learned from it and that gave us the world order after the second world war.

So why are we repeating the mistakes but not learning from it this time? That is until it all goes tit's up of course.....

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There must still exist some way for the extra goods resulting from increased productivity to be purchased.

Given a constant supply of money more productivity = lower prices.

The only way that can be done if wages do not rise with productivity is via increased household and personal debt.

No. The fundamental problem is that productivity did not rise and so we tried to mask that fact and artificially raise standard of living through debt, it worked for a while (or at least appeared to).

No amount of financial voodoo: fiddling with personal/public debt ratios, taxes, IRs etc etc can get around the basic laws of physics i.e. if we want to be better off we have to make/do more per hour worked.

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Given a constant supply of money more productivity = lower prices.

No. The fundamental problem is that productivity did not rise and so we tried to mask that fact and artificially raise standard of living through debt, it worked for a while (or at least appeared to).

No amount of financial voodoo: fiddling with personal/public debt ratios, taxes, IRs etc etc can get around the basic laws of physics i.e. if we want to be better off we have to make/do more per hour worked.

1)And that is a real terms pay rise, so exactly what I have argued should have occurred but hasn't.

2)False, productivity has risen markedly. That is unless you don't believe the OECD, UK gov, and a host of other bodies nationally and internationally just make numbers up (and you also generally don't believe your eyes/senses)

germany-uk-labour-productivity1.png

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That's right - they all said, if we get out of here together we can push the prices of assets up to unbelievable levels and then sell them to the ones following on after us.

And yet another getonyourbiker, econhedge.

@faisalislam as before, we know there are no jobs in North east. why don't more of the jobless there move to London and S East?
@RosemaryFrazer @faisalislam no, young unemployed from other countries are able to do that themselves are their UK equivs less capable?

Nothing is anyone's fault, it 'just happens'

Edited by 7 Year Itch

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You seem to think they are unlinked, they are not, and are both the same thing.

No, because in some parts of the world one can live in dignified poverty without having to spend much money and without having to borrow. Examples abound.

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No, because in some parts of the world one can live in dignified poverty without having to spend much money and without having to borrow. Examples abound.

Perhaps we could.

But then we'd destroy a third to a half of our economy in the process as consumption would only be limited to income. As outside of credit/wages this is the only way the productivity-income circle can be squared.

And why on earth would we choose this option over rebalancing where income went and kept our living standards as is? My mind boggles that you'd think this is the better solution.

This also completely ignores the fact that human societies just don't absorb such changes well, nor do our growth orientated economic systems. I hear the fascists are doing extremely well in hungary these days, and the communists in greece too. I'm sure we'd follow the same path with your suggestions.

Edited by alexw

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