The Wages Must Rise To Support Recovery/housing Thread

[winkie]

100% agree as I hope was clear in my OP.

Agree with other posts too, that there are several aspects to this. Nominal wages, real wages, and the distribution in both the public and private sectors as well as the need for productivity improvements. Employment is still some way off anything like full employment and there's clearly still uncertainty over the output gap.

I realise I'm early on this and really wanted to start thinking ahead to how this circle might ultimately be squared. Clearly simply pumping up household credit again, as is currently happening, can only be sustained in the short run (election cycle) thereafter something else has to happen.

I'd be very surprised if the coalition were to relax the squeeze on PS wages just yet for instance but anything is possible going into the election I suppose. So really we'd need to be looking at productivity improving followed by private sector wage increases.

I agree....also what once used to be a good public sector job is now an agency contract.

[winkie]

I think labor is in a race with technology at this point- outsourcing is as much a technological phenomena as a political one- but in a sense it's a transient stage. The same technology that makes it viable to site a call center on another continent will eventually start to encroach on those workers too.

I phoned a helpline the other day and the nice robot on the other end asked me to describe my problem in a short paragraph- which it correctly understood and passed me on to the right department. Not exactly high level AI perhaps but one of those straws in the wind that do indicate it's direction of travel.

How long will it be before the voice recognition robot will also answer your query... No human being required?

[tomandlu]

How long will it be before the voice recognition robot will also answer your query... No human being required?

It's when a robot is asking the question that you really need to worry.

[Georgia O'Keeffe]

Prepare to be surprised. It looks like they're going to run up teaching salaries under the guise of performance-related pay. By extension, it's not difficult to imagine them throwing buckets of cash at a variety of PS graduates before the GE. Anything to maintain the housing bubble and the facade of prosperity? Actually Carney has form here already, Canadian wage growth was red hot during his tenure as Governor of the BoC. As, of course, were Canadian house prices.

The sole purpose of PRP is that its finally got rid of Bloo Loos bane of auto pay scale increments, and auto time increments in teaching. I think youll be pretty dissapointed if you believe the introduction of this offset by the loss of tother results in pay going up in teaching. The Unions are nothing if not self interested and they know exactly what it means which is why they were and still are so anti its introduction a few months ago

After all the removal of auto time based salary increases over to PRP in the 90s has done wonders for the salary of average and competent Joe Bloggs salary in the private sector hasnt it

Edited January 5, 2014 by Maria Gorska

[cybernoid]

"The Wages Must Rise To Support Recovery/housing Thread"

So much nonsense on this thread but I will just address the implicit incorrect assumptions in the title (thats impressive) and leave it at that.

First of all, what recovery? We have a injection of more household debt in the form of artificial temporary props to the housing market that is being spent lately. That moves some of the indices in a way that fools some people into thinking we've 'turned the corner' and all of that cr4p you hear politicians spout on tv. Cameron being one of them actually, interesting to see RK agreeing with the conservative prime minister on that.

Some needles jumped a bit and the press talks up 'the recovery' as though there is one. There isn't, we're seeing the start of the impact of temporary irresponsible measures to further indebt people so they've some money in their pockets in the lead up to the general election. I thought that was pretty obvious and has been mentioned on this forum before and in the thinking press.

Second, 'wages must rise'. Now I know this has its seeds in the assumption that if only those nasty higher ups in all those companies spread the money down to the poor tear stained faced sweaty browed salt of the earth people with families (won't somebody think of the children) and up their paltry wages instead of bathing in caviar then higher costs would be less of a problem. Oh those fat cats. Wail wail. etc.

Venger correctly identified that it makes no sense to pay someone more than their worth to a company, or they wouldn't be able to get a job, but that seemed to confuse at least one responder despite being patently obvious and apparent. But none the less, regardless of this silly narrative about the downtrodden poor and champagne guzzling higher ups blah blah blah (which incidentally is fantasy, more businesses are SMEs where the owner isn't actually getting much more than the staff, but hey thats less fun to talk about) - what this higher wages call is really for is higher inflation and the debt forgiveness for those that got us into this mess.

You want those that outbid the financially prudent and who have lived it up in houses they can't afford due to their irresponsible borrowing to have this debt eroded by wage inflation? Its a crazy idea that further punishes those that took responsible financial decisions in favour of those that did not.

Id like to suggest that reality gets a bit of a look in. On you go.

[wonderpup]

Id like to suggest that reality gets a bit of a look in. On you go.

I think the point that the OP made was simply that it is an implicit part of the current strategy that wages must rise- I don't think he was calling for wages rises as a moral imperative.

So the wage rises are required not for moral reasons but to validate the strategy being followed- for example the government of Japan (and the CBI) have been calling for wage rises not because they have suddenly developed a burning passion for social justice, but because without wage increases their inflation based schemes will fail.

Edited January 5, 2014 by wonderpup

[alexw]

I think the point that the OP made was imply that it is an implicit part of the current strategy that wages must rise- I don't think he was calling for wages rises as a moral imperative.

So the wage rises are required not for moral reasons but to validate the strategy being followed- for example the government of Japan (and the CBI) have been calling for wage rises not because they have suddenly developed a burning passion for social justice, but because without wage increases their inflation based schemes will fail.

It's not just inflation, they need wages to rise to support consumer based demand. Now that debt based consumption is in its last gasp, there is no other way for our mass consumption economies to keep going. It won't work though not without massive changes that empower workers vs capital.

On that note the global savings rate is expected to hit 25.5% this year, another record high, so the imbalances are still growing.

[R K]

I think the point that the OP made was simply that it is an implicit part of the current strategy that wages must rise- I don't think he was calling for wages rises as a moral imperative.

So the wage rises are required not for moral reasons but to validate the strategy being followed- for example the government of Japan (and the CBI) have been calling for wage rises not because they have suddenly developed a burning passion for social justice, but because without wage increases their inflation based schemes will fail.

Quite.

The current govt. strategy as far as I can tell, is to generate growth primarily through expanding the household debt/earnings ratio. We know that to be unsustainable. It's a short-term political solution to generate some growth and attempt to get re-elected (I would think).

I was also trying to look beyond the short-term election cycle, which doesn't really interest me particularly, to ask whether we might also be starting to see (not yet, but over the next several years) a secular change from productivity increases going largely to capital to a shift to benefit labour. i.e. the end of the last 30 years model, broadly since the fall of communism, of consumption growth derived from expanding household (in particular) debt, to one of rising nominal (then real) wages.

It seemed a reasonable time to start thinking about this with it being 1. A new year and 2. The CBI of all people apparently arguing for higher wages (with all the usual caveats about productivity and so on).

[tomandlu]

You want those that outbid the financially prudent and who have lived it up in houses they can't afford due to their irresponsible borrowing to have this debt eroded by wage inflation? Its a crazy idea that further punishes those that took responsible financial decisions in favour of those that did not.

You are making a logical fallacy. Just because they were irresponsible, it doesn't mean they can't 'win'. You seem to be assuming that the economy must follow a moral imperative.

[zugzwang]

Worth a bump. Allister Heath thinks that Osborne is planning a major uplift to the NWM before the GE.

Entirely in keeping with Carney's m.o. too (as I posted earlier in this thread).

http://www.telegraph.co.uk/finance/economics/10556437/George-Osbornes-plan-to-shrink-the-state-is-a-disaster-for-Britain-it-doesnt-go-far-enough.html

On the one hand, we are told that Osborne wants a smaller state; on the other it is looking increasingly as if the Coalition may be planning a major increase in the minimum wage, price fixing par excellence.

In the mind of the idea’s supporters, this makes sense: they believe that spending on in-work benefits could be cut by forcing up wages for the lower paid. But a large enough hike to make a real difference would destroy jobs and be a disaster for those with low skills, who would become permanently frozen out of the labour market; and it would make a mockery of the Chancellor’s supposed commitment to the market economy.

It would reduce one misguided intervention at the cost of increasing another.

The Tories are falling into the same trap that befell the Republicans under George Bush: they are embracing a form of post-market, big government conservatism, where favours are doled out to friendly groups and expediency determines domestic policy. The only difference is that Bush was a boom-time president while Osborne is constrained by the UK’s massive budget deficit.

Karl Rove, who pioneered big government conservatism, was originally hailed as a hero by the Right; but his grand scheme ended in electoral and cultural catastrophe for the Republicans and paved the way for the rise of the Tea Party, a point Osborne should consider carefully.

The message all of this sends out is one of incoherence; once again, tactics – wrong-footing the Labour party over the next 18 months by outflanking it leftwards and rightwards simultaneously – is being confused with strategy – mapping out a new, principled conservative vision for Britain for the next several decades.

[zugzwang]

Worth a bump. Allister Heath thinks that Osborne is planning a major uplift to the NWM before the GE.

Entirely in keeping with Carney's m.o. too (as I posted earlier in this thread).

http://www.telegraph.co.uk/finance/economics/10556437/George-Osbornes-plan-to-shrink-the-state-is-a-disaster-for-Britain-it-doesnt-go-far-enough.html

On the one hand, we are told that Osborne wants a smaller state; on the other it is looking increasingly as if the Coalition may be planning a major increase in the minimum wage, price fixing par excellence.

In the mind of the idea’s supporters, this makes sense: they believe that spending on in-work benefits could be cut by forcing up wages for the lower paid. But a large enough hike to make a real difference would destroy jobs and be a disaster for those with low skills, who would become permanently frozen out of the labour market; and it would make a mockery of the Chancellor’s supposed commitment to the market economy.

It would reduce one misguided intervention at the cost of increasing another.

The Tories are falling into the same trap that befell the Republicans under George Bush: they are embracing a form of post-market, big government conservatism, where favours are doled out to friendly groups and expediency determines domestic policy. The only difference is that Bush was a boom-time president while Osborne is constrained by the UK’s massive budget deficit.

Karl Rove, who pioneered big government conservatism, was originally hailed as a hero by the Right; but his grand scheme ended in electoral and cultural catastrophe for the Republicans and paved the way for the rise of the Tea Party, a point Osborne should consider carefully.

The message all of this sends out is one of incoherence; once again, tactics – wrong-footing the Labour party over the next 18 months by outflanking it leftwards and rightwards simultaneously – is being confused with strategy – mapping out a new, principled conservative vision for Britain for the next several decades.

[Liquid Goldfish]

Worth a bump. Allister Heath thinks that Osborne is planning a major uplift to the NWM before the GE.

Entirely in keeping with Carney's m.o. too (as I posted earlier in this thread).

Osborne is even worse than Brown when it comes to doing things purely for political gain. How these two loons ever obtained so much power I will never know.

[Mikhail Liebenstein]

The only wages the government can control (bar min wage setting) is the public sector. Why would anyone in the private sector raise wages to help the general economy when you can bring in trained immigrants to work for less or export the jobs; in either case it increases profits and benefits the shareholders.

You could assume a minimum wage of say £25k, and then tax firms double the amount they pay anyone below that?

Might cause a bit of unemployment, but where employees are genuinely productive there should be an issue.

[zugzwang]

Osborne is even worse than Brown when it comes to doing things purely for political gain. How these two loons ever obtained so much power I will never know.

Osborne's proven himself to be worse than Brown in just about every way imaginable. Incredible, but true.

Anyway, it looks official now. He's trying to buy the GE, as we all suspected he would, and to hell with the national debt.

http://www.independent.co.uk/incoming/lib-dems-accuse-tories-of-stealing-their-policy-as-george-osborne-prepares-to-approve-aboveinflation-rise-in-minimum-wage-9045000.html

George Osborne is ready to approve an above-inflation rise in the national minimum wage as the Conservatives seek to appeal to the low paid and shed their “party of the rich” image.

A day after the Chancellor announced plans for another £12bn of welfare cuts between 2015-17, Treasury sources talked up the prospect of a “real terms rise” in the £6.31-an-hour minimum wage this October.

The move is significant because the Conservatives opposed Labour's decision to bring in the minimum wage in 1999, predicting wrongly that it could cost two million jobs. The Tories have traditionally backed calls by business leaders to keep down the wages floor. But their planned U-turn reflects their concerns at being seen as “out of touch” with ordinary people hit by what Labour calls the “cost of living crisis.”

According to the Resolution Foundation think tank, the minimum wage is now at its lowest level since 2005 in real terms. It has fallen in value for the past five years, and by 5.2 per cent in real terms over this period. If it had been linked to inflation, it would now stand at £6.68 an hour. A five per cent increase this October would take it to £6.62 an hour.

The Government will not recommend a precise increase in the data it sends shortly to the independent Low Pay Commission, which will publish its recommendations in the spring.

[R K]

Well that didn't take long

FT editorial calls for higher pay (££££)

http://www.ft.com/cms/s/d4a040b4-77a7-11e3-807e-00144feabdc0,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2Fd4a040b4-77a7-11e3-807e-00144feabdc0.html%3Fsiteedition%3Duk&siteedition=uk&_i_referer=#axzz2po7gGiRs

[R K]

Worth a bump. Allister Heath thinks that Osborne is planning a major uplift to the NWM before the GE.

Entirely in keeping with Carney's m.o. too (as I posted earlier in this thread).

Tories and LibDems are fighting over the glory for raising the minimum wage

http://www.theguardian.com/society/2014/jan/07/tories-nicking-lib-dem-low-pay-policies

The Liberal Democrats on Tuesday accused the Tories of "nicking" their ideas after Iain Duncan Smith joined forces with supporters of George Osborne to press for a noticeable increase in the national minimum wage.

Vince Cable said he hopes the low pay commission will introduce "significant rises" to the minimum wage as Lib Dem sources described the Conservatives as "latching" on to their fairness agenda.

The Lib Dems, whose leader Nick Clegg warned on Monday that Osborne is in danger of making a "monumental mistake" by pressing for welfare cuts of £12bn in the next parliament, turned on the Tories again amid signs of a Tory push for a dramatic rise in the minimum wage as a way of signalling that the party is keen to champion low-paid workers.

Pleased I've been proved correct, but a little surprised it's only taken a few days (!)

[okaycuckoo]

Seems like window dressing - a chunk of the rise in NMW will be absorbed by reduced entitlements to tax credits and housing benefit. Add accelerating cuts to TC & HB, it may be a reduction in income.

[Liquid Goldfish]

Seems like window dressing - a chunk of the rise in NMW will be absorbed by reduced entitlements to tax credits and housing benefit. Add accelerating cuts to TC & HB, it may be a reduction in income.

That could well be true. Will a 50p per hour rise in the NMW really make people feel better off? Although I suppose it does equate to a £1000 per year rise for someone working full time on NMW. And will there also be a ripple effect with higher paid workers demanding that their differentials are maintained?

[wonderpup]

And will there also be a ripple effect with higher paid workers demanding that their differentials are maintained?

This may be the hope- that some kind of wage inflation can be kicked off- but the lack of coherence here is comical- help to buy pushing up mortgages and therefore rents is adding to the 'cost of living crisis' that Osbourne now identifies as his nemesis.

So the same man who inflates the cost of living via help to buy is simultaneously trying to offset this by pushing up wages- against a background of low interest rates and QE designed in part to lower the prices of our exports.

An utter shambles.

[Liquid Goldfish]

This may be the hope- that some kind of wage inflation can be kicked off- but the lack of coherence here is comical- help to buy pushing up mortgages and therefore rents is adding to the 'cost of living crisis' that Osbourne now identifies as his nemesis.

So the same man who inflates the cost of living via help to buy is simultaneously trying to offset this by pushing up wages- against a background of low interest rates and QE designed in part to lower the prices of our exports.

An utter shambles.

Yes, totally incoherent and shambolic - but it might work!

If the reported figure of a 50p rise in the NMW is correct and everyone earning more than that also gets the same 50p rise in order to maintain differentials - then very roughly that would be a 4% earnings rise across the economy - just in time for the election!

[winkie]

......this is a difficult one.....low NMW means benefits subsidising low pay allowing big corporates and share holders bigger profits, and helping stop smaller business failing........higher NMW means higher inflation, rising prices and higher unemployment, wider divides of haves and have nots in communities.

Edited January 9, 2014 by winkie

[Billy soy]

Yes, totally incoherent and shambolic - but it might work!

If the reported figure of a 50p rise in the NMW is correct and everyone earning more than that also gets the same 50p rise in order to maintain differentials - then very roughly that would be a 4% earnings rise across the economy - just in time for the election!

Well osbournes in for a shock, 50p rise in NMW might be on the way but he can't force employers paying over NMW to hand out a 50p raise.

[spyguy]

Osborne is even worse than Brown when it comes to doing things purely for political gain. How these two loons ever obtained so much power I will never know.

No, not at all. Bar the like of Pol Pot and Stalin, you'd struggle to find a politician worse than Brown.

He's responsible for spouting hot air but there's very little spending behind anything.

The coalitions main fault is not building a big bonfire and putting Brown's spending on it - tax credits, massive increases in public sector workers etc etc.

The coalition has been too cautious. Understandable when you consider the UK and global economy.

[R K]

http://www.bbc.co.uk...litics-25766558

Chancellor George Osborne has said he wants to see an above-inflation increase in the minimum wage.

He told the BBC the "economy can now afford" to raise the rate, currently set at £6.31 an hour for people over the age of 21.

The call comes after Labour claims that the economic upturn has not translated into improved living standards.

But Mr Osborne said it was Labour's fault that they had fallen and he was aiming to make people better-off.

The value of the minimum wage, paid to an estimated 1.35 million people, has fallen in real terms since the financial crisis of 2008. The current rate of inflation is 2%.

Continue reading the main story HOURLY MINIMUM WAGE

• Over-21s - £6.31
• 18 to 20s - £5.03
• Under-18s - £3.72

Conservative Mr Osborne told BBC political editor Nick Robinson it would have to increase to £7 an hour by 2015 for its value to return to where it was before the economic downturn struck.

But he stressed that the decision was not his but that of the Low Pay Commission, which is overseen by Liberal Democrat Business Secretary Vince Cable.

He said the coalition, since coming to power in 2010, had "rescued the country from the brink of disaster and got us into a position where we can now see the minimum wage going up for people and, more broadly. I want living standards to go up for the whole country as we fix the economy."

Bingo bongo

Edited January 16, 2014 by R K

[DarkHorseWaits-NoMore]

http://www.bbc.co.uk...litics-25766558

Bingo bongo

Yes, an interesting development, +10% in a year or 2.

How he keeps a straight face when he speaks deserves an Oscar nomination (at least or a good slap!).