Tories Reverse Thinking On Minimum Wage

[campervanman]

http://www.dailymail.co.uk/news/article-2535209/Tories-plotting-50p-rise-minimum-wage-counter-image-posh-boys-touch-low-paid-workers.html

So the penny has dropped that if wages are continually driven down then a capitalist society destroys itself from within. Seems that the past 35 years of Tory thinking that has led to substituting purchasing power through income growth with purchasing power through debt has run it's course and it is back to the 1970's.

[kjw]

http://www.dailymail.co.uk/news/article-2535209/Tories-plotting-50p-rise-minimum-wage-counter-image-posh-boys-touch-low-paid-workers.html

So the penny has dropped that if wages are continually driven down then a capitalist society destroys itself from within. Seems that the past 35 years of Tory thinking that has led to substituting purchasing power through income growth with purchasing power through debt has run it's course and it is back to the 1970's.

Perhaps they've been influenced by the thinking of a fellow consrvative from across the pond?

http://www.nytimes.com/2013/11/26/us/conservative-leads-effort-to-raise-minimum-wage-in-california.html?_r=0

[interestrateripoff]

The system is only destroyed if wages go down and prices go up and there are large debts.

If prices go down it's not a problem for those not in debt.

[SleepyHead]

They've just opened the door to millions more cheap workers.

Raising the minimum wage by 50p won't do anything now.

Idiots

[tomandlu]

Pretty predictable, since *some* wage-rises are the only way they can pull this off. It's a half-way house between inflation and stagflation. Bails out debtors and banks, reduces demand for imported goods, what's not to like? (assuming you're not a saver)

[campervanman]

The system is only destroyed if wages go down and prices go up and there are large debts.

If prices go down it's not a problem for those not in debt.

The system is destroyed if debt is required to buy the basics.

[Dorkins]

The minimum wage is well below subsistence level if you have dependents to support, so the government has to top it up with benefits and tax credits anyway. If they increase the minimum wage they can shift some of this burden onto employers and away from the Treasury.

[durhamborn]

Its all to do with reducing benefits.

The best way to cut the benefit bill is to freeze the allowable earnings threshold and keep the increase in the headline rates below wage increases.

If benefits are increased by 1% and NMW by 3% and allowable earnings threshold frozen, a couple with 1 earner on NMW with 1 child would see their headline tax credit rate rise to £150 a week this year,an increase in tax credits of £1.50 a week.

NMW increase at 3% would see a roughly £7 increase in wages.If the allowable earnings threshold is frozen (it is) that means 41% of the £7 I taken off the tax credits.£2.87.

So the tax credit award would FALL by £1.37 a week even though tax credits have gone up 1%.A real terms cut in benefit of 3.8%.

In means tested in work benefits the allowable earnings threshold is as,or more crucial to how much your benefit increases/decreases than headline rates.

That's why buried in the autumn statement were figures showing the allowable earnings threshold under Universal credit would be frozen.

[Bloo Loo]

The system is destroyed if debt is required to buy the basics.

In other words, debt, created to buy non productive assets that can only be repaid through time invested somewhere else, is ultimately destructive.

Its currently inbuilt into the current modus operandi of the banks...Its called...Financialisation...and its currently supported by deficit spending.

[Ologhai Jones]

http://www.dailymail.co.uk/news/article-2535209/Tories-plotting-50p-rise-minimum-wage-counter-image-posh-boys-touch-low-paid-workers.html

So the penny has dropped that if wages are continually driven down then a capitalist society destroys itself from within. Seems that the past 35 years of Tory thinking that has led to substituting purchasing power through income growth with purchasing power through debt has run it's course and it is back to the 1970's.

Hazlittt's Economics in One Lesson has a view on minimum wages (among other things).

Hard to imagine many on here have yet to read this book, but, if you haven't yet, you may enjoy it.

[kjw]

I would get rid of the minimum wage. But I would have a basic Citizens' Income so that all work pays.

Which is more 'Marxist'?

+1

Neither the minimum wage (nor indeed tax credits) address things as elegantly as a guaranteed income (with the addede proviso we have aggressively progressive taxation imo) would: everyone gets a basic living, the rich have it taxed away, small businesses could afford to hire people for what they could/would pay (perhaps some unionism would also be desirable here?), no one could say that they were deprived (for instance, the middle class whining about they pay taxes and poor people get the benefits). There would be more people willing and able to do some adventurous businesses, because they wouldn't be terrified of starving to death if they fail. Children wouldn't be punished for their parents lack of earning capacity.

God would be in heaven and all would be well on earth...

[@contradevian]

I think Brown hoped to recoup the cost of WTC through increased corporation tax (higher profits because the work force was effectively subsidised) but employers got the benefits of a cheap workforce without having to pay for it.

Tories have only come round to NMW because (1) any increase will be captured by the rentiers and (2)it will become the standard wage, not the minimum as employee's really don't have to compete for staff with an open door policy.

Edited January 8, 2014 by aSecureTenant

[Squeeky]

I would get rid of the minimum wage. But I would have a basic Citizens' Income so that all work pays.

Which is more 'Marxist'?

We have a minimum income guarantee, so we have NMW to stop employers taking the **** too much.

To keep a minimum income guarantee for the populations you can either have a very cumbersome system that requires lots of information (and has lots of mistakes) that makes the state top people up on top of their earnings. In theory if it is all set up correctly you should always get the minimum amount almost regardless of the amount of work you put in or don't.

Or

You have a substance level flat rate income for all. With taxes clawing more back the more you earn, but you are always better off working.

[kjw]

I think Brown hoped to recoup the cost of WTC through increased corporation tax (higher profits because the work force was effectively subsidised) but employers got the benefits of a cheap workforce without having to pay for it.

Tories have only come round to NMW because (1) any increase will be captured by the rentiers and (2)it will become the standard wage, not the minimum as employee's really don't have to compete for staff with an open door policy.

One reason why Brown introduced a minimum wage was precisely to stop employers cutting wages in response to the introduction of tax credits... after all, capitalists are rather keen to drive pay so low that at the bottom end so *they* get extra negotiating power. I mean, when your next pay packet is the money for your essentials you have very little bargaining power really.

[Goat]

I would get rid of the minimum wage. But I would have a basic Citizens' Income so that all work pays.

Which is more 'Marxist'?

How much per month?

Is this to replace all other benefits?

[Bloo Loo]

Hazlittt's Economics in One Lesson has a view on minimum wages (among other things).

Hard to imagine many on here have yet to read this book, but, if you haven't yet, you may enjoy it.

within 10 minutes he has illustrated the fallacy of Government spending in excess of tax, and the myth and subsequent justifications for many other memes based on the broken window fallacy.

Havent read this book before today and will continue later..

Many thanks for posting.

[fluffy666]

Pretty predictable, since *some* wage-rises are the only way they can pull this off. It's a half-way house between inflation and stagflation. Bails out debtors and banks, reduces demand for imported goods, what's not to like? (assuming you're not a saver)

The cynic /conspiricy nut in me thinks that TPTB have finally noticed that if the proles don't get a bit of a rise then the whole system is at risk of imploding, which might result is genuine change. Hence the message being put out on wage rises, even by organisations like the CBI..

[@contradevian]

within 10 minutes he has illustrated the fallacy of Government spending in excess of tax, and the myth and subsequent justifications for many other memes based on the broken window fallacy.

Havent read this book before today and will continue later..

Many thanks for posting.

Yes it looks a good post, Will read the book later.

[kjw]

I don't know what it would end up being to be honest. One of the key ways to pay for it would be a Land Tax and distribution of new base money (increase money supply by about 4% a year to cater for 2% inflation and 2% gdp growth) on top of replacing many existing benefits.

I would deploy this tool of LVT to reduce inequality, and, along with liberalisation of certain aspects re property development use these to bring down by far the biggest cost of living expense. And aside from that, such a reduction would also feed into all other costs as shops wouldn't have to pay such high rents etc., companies and the state wouldn't have to pay their staff such high wages etc etc etc so they would be better placed to reduce their prices in a competitive fashion.

So effectively, these proposals taken together would be designed to radically bring down the cost of living and wages too and make the UK a far better and more competitive place to undertake commercial producitve enterprises. I would let the exchange rate do most of the heavy lifting towards making the UK more wealthy in the world and this would be achieved via improved trade rather than sucking in capital to buy up our companies and land.

And whilst as far as possible I would like many of the existing benefits to be done away with from unemployment benefit, to state and private pensions, winter fuel allowance, bus passes, free tv licenses etc etc etc I am not so naive to fall into the trap of thinking that someone who is deeply disabled might need some extra help.

Chris Dillow has a go at crunching some numbers here, as well as explaining the merits of a guaranteed income. (It's quite an old article but still presents a reasonable outline, I think)

http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2005/04/the_case_for_ba.html

[fluffy666]

Hazlittt's Economics in One Lesson has a view on minimum wages (among other things).

Hard to imagine many on here have yet to read this book, but, if you haven't yet, you may enjoy it.

Not really.. I'm not a great fan of the Austrian School 'Attitude', which is like 'We are the grown ups and all the other people are silly socialist children, so we don't need to present anything as grubby as evidence..'

[goldbug9999]

The minimum wage is well below subsistence level if you have dependents to support, so the government has to top it up with benefits and tax credits anyway. If they increase the minimum wage they can shift some of this burden onto employers and away from the Treasury.

Employer just pass the increase in cost on to their customers, a fair proportion of whom are probably people on minimum wage ...

Edited January 8, 2014 by goldbug9999

[Bloo Loo]

Not really.. I'm not a great fan of the Austrian School 'Attitude', which is like 'We are the grown ups and all the other people are silly socialist children, so we don't need to present anything as grubby as evidence..'

Austrian economics is about attitudes and why people have them, then how these attitudes progress into society and the results of the attitudes to the economy as a whole.

Most economics today is about VI. THATS the attitude I despise.

[campervanman]

within 10 minutes he has illustrated the fallacy of Government spending in excess of tax, an

But government spending in excess of tax receipts , suppressed wages, high levels of personal debt and channelling the proceeds of productivity and technology into the hands of the few of are all part of the same failed economics. You only need to look at the level of personal debt and taxpayer subsidies such as housing benefit in the UK to see where the substitute for income growth demand has been coming from. To a large extent, government spending in excess of tax receipts is a consequence of suppressing incomes not a cause. The windows have been broken by and continue to be broken by the multinational corporations and the 1% and the replacement cost has had to be met by the taxpayer or through more personal debt. The dawning realisation seems to have been revealed that taxpayer/debt based demand has run its course.

Edited January 8, 2014 by campervanman

[zugzwang]

But government spending in excess of tax receipts , suppressed wages, high levels of personal debt and channelling the proceeds of productivity and technology into the hands of the few of are all part of the same failed economics. You only need to look at the level of personal debt and taxpayer subsidies such as housing benefit in the UK to see where the substitute for income growth demand has been coming from. To a large extent, government spending in excess of tax receipts is a consequence of suppressing incomes not a cause. The windows have been broken by and continue to be broken by the multinational corporations and the 1% and the replacement cost has had to be met by the taxpayer or through more personal debt. The dawning realisation seems to have been revealed that taxpayer/debt based demand has run its course.

Osborne's had a dawning realisation that the policy he's been following since 2010 is wrong?! I can't see it myself. What he really wants is a nice little burst of inflation into the GE so he can dress up the growth figures and make-believe everything's on the mend. After the GE, in the unlikely event of the Tories/Coalition being re-elected, a resumption of business as usual.

[Bloo Loo]

But government spending in excess of tax receipts , suppressed wages, high levels of personal debt and channelling the proceeds of productivity and technology into the hands of the few of are all part of the same failed economics. You only need to look at the level of personal debt and taxpayer subsidies such as housing benefit in the UK to see where the substitute for income growth demand has been coming from. To a large extent, government spending in excess of tax receipts is a consequence of suppressing incomes not a cause. The windows have been broken by and continue to be broken by the multinational corporations and the 1% and the replacement cost has had to be met by the taxpayer or through more personal debt. The dawning realisation seems to have been revealed that taxpayer/debt based demand has run its course.

exactly, failed economics...its just failing very slowly, and thats called kicking the can...they know there is a failure point, but they want to keep moving it..Others call this financial repression.