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Minimum Wage Increase

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George Osbourne was on the radio discussing the increase in minimum wage and how "we could afford it". Of course, he didn't actually say who "we" where.

Anyway, I wondered if increasing minimum wage would actually save the government money. e.g. The employer pays it, the government taxes it any pays less out in tax credits.

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George Osbourne was on the radio discussing the increase in minimum wage and how "we could afford it". Of course, he didn't actually say who "we" where.

Anyway, I wondered if increasing minimum wage would actually save the government money. e.g. The employer pays it, the government taxes it any pays less out in tax credits.

I think that it is meant to be 'neutral' if done at a time when it doesn't result in lots of job cuts. (Govt pay less in benefits, but receive less in Corp. tax etc as Employers pay more to workers instead of the Govt).

Politically it is probably good for Osborne as it will reduce the amount paid in WTC etc and so he could potentially argue to bring the benefits cap down again. Bit of a balancing act though.

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Politician says...we want to increase minimum wage 10%.

Politician actually does.......

Answers on a postcard please ?

Nothing, as it isn't upto him - it's upto the (supposedly politically independent) Low Pay Commission.

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It is a slightly atypical government pre-election bribe, in that instead of taxpayers being bribed with their own money they are being bribed with their employers' money.

That said, it seems right to me the transfer the cost of a worker from the government (paying in-work benefits such as Tax Credits, Child Tax Credits and Housing Benefit) to the actual employer.

I'd like to see all in-work benefits abolished and the minimum wage raised to the living wage, or more even, say £10/hr. Some jobs would be lost one supposes but since it would be a level playing field across all employers not many. Some prices might has to rise. Some profits would fall. But all jobs would be self-funding and taxes could be lowered. Possibly employers' NI and Business Rates could be abolished to compensate employers somewhat.

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I'd like to see all in-work benefits abolished....

Too simplistic. How would you deal with part time workers? What about single mothers who'd otherwise be entitled to ~ £20,000 benefits?

You'd be asking people to take a full time job on say £15,000 p/a and be ~ £5,000 or more out of pocket.

... and the minimum wage raised to the living wage, or more even, say £10/hr.

Minimum wage is ~ £14,000 p/a, you should be able to live off that. The question is why is someone working in a minimum wage job paying £1,500 a year income tax/NIC?

Of course things get more difficult when you factor kids in but do we really think that minimum wage should be enough to support a non-working wife and say 4 kids?

Some jobs would be lost one supposes but since it would be a level playing field across all employers not many.

Blog on the Telegraph: What's the point of increasing the minimum wage if employers don't pay it?

Essentially what you'd see is even more foreign workers dragged in and paid below MW whilst the indiginous workers are left to rot on the dole.

Also bear in mind that many min wage jobs can be moved out of the country (call centres eg) or replaced by technology (supermarket self-service tills).

... But all jobs would be self-funding and taxes could be lowered....

Assuming that the additional costs of unemployment don't outweigh the benefit of additional tax revenue and reduced benefits, which is far from certain.

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Reduce benefits bill for those in work

be seen to be helping the poor before an election

Increase in unemployment helps justify keeping rates low for longer putting off the correction beyond the election

unemployment stats have improved lately so theres some room to bump that up

Hurts small business but who cares about that when you've got high house prices, and who else are they going to vote for, labour!?

No brainer

Literally

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The trouble with artificially pushing up lower incomes is that it distinctiveness skilled workers.

For example Skilled worker in international competitive business earns £10 per hour because that is all the company can afford.

Unskilled workers wages go from £6 to £8 because some dick head wants to up minimum wage.

What point is there someone of someone going to the expense and hassle of becoming skilled if min wage jobs pay so well?

The market should be settings wages, house price and rents - not the Nasty Party.

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Stupid people, this is seriously getting on my nerves. All the prices go up so the effect of an increase is cancelled out anyway but there is one entity that will benefit who takes a % cut from everyone, guess who that is kids.

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Stupid people, this is seriously getting on my nerves. All the prices go up so the effect of an increase is cancelled out anyway but there is one entity that will benefit who takes a % cut from everyone, guess who that is kids.

You have to admire his chutzpah if nothing else. I doubt we've seen a political operator with such low cunning since Mandelson slunk back into the shadows.

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On a site where we are forever bemoaning manipulation of house and asset prices, it seems strange to me that anyone here would condone a min wage.

Wages should be left completely to the market to decide. It may have stopped some of the crazy rises of rents and house prices!

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Stupid people, this is seriously getting on my nerves. All the prices go up so the effect of an increase is cancelled out anyway but there is one entity that will benefit who takes a % cut from everyone, guess who that is kids.

Careful.... if you are suggesting a minimum wage increase will just go to CEO's via rising prices, alexw will be along shortly to sort you out. I've learnt my lesson so don't upset him/her about it now.

If minimum wage worked for workers, there would be no need to talk about a living wage. All a minimum wage does is devalue the earnings of people who earn a little bit more. I nearly slipped into the correlation of executive pay rises since minimum wage started but stopped myself just in time. I hope him/her didn't notice.

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The people that will gain most from the increase are home owners. If you earn an extra £100 a month you can afford to pay an extra £100 a month in rent. since there is a shortage of houses to rent that is what will happen.

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What point is there someone of someone going to the expense and hassle of becoming skilled if min wage jobs pay so well?

When we all get the same that's 'fair'. It's 'the right thing to do'. Helping 'hard working families'.

Back to the socialist worker for re-education comrade

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The people that will gain most from the increase are home owners. If you earn an extra £100 a month you can afford to pay an extra £100 a month in rent. since there is a shortage of houses to rent that is what will happen.

Manipulation of benefits/rents and house prices, the manipulation of HTB and the manipulation of wages does not sit well with me......only means further unemployment and inflation of prices in a deflationary market....min wage should not be used like a qe substitute....prices need to come down to match wages not to rise them so as to increase prices........we live in a competitive world. ;)

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Any increase in wages would be captured by the rentiers. So no wonder he is in support of it. The piggies are squealing.

Ricardian Rent

Edited by aSecureTenant

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Any increase in wages would be captured by the rentiers. So no wonder he is in support of it. The piggies are squealing.

Ricardian Rent

What increase in wages? If they could legislate pay rises into reality, we would all be rich.

P.S. I'm glad to see the law of rent linked there too, btw!

Edited by Traktion

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Any increase in wages would be captured by the rentiers. So no wonder he is in support of it. The piggies are squealing.

Ricardian Rent

That link doesn't say what you think it does.

Of more relevance would be a link to a study showing the income elasticity of demand for housing.

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The trouble is that almost every asset has been captured by rentiers, but I suppose that is the ultimate goal of monopoly/capitalism.

The rentiers own:

> The houses

> The trains

> The utilities Water, electricity

> The telecommunications network

Next it will be the Roads, NHS and schools.

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It isn't really an increase in NMW, it's a reversal of the real terms decrease over the past few years.

Without strong unions to drive wage inflation and wider inflation, the government needs to drive wage inflation itself in order to inflate away the debt, and in turn allow interest rates to rise due to the wage inflation.

This will decrease benefits in real terms quite considerably as most of them are capped at 1%.

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It isn't really an increase in NMW, it's a reversal of the real terms decrease over the past few years.

Without strong unions to drive wage inflation and wider inflation, the government needs to drive wage inflation itself in order to inflate away the debt, and in turn allow interest rates to rise due to the wage inflation.

This will decrease benefits in real terms quite considerably as most of them are capped at 1%.

The government doesn't need to drive wage inflation to inflate away its own debt, As evidenced by QE it has simply been using the central bank to buy it and this has given rise to persistent general inflation which has now got to the point where it can't be ignored any more.

I'd say that the minimum wage talking point is all about mollifying the proles who, despite the haze of media distractions, have started to notice that their pockets are emptier than usual .. and also a recognition that you can only take so much from the masses before you hit a limit where general economic activity is seriously impeded as a result of many of the consumers being skint.

Rather than roll back the policies that are causing cost of living inflation, they are preferring to make the employers of lower-paid workers take the hit by enforcing modest pay rises for those at the very bottom. You could argue that the state is actually subsidising lower paid workers anyway through working tax credits so the Government are just saying that the employers need to start paying more of their 'fair' share.

Don't worry, rises in income virtually never keep pace with inflation (unless you are a banker or a boss, of course whose incomes have been comfortably outpacing the inflation caused by the fallout from the financial crisis). But history tells us that as long as people see some sort of extra amount in their salary statement, they are less likely to cause problems over a rising cost of living. They basically don't bother sitting down and doing the sums.

Hence Osborne's 'munificence'. God bless him!

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Wages should be left completely to the market to decide. It may have stopped some of the crazy rises of rents and house prices!

The problem with this idea is that it's entirely possible for the market to decide that your labor currently has so little value that it won't pay you enough to stay alive- at which point you either let people starve or prop them up with welfare.

But as soon as welfare is introduced employers can game the system by allowing the state to subsidize low wages.

The problem with the labor market is that the law of supply and demand does not work properly- what should happen is that excess labor should starve to death which would restore the equilibrium between the demand and the supply as the number of workers left alive aligned with demand- but we don't allow this 'wastage' to take place, we choose to interfere on humanitarian grounds.

Humans lack fungibility as a commodity- unlike say wheat or potatoes the crop takes two decades to produce and any excess that is grown cannot be easily disposed of.

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