Thursday, 9 January 2014

Increasing the minimum wage

The Tories are considering promising a rise in the national minimum wage (NMW) as part of their general election bribes to the electorate.

It's a typical government bribe, in that someone else will be paying for it. Usually it's the taxpayer who pays for his own bribe. This time, unusually, employers would foot the bill so it's a cash transfer down the social spectrum - money would move from the rich (company owners) to the poor (workers.)

The current adult minimum wage is £6.31 per hour and the thinking is they might go up as high as £7. (The Joseph Rowntree Foundation has the living wage at £8.81 in London and £7.65 outside London.)

Which begs the question: how do people on minimum wage actually stay alive? The answer is simple. They claim benefits. About half the people claiming Housing Benefit are in work. And on top of HB they may be eligible for Tax Credits. TCs are paid to people in work. Although the name seems to imply some sort of tax refund, far more can be claimed than was ever paid in tax - it's a straight benefit despite the name. In fact it's two benefits: working tax credits (WTC) and child tax credit (CTC). Also for those with children comes Child Benefit.

A low paid family in work can more than double their income by claiming benefits. A family making twice the national average wage (say £50,000 per year) can still be getting some benefits if they have enough children.

What happens is that employers pay the lowest wage they legally can (ie, the national minimum wage) and the taxpayer makes up the difference. By this means the high volume/low pay employers such as the supermarkets, service companies, etc, are effectively subsidised by the taxpayer.

This blog is all in favour of putting up the minimum wage. Put it up to £10 per hour! Put it up to an amount that means employers are paying the entire cost of employing their staff. This would massively reduce the tax burden on the country.

Some of the savings from increasing the minimum wage should be recycled back to employers in the form of tax cuts. Specifically the employers' National Insurance contributions should be abolished, and Business Rates should be abolished. Both of these are taxes on jobs and should be got rid of.

1 comment:

Anonymous said...

Christopher Philips: Britain’s Latest Political Prisoner: