Wages are too low

 

              Let me make common cause today with the labour movement. Wages in the UK are too low. Instead of spending so much time complaining about the pay of a minority who are well paid in the private sector, maybe we should spend more time asking how more people can enjoy higher pay. I am not one of those hypocritical commentators on a good salary always urging pay restraint on others.

               Before the labour movement gets too excited, however, I do believe a couple of other things about pay. I do not think you can legislate successfully for higher pay. It has to be earned. The problem with minimum wage legisaltion is if you set it too high you drive jobs away, and if you set it too low it has no benefiical impact. If you get it somewhere in the middle it does not deliver great living standards, and may still encourage  non compliance and a larger black economy. Labour’s minimum wage has left many people on low pay and in receipt of benefit top ups so they have a more reasonable income.   The UK’s problem is we do not have enough companies with enough power in the marketplace to command the prices and sell the volumes we need to pay more people higher pay. This is what economists call our productivity problem.

               Sensible people in the Union movement accept that we need a culture of “something for something” or “more for more”. It may not mean working harder or longer hours, though that does usually  bring forth higher pay. It may mean working smarter. Our best manufacturing businesses in the UK know and do this already. They put the machine power at the elbow of their employees. They train their staff. The treat them with respect and pay them well as the factory achieves its targets.

                 The Chinese economy is advancing rapidly with large increases in real wages fuelling more domestic consumption, which in turn pays higher domestic wages. It is a virtuous circle. In their case it it is still taking place from a base position of much lower  average wages than we enjoy. There is no reason, however, why an advanced country cannot also create a virtuous circle. It is about training and motivation, about reward that people want and believe they can achieve.

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205 Comments

  1. Gerry Dorrian
    Posted July 19, 2012 at 5:40 am | Permalink

    On the left there are also resurgent Trotskyites with their “transitional demands” – working up people to ask for undeliverable increases with the goal of fostering discontent when they don’t appear.

  2. Mick Anderson
    Posted July 19, 2012 at 5:42 am | Permalink

    Government can effectively legislate for higher wages by changing tax law to reduce the amount they take from us.

    Tie it into a reduction in long-term, out-of-work benefits, and income becomes much more related to the amount of work that you do.

    • uanime5
      Posted July 19, 2012 at 6:23 pm | Permalink

      The problem with reducing benefits is that getting less benefits doesn’t make you any more employable or create more jobs. Thus it results in more homelessness and crime, not more spending.

      • Bob
        Posted July 19, 2012 at 8:41 pm | Permalink

        @uanime5

        Less benefits means less tax for employees and employers, which would make it more affordable to employ people, and less attractive for the indolent to rely on benefits.

        Win win unless you’re a lazy layabout!

        • uanime5
          Posted July 20, 2012 at 3:24 pm | Permalink

          Sadly you seem to believe the fantasy that high taxes reduce jobs even though most employers making large profits aren’t increasing their workforce.

          You also seem to believe the fantasy that all the unemployed will magically be able to get jobs if there benefits are cut. Care to explain how reducing benefits will give the unemployed the skills they need to get a job. This might surprise you but most employers don’t want someone who has no work experience and will need training.

          • Bob
            Posted July 20, 2012 at 8:58 pm | Permalink

            @uanime5

            Nature has endowed all living things with a thing called hunger. It’s the thing that spurs them on to go out into the world and find some food. Without it they will just stay in bed (as we can see from the ever expanding waistlines of the ever expanding welfare class).

            Our welfare state is killing with kindness.

      • Mick Anderson
        Posted July 20, 2012 at 6:19 am | Permalink

        I’m suggesting reducing long-term benefits, to stop people from choosing them as a lifestyle. No sane person can suggest that anyone should be allowed to sponge off taxpayers as a career choice.

        Reducing taxes can include things like NI (often described as a tax on jobs) and corporation tax. It will do more to encourage employers to hire and generate that elusive growth than LibLabCon governments trying to persuade us all to take on more debt. More jobs will mean that reducing benefits will head towards affecting the lazy more than those who are genuinely looking for work.

        The point of lowering taxes is to give a virtuous circle, which the current situation is very far from. Taxing the prudent and wasting the money is no way to run a Country, or to persuade the put-upon tax payer that the situation is reasonable or fair.

        • uanime5
          Posted July 20, 2012 at 3:30 pm | Permalink

          Your comments show you don’t understand the problem and erroneously believe that the majority of the unemployed are lazy. I’ll try to explain the problem simply.

          1) If people don’t have the skills employers want they won’t get hired.

          2) If people don’t have the work experience employers want they won’t get hired.

          3) If people don’t have the qualifications employers want they won’t get hired.

          4) If the unemployed can’t get these skills, work experience, or qualifications they will remain unemployed no matter how many jobs are created.

          5) If the unemployed can’t get to jobs created then they can’t work in them no matter how many jobs are created.

          6) Reducing taxes and benefits won’t fix any of the above problems.

          Also having companies that prefer to hire immigrants with experience than train the locals is no way to run an economy.

          • David Price
            Posted July 21, 2012 at 9:52 am | Permalink

            So you ought to be in favour of the various initiatives such as apprenticeships, work experience, work together support for new enterprises all of which address your points 1-5.

            For your final point I suggest you go and complain to your heroes in One Brewers Green.

  3. norman
    Posted July 19, 2012 at 5:46 am | Permalink

    Get rid of employers and employees NI for a start. There you go, 15%+ take home pay rise for all.

    Spend less. Lower taxes. Simples.

  4. Martin Cole
    Posted July 19, 2012 at 6:15 am | Permalink

    Well said,and please read Ironies Too this morning.

  5. Pete the Bike
    Posted July 19, 2012 at 6:18 am | Permalink

    The problem is caused by regulation and taxation. Reduce both and wages will stand some chance of going up. Increase either and the spiral of poverty and debt slavery will increase. Why can’t politicians see that?

    • lifelogic
      Posted July 19, 2012 at 8:12 am | Permalink

      Because they are interested in power and a nice job also nearly all their input comes from the state sector staff all say we need to spend more on this or that.

  6. Adam5x5
    Posted July 19, 2012 at 6:19 am | Permalink

    maybe we should spend more time asking how more people can enjoy higher pay.

    Lower tax.

    Given that for an average earner, tax and NI take circa 30% of the wage, would it not be better to lower the tax rate and we can keep more of our money?

    Of course, this idea would never get off the ground because the government wouldn’t be able to afford the bloated, oversized, inefficient, unnecessary, incompetent public sector services which win them votes we all can’t survive without…

    If I put £100 of fuel into my car, I have to earn £150 to do that with £50 going to the government. Of that £100 I spend, £65 goes in tax to the government.

    How about, I earn £150, some is taken for vital services (police, military, justice) – say 20% (£30). I could then put the same amount of fuel into the car – again lets allow some tax here, say £50 for the same amount of fuel. I would then have £70 left to spend or save, which would help the economy.

    Of course, individuals are unable to make these decisions, only the nice government are able to make the correct decisions about where my money should be spent. (HS2, the Olympics, excessive benefits, BBC, NHS computer systems, ad nauseum)

    • Adam5x5
      Posted July 19, 2012 at 6:20 am | Permalink

      PS. Numbers in the above are rough – it’s too early in the morning for me to have the energy to get the exact figures, they’re ballpark and the point stands.

      • lifelogic
        Posted July 19, 2012 at 8:19 am | Permalink

        Indeed they are even worse than those I think with employer’s NI and the petrol might just be to get you to work. Many need to work on day in five just to cover their car commuting costs – making nothing for themselves that day of the week at all.

        Fire the parasites one in two. No one would even notice and very many would actually benefit from the reduced inconveniences. Limit pay off to 3 months.

        The fired would be happier too after a time they could do something more useful for a change.

        • uanime5
          Posted July 19, 2012 at 6:28 pm | Permalink

          I’m fairly sure that if you fired half the police officers, fire fighters, nurses, doctors, social workers, teachers, judges, and border staff someone would notice. It’s purely a fantasy to believe that you can halve the number of staff without effecting their efficiency in any way.

          • alan jutson
            Posted July 19, 2012 at 8:19 pm | Permalink

            uanime5

            You mention all front line staff, who it is of course desirable to keep, but how about those bean counters in the background, who it would appear cannot count, and who simply make up boxes for others to tick, and who number hundreds of thousands.

          • Adam5x5
            Posted July 20, 2012 at 5:19 am | Permalink

            doctors, nurses, teachers, border staff, fire fighters

            All occupations that could and are provided better and cheaper by the private sector than the public one.

            All it takes it a well written contract and regular re-tendering of the contract to allow competition.

            Plus we can do away with all the H&S jobsworths and other government non-jobs. The culture is there now, people tend to demand a reasonable working environment so competition among employers for the best staff will ensure that standards remain high.

          • K Chegwin
            Posted July 21, 2012 at 8:55 pm | Permalink

            Proof Adam 5X5?
            Thought not

    • Vanessa
      Posted July 19, 2012 at 8:29 pm | Permalink

      So agree! On EuReferendum.com they are talking about direct democracy which would mean we, the people, would have more say in a true democratic state. The politicians only give us democracy every 4/5 years with nothing in between. If we took more control of our “servants” then we could make sure we were not taxed up to the hilt, kept more of our money and slung out all these greedy, corrupt and dishonest criminals who say they govern us.

  7. lifelogic
    Posted July 19, 2012 at 6:22 am | Permalink

    Wages are too low because government is too big and too incompetent. It is often all companies can afford to pay without going out of business. Further this wretched doomed government and the one before has clearly chosen to flood the labour market and undercut people’s trades with migrant workers.

    If companies do pay more then so little ends up with the employee, after tax and benefit reductions, that there is very little point in so doing. As you cannot fire bad staff anyway (and they know it) many do not even try to work well and are simply not worth any more.

    Finally there is not enough capital equipment behind each employee due to the fact that the banks are not lending and sensible businesses anyway tend to put the capital investments in countries with sensible governments and sensible tax regimes and laws. Not with people like Cable and Cameron talking happiness & green drivel running the show.

    Change the wretched laws, fire Vince Cable (the anti business secretary) and halve the state sector, stop over tax borrow and waste, stop the over expensive green energy tosh and get some functional banking, and limit migration to people we actually need and will pay for themselves.

    Growth and higher wages will follow as sure as eggs is eggs.

    • lifelogic
      Posted July 19, 2012 at 6:46 am | Permalink

      Cameron in the Telegraph today:-

      Cameron: austerity will last until 2020 – well it certainly will be with his absurd (happy, green, over tax borrow and waste policies) and Labour’s insanities from 2015. Rather longer than 2020 I suspect.

      I assume he has already given up on a second term and is seeking a nice EU jobs for himself and Clegg.

      • Lord Blagger
        Posted July 19, 2012 at 9:33 am | Permalink

        Average recessions post a banking crisis are 8 years. This is for a single country. This crisis is going to last longer.

        Couple that with the real cause, government debt. John still hasn’t provided the link to the numbers, even though he has said they exist, but we don’t know where.

        True government debt, pensions included is 7,000 bn not the 1,100 bn borrowing figure. That’s the nightmare.

      • norman
        Posted July 19, 2012 at 10:46 am | Permalink

        I see he’s reprising his fruitcake speech as well, saying that people who think we can have a Switzerland type relationship with the EU are deluded fools (I’m paraphrasing) but that we need to buy a seat at the table so we can help write the rules. In other words the same old policy and indistinguishable from Labour or the Lib Dem position on Europe.

        I know conservatism is a broad church but how someone with such rabidly Europhile views can lead a party where 81 non-payroll MPs are prepared to vote for an EU referendum and hope to maintain any sort of cohesion or purpose is beyond me.

        And the record of this government seems to bear that out.

    • uanime5
      Posted July 19, 2012 at 6:32 pm | Permalink

      Companies pay their staff as little as possible so they can make large profits, not because of the cost of Government regulations. The fact that major supermarkets have large number of staff on minimum wage, yet make large profits shows that they can afford to pay their staff more.

      Also the UK has the third most lax employment laws in the OECD and a host of ways to easily hire and fire people. So your claims about restrictive employment laws are clearly wrong.

      • a-Tracy
        Posted July 19, 2012 at 8:54 pm | Permalink

        You’ve obviously never hired people or tried to fire unsuitable workers in the UK.

        I don’t believe we have the most lax employment law in the UK and I would like to read your evidence for this statement. Having to maintain unsuitable, and unproductive workers is born by the business, their fellow workers and the State eventually through a stagnant economy which puts pressure on everyone else to pay more taxes.

        At the end of the day Companies are in the business of making profit in order to give a reward for risk, investment, and to pay back the first ten years when you made no profits, topped up your personal credit card, put your house on he line, took no holidays, put in over 60 hours per week on subsistence amounts and these profits are typically reinvested or used to improve cash flow after the banks and government take their majority cut.

        Perhaps you should set up a company and hire lots of well paid workers, what’s stopping you I know lots of people that started up from working class backgrounds with very little money.

        • uanime5
          Posted July 20, 2012 at 3:34 pm | Permalink

          You’ve obviously never tried to fire someone in France or Germany, where the law actually makes this difficult.

          Are you saying that England doesn’t have the most lax employment laws in the UK? I said that the UK has the third most lax employment laws in the OECD.

          Your comments about starting up a business show that you have never started up a business and have no idea how to do so.

          • a-Tracy
            Posted July 21, 2012 at 5:58 am | Permalink

            How do you know what it is like to dismiss people in France and Germany?

            Sorry for any misunderstanding to clarify I don’t believe UK businesses have the most lax employment laws and I’d like to read more and read your evidence.

            I have started up seven businesses.

        • Bazman
          Posted July 20, 2012 at 5:01 pm | Permalink

          Agencies, temporary contracts self employed, Umbrella companies. Ran out of work. I will pull anyone up on this lie and fantasy that it is difficult to hire and fire employees.

          • a-Tracy
            Posted July 22, 2012 at 7:16 am | Permalink

            We’ve never used Agencies they are too expensive.

            I use self-employed window cleaners, whom I check have all the correct insurance, risk assessments for the job of work, and correct equipment for the job. Otherwise all staff are employed, you shouldn’t make assumptions about all businesses from your limited experience.

            I don’t know about Umbrella companies are these to do with large enterprises?

            Finally ‘ran out of work’ if this is true then making employees redundant is very expensive and traumatic if you know your employees. But you can’t make people redundant if you are rehiring without taking a considerable risk on a tribunal case which most SMEs couldn’t afford.

            When SMEs start up the don’t set up with a mind that it’s going to fail, they grow organically, you start hiring other people to share some of your duties so that you can concentrate on growing the business, we’re not all HR consultants with huge budgets and not all candidates tell the truth at interview, or genuinely want your job and sometimes just aren’t capable of growing with your business. As you expand job roles change by default and if people aren’t capable of evolving or adapting or indeed aren’t willing to take on training that you’ve offered to pay for to accommodate change now you get stuck with people.

          • Bazman
            Posted July 22, 2012 at 9:20 am | Permalink

            How do you explain revolving door recruitment policies employed by many large companies and the hire and fire of unsuitable workers by small ones then? They do not exist and it’s not true? Oh really.

          • a-tracy
            Posted July 23, 2012 at 9:55 am | Permalink

            Bazman, I can’t answer your allegation about large organisations sorry, perhaps Mr Redwood could ask the CBI or IOD for an explanation or rebuttal.

            I would suggest that SME’s take on new recruits on a probation period as you cannot identify suitability in an hours interview, especially if you hire a new employee with no previous work experience or qualifications for your position. We perform a first month review, a three month review and a six month review. Sometimes if the new worker hasn’t reached the standard but they are keen and willing to improve their probation is extended up to a year but you have to make a decision within that year or you could get stuck with an under-performing member of staff for years as you then have to start going through formal disciplinary procedures. If a new recruit isn’t suitable then you have the expense of hiring a new worker to replace them.

  8. Mike Stallard
    Posted July 19, 2012 at 6:28 am | Permalink

    This is a most inspiring post.

    Meanwhile on Labour List…………

  9. Alte Fritz
    Posted July 19, 2012 at 6:38 am | Permalink

    A little like employment legislation, it is hard to see what minimum wage legislation actually delivers. Apocryphal evidence shows that it is hard to recruit in many areas which pay appreciably above minimum wage, yet this week’s figures show continuing high unemployment amongst the young.

    Even the modestly paid have to pay too much PAYE and NI. The benefit system traps those whom the education system and prevailing non work ethic fail.

    We need a lot more of Mr R’s optimism that we can achieve much if we both want and try to.

    • uanime5
      Posted July 19, 2012 at 6:34 pm | Permalink

      Regarding jobs that pay more than minimum wage, how many of the require training or work experience but are unwilling to provide this training or work experience? Most companies that can’t find the staff refuse to hire anyone other than a perfect candidate, who will work for a below average wage.

      • a-Tracy
        Posted July 19, 2012 at 8:58 pm | Permalink

        What are you basing that comment on unamine5?

        Is this just a feeling you have or based on research?

        What Government dept records every Companies training schemes, how would it record unique internal company training that always starts from scratch because of unique systems?

        • uanime5
          Posted July 20, 2012 at 3:37 pm | Permalink

          I’m basing it on the constant complains by businesses that they can’t find enough engineers, medical staff, and technicians. Even some major jobs in the City are having trouble attracting more than one candidate.

          Regarding company training schemes any job advert that asks for work experience is one that doesn’t provide training.

          • a-Tracy
            Posted July 21, 2012 at 6:13 am | Permalink

            All those type of jobs: engineers, medical staff and technicians require the individuals to have higher education. You couldn’t take a nurse off the street and put her or him into a department from scratch.

            A person wanting to improve their employment prospects need to study the qualifications needed by industry and I have always felt that this is what business organisations like the CBI, IOD, Chambers of Commerce have been trying to advise people.

            I know students that have just finished degrees that have been hired but will still have opportunities to train further that the company is paying for?

            I don’t live in the City but I’m curious which jobs you are typing about having only one candidate for a major job? You only need one suitable candidate for each vacancy and I’d like know what sort of job only gets one suitable candidate.

            Training in any job is ongoing, even lowest grade jobs have changes in equipment use, product safety, legislative compliance all of which require new knowledge to be acquired all of which requires training.

            I’ve always attended night college outside of work to improve my skills in order to perform functions myself like accounts, payroll, etc that otherwise I’d have to pay someone else to do there are excellent low cost courses available and open university, part time degrees etc to improve your employment prospects.

  10. Rebecca Hanson
    Posted July 19, 2012 at 6:49 am | Permalink

    I think we should develop an option of allowing people to stay on benefits but to earn with their money being channelled through a state funding stream – they receive 30% the state receives 70%. This would allow them to take low paid and insecure work without taking the huge step of losing the security of their benefits.

    It’s along the lines of the original Duncan-Smith reforms but it would work if you did it this way because you aren’t trying to shut down and change the whole system, you are just creating a voluntary wrapper for some people in it.

    • Winston Smith
      Posted July 19, 2012 at 10:25 am | Permalink

      Gordon Brown lives on.

      • Rebecca Hanson
        Posted July 19, 2012 at 4:59 pm | Permalink

        You’d need to allow real costs such as travel to work to be paid as expenses rather than wages.

        • Bob
          Posted July 19, 2012 at 8:46 pm | Permalink

          @Rebecca

          Isn’t that what the personal allowance is about?

          We really need simplification, not the complexity of means testing.

      • Rebecca Hanson
        Posted July 19, 2012 at 5:04 pm | Permalink

        I’m definitely Rebecca Hanson Winston. If you follow the link from my name to my blog and then follow the first link in that blog you can find me on linked.

        I have no need to conceal my name because I have no hidden agenda and post only comments I am happy to discuss, explore and move on from through intelligent discussion.

    • Henry
      Posted July 19, 2012 at 6:24 pm | Permalink

      Like the last government, if you change enough things, you create an illusion of progress!

    • uanime5
      Posted July 19, 2012 at 6:38 pm | Permalink

      Why would anyone on benefits want to work when the state takes 70% of what they earn? I think you mean that their benefits are reduced by 70p for every pound they earn, rather than requiring them to pay a 70% tax rate.

  11. Bazman
    Posted July 19, 2012 at 6:54 am | Permalink

    On lower paid work the companies ain’t going to share that for sure.With the government pursuing minimum wages under the minimum wage act would it be right to do skilled work for the minimum wage and would it be right after asking an employer for a pay rise above minimum wage to resign should that rise not be forthcoming in the circumstances of that employer making large profits?

    • uanime5
      Posted July 19, 2012 at 6:40 pm | Permalink

      Don’t forget about the apprentice wage which lets companies pay adults one third of minimum wage.

      • Bob
        Posted July 19, 2012 at 8:51 pm | Permalink

        uanime5

        Apprenticeships are about training.
        Once you’re skilled up you can go out into the big wide world and make you own way if the employer who trained you doesn’t want to pay the going rate.

        • uanime5
          Posted July 20, 2012 at 3:40 pm | Permalink

          Apprenticeships are about cheap labour. If they were about training then companies would pay them at least minimum wage; rather than pay them one third of minimum wage, then at best pay them minimum wage once their training has ended and at worst fire them and hire more apprentices.

          • Bazman
            Posted July 20, 2012 at 5:12 pm | Permalink

            In fact as a time served apprentice it is both about training in which to become indentured you had to serve the four or in my fathers case five years, and as a source of cheap labour. These trades ain’t rocket science and can be learned in 2-3 years the rest is to give the company something for the opportunity of learning a trade. At the end of an apprenticeship you can be fired. Always has been that way.
            The companies then wanted no training and cheap labour and bleated that their apprentices left for other companies. Always did and then often returned to the old company with their rivals skills and ideas. You can be sure that many of today’s apprenticeships are a cover for cheap labour and to circumvent the minimum wage. Or in some cases you laughably pay the company or your parents do for an internship. Middle class social security system and working class exploitation.

          • Bob
            Posted July 20, 2012 at 9:00 pm | Permalink

            How many apprentices do you employ each year uanime5?

          • a-Tracy
            Posted July 21, 2012 at 7:39 pm | Permalink

            Bazman do you believe an NVQ level 3 plus two years work experience would be less valuable and give you less opportunity of finding another job than someone out of 6th form or college with their A levels or BTECs?

      • a-Tracy
        Posted July 19, 2012 at 9:03 pm | Permalink

        I’m not aware of this apprentice scheme that pays 1/3 of the NMW can you direct me to the scheme details please?

        Are you counting in hours when the trainee is out of the workplace and at a training establishment?

        I’ve been in business 30 years this year and I honestly haven’t come across this.

        • uanime5
          Posted July 20, 2012 at 3:46 pm | Permalink

          The apprentice wage was introduced by the Government after they took office and allows employers to pay people £2.60 per hour. I would recommend you look on the Job Centre Website as they have plenty of jobs that pay about a third of minimum wage.

          http://www.direct.gov.uk/en/EducationAndLearning/14To19/OptionsAt16/DG_4001327

          As an apprentice receives on the job training they don’t go out of the workplace for training and this doesn’t effect their hourly rate.

          • David Price
            Posted July 20, 2012 at 5:35 pm | Permalink

            Did you even bother to read and follow up the site you linked to?

            The apprenticeships.org.uk site suggests from research that the average apprentice wage is about £170 pw and after the first year employers must pay at least the age specific NMW to people 19 and over.

          • a-Tracy
            Posted July 21, 2012 at 6:57 am | Permalink

            My husband did a four year apprenticeship with on the job training and day release (12 hour day) in college, I had a youth opportunity program for one year and a YTS for one year and got all my training on the job after leaving school on £23.50 per week in 1981-83. This training enabled us to set up and grow our own businesses.

            Most people looking for Apprentice schemes are 16-19 instead of going to college or 6th form the nmw for that age group is £3.68 16-18 and £4.98 18-20 I was told by Business Link and an apprenticeship organiser that modern apprentice schemes include a days external training in college in order to validate internal training provided and to work within the nvq framework, evidence logs written by the employee, verified by the employer then externally verified by the college. Perhaps some industries don’t have to provide external college courses if they are big enough to issue training qualifications that are externally verified? 37.5 hours x £2.60 = £97.50 with day release it gives the employer a £3.25ph wage whilst training in the workplace age 18-20 or £1.73 per hour saving over the NMW for a position for which you’d already gained the qualifications or work experience previously.

            Getting work experience whilst being trained at cost to the business that is training you is an excellent alternative to 6th form or college for those children not planning to go on to University, I recommended it to my niece who is now a fully trained hairdresser, my nephew who moved from his training scheme into the RAF at 18 and plenty of other youngsters that have gone on to become decorators running their own business, bricklayers, gardeners and administrators and customer services/sales people.

            I don’t need apprentices at the moment and haven’t for a good few years, you seem to label every business as an exploiter of trainees but I refuse to believe that because my personal experience indicates otherwise. Even young adults I know that had a bad experience moved on to other traineeships.

            What is unemployment benefit for 16-20 year olds? Surely they are better off on a traineeship and if necessary at night school than sitting at home moaning about their lot?

  12. alan jutson
    Posted July 19, 2012 at 7:08 am | Permalink

    Perhaps our rather generous Benefits system holds the key.

    If people are given a real need to work, then many do.

    No I am not advocating forcing people who are too ill, or incapacitated to work, just those who are reasonably fit and are capable.

    Remove the financial incentive not to work, and you start a process that encourages people to improve their lot by their own efforts.

    Perhaps if the Benefits system was rather more flexible with regard to signing off and signing on, we may get many more people giving temporary work a try, or even self employment.
    Many will not take on such work, as they could be without benefit payments for months once temporary employment stops as it takes weeks to get back into the system again.

    Why can we not have simple sign off, sign on, proceedures with no delay in registration and payments.

    • uanime5
      Posted July 19, 2012 at 6:42 pm | Permalink

      The lack of jobs, the lack of training for the unemployed, and the unwillingness of employers to hire people without work experience are three major barriers that prevent people getting a job. Nothing you’ve proposed will fix any of these problems.

      • alan jutson
        Posted July 19, 2012 at 8:35 pm | Permalink

        unanime5

        Really, how about becoming self employed and trying your hand at:

        window cleaning, car cleaning /valeting, grass cutting, garden maintainance, leaflet distributor,

        None of the above require a huge investment in equipment, indeed you can hire it all if required.

        Then of course there is manual (non skilled) work on a building site.

        There are some ideas from me where people are making decent money with effort !

        Where are your ideas ?

        Or do you just condone people sitting at home taking the taxpayers money, in the vain and deluded hope, that someone knocks at their door and offers them a fantastic job that pays huge sums of money.

        I am fully aware that time delays on Benefits causes problems, and hardship, that is why I suggested a change to the system that should help if implemented.

        Sometimes a temporary job leads to a full time perminent one, because you can show that you are of value, and can prove your skills to the Company before employment, as both my wife and Daughter can confirm.

        • uanime5
          Posted July 20, 2012 at 4:21 pm | Permalink

          window cleaning, car cleaning /valeting, grass cutting, garden maintainance, leaflet distributor,

          Most people would make more money on the dole than doing any of these because you’re unlikely to have regular customers or working hours. Selling food would be a better recommendation because you’re more likely to have the same number of customers every day.

          Then of course there is manual (non skilled) work on a building site.

          Which you can’t do without a CSCS card. Also most manual labour, such as brick laying and flooring, requires training which is expensive. The building trade isn’t so poorly regulated that you can turn up with no skills and expect to be given a job.

          Regarding helping the unemployed I recommend the Government partners with companies and starts offering training that companies want to the unemployed in order to create people who can fill the skills shortages. At present al the Government does is give private companies large amounts of money to keep the unemployed off the unemployed statistics, even though these people leave as unemployable as when they started.

          I don’t doubt that temporary jobs can lead to permanent ones, the problem is getting the temporary job when you lack the work experience or training that employer wants.

      • Bob
        Posted July 19, 2012 at 8:56 pm | Permalink

        uanime5

        You must take some responsibility for yourself. Sweep the factory floor if necessary, make the tea, and if you have the right attitude you will be promoted.

        You cannot expect to get the managers job on day one.

        • uanime5
          Posted July 20, 2012 at 5:05 pm | Permalink

          You’d be surprised how difficult it is to get the job sweeping the floor or making the tea. Also neither of these jobs will lead to you being promoted. Companies prefer to promote those who are involved in the core aspects of the company, rather than support staff.

      • a-Tracy
        Posted July 19, 2012 at 9:07 pm | Permalink

        What job exactly is it that you feel they should get with no training or experience and how much do you think they should be paid per hour in London and in say Birmingham?

        • uanime5
          Posted July 20, 2012 at 5:09 pm | Permalink

          You’ve missed the point completely. If companies were willing to train people or were prepared to hire people that didn’t have the required work experience you wouldn’t already need training or work experience to get a job. This would make many of the entry levels jobs more accessible to the unemployed.

          At present the only way you can get an entry level job is to have already worked in this job.

          • a-Tracy
            Posted July 22, 2012 at 7:23 am | Permalink

            Rubbish. I hire without relevant work experience and train them and could provide evidence my Sales Director started as a driver, some people have to move out of our SME to get promotion at the speed they want but move on and up they do.

            I know people that have done degrees at home study and night after work in order to get the training.

        • Bazman
          Posted July 23, 2012 at 9:37 am | Permalink

          The point he makes is that many companies are users and liars wanting skilled work for little pay and no respect. Temporary jobs are exactly that. I make them play by some rules though, even if they are their own. If they do not want to do even that, then they can ram it and find another fool and plenty have.

          • a-tracy
            Posted July 23, 2012 at 4:55 pm | Permalink

            In your example what is the skilled work and what is the gross pay per hour and how many hours per week?

            I can give you just as many examples of employees who have no respect, I suppose it depends on what side of the fence you sit, I try to sit always on that fence so that I can see things from both points of view.

            What are the obstacles from your starting working for yourself, if you have a skill and there is demand for that skill why don’t you set up on your own then you don’t have to worry about working for other people who sometimes don’t appreciate you?

  13. RB
    Posted July 19, 2012 at 7:09 am | Permalink

    Mr R do you agree that the tax credit system has contributed to low wages, effectively subsidising employers?

    • lifelogic
      Posted July 19, 2012 at 8:22 am | Permalink

      Well it certainly mean paying more to many of the staff makes no sense as it all goes in tax and benefit reductions!

    • Adam5x5
      Posted July 19, 2012 at 9:18 am | Permalink

      Lower wages yes, but not really subsidising the employers, more hammering those who aren’t eligible for tax credits. After all, we’re the ones on whom the tax incidence and cost of administration eventually falls. And the wages of the non-tax credit recipients will be driven down to compete with the credit recipients.

    • uanime5
      Posted July 19, 2012 at 6:50 pm | Permalink

      If tax credits were abolished wages wouldn’t rise; they would remain low, and employers would be complaining about the difficulty in finding employees and would be calling for higher immigration.

      • Adam5x5
        Posted July 20, 2012 at 5:23 am | Permalink

        If the employers couldn’t find the staff for a low wage, then they would be forced to raise it. It’s the essence of competition – if my wage is lower than that which I could be earning elsewhere then I will (and have) change position. This is why comparable jobs have comparable salaries – because companies want to retain staff and this means making the cost of moving outweigh the benefits for the staff member.

        • uanime5
          Posted July 20, 2012 at 5:12 pm | Permalink

          If lack of staff forces companies to raise wages then why are companies unable to recruit engineers. By your logic low levels of engineers would result in higher salaries and more people becoming engineers, in reality companies refuse to pay their staff more money and try to get immigrants to fill the gaps.

          • Bazman
            Posted July 23, 2012 at 9:40 am | Permalink

            Chancers employing chancers. Good luck to them all.

        • Bazman
          Posted July 20, 2012 at 5:24 pm | Permalink

          When hundreds are applying for a few menial jobs in some areas how would the rate rise?
          Many companies do not want to retain staff and run a revolving door recruitment policy. Any ideas why?
          The so called skills shortage in Britain that was predicted many years prior was got around by employers using this revolving door to find desperate and often foreign skilled employees daft enough to work for the rates they were offering. Metal trade or shelf stacker for six quid? Hmmm! Let me think! Oh! Go on then shelf stacking, or maybe the dole if the stacking does not provide enough hours. Ram it.

          • a-Tracy
            Posted July 22, 2012 at 7:30 am | Permalink

            Do you know how much it costs to recruit people, the time alone interviewing, the advertising costs, reading application forms, ensuring you are complying with legislation, doing reference checks, base line checks and verifying documentation, typing contracts, induction days, health and safety training, purchasing new uniform if necessary and initial training.

            Sometimes people go for jobs they only need for a short time, sometimes people take your job whilst they continue looking for what they gained experience on training on, staff are required to cover long term sick, Maternity/paternity leave but in a small organisation when the person they are covering returns there may not be enough work to carry on. If you over 60 year old applicants they retire after a few years creating a new vacancy, some people move on for promotions if you’ve trained them well and they’ve embraced that training. There are many genuine reasons for staff changing jobs from SME employment that larger companies don’t have to face.

  14. oldtimer
    Posted July 19, 2012 at 7:11 am | Permalink

    Others have already drawn attention to the apparent mismatch between employment levels (up) and output (flat or down) , which appear to suggest a either a drop in productivity or that there is simething wrong with the numbers. I suppose another possible influence is that higher paid state sector jobs are being replaced with lower paid private sector jobs. Do you have a view on this?

    Otherwise I agree with your view about pay levels. There is not much of a future for the UK if it tries to be a low cost producer or to add value based on low pay. It needs imaginative ideas, investment in technology and the right tax incentives to achieve this outcome. The present tax regime (on energy costs, on incomes and on investment) is inimical to this outcome.

    • lifelogic
      Posted July 19, 2012 at 8:23 am | Permalink

      Inimical indeed.

  15. Tony
    Posted July 19, 2012 at 7:27 am | Permalink

    Hi John

    I think this paper gives a pretty good idea as to where wage imbalances may have come from. It was written 16 years ago, so isn’t “tailored for our times”, however I think the logic holds quite well. (It was co-authored by the now chairman of economics at Harvard.)

    http://www.economics.harvard.edu/files/faculty/40_whatdobudgetdeficitsdo.pdf

    Regards.

  16. oldtimer
    Posted July 19, 2012 at 7:30 am | Permalink

    Mr Cameron is reported in the Telegraph to say: “Obviously it’s been a very tough time to be in government but I think the most important thing is we’ve given Britain a secure plan for getting out of the debt and the deficit and the difficulties that we inherited.”

    A secure plan? This sounds extraordinarily complacent to me, especially in view of his later comments that austerity will last to 2020 and the EZ problem will drag on and on. The outlook is very unfavourable for future earnings and pay levels.

    • lifelogic
      Posted July 19, 2012 at 8:26 am | Permalink

      “a very tough time to be in government” – Indeed – so all the more reason why Cameron might have started to do the right things why has he not done any of them after 2+ years?

    • zorro
      Posted July 19, 2012 at 6:35 pm | Permalink

      ”secure plan for getting out of the debt and the deficit and the difficulties that we inherited.”……Oh that’s interesting……Is that why he is on the way to increase debt by almost 60% over this Parliament to nearly 1.5 trillion pounds (1,500,000,000,000 pounds that is…..)…..Interesting that he mentions debt before deficit…not that he’s making much headway into deficit either. Completely delusional of course, he is is only interested in slow, inflationary default and woe betide anyone with cash savings.

      John, what do you make of the latest musings of ‘Cast Elastic’…..?….Do you still think that ‘Eurosceptic’ Mr Cameron is going to repatriate anything from Brussels?

      It looks like he won’t be campaigning for the UK to leave the EU…..’I think it would be bad for Britain. When I look at what is in our national interest, we are not some country that looks in on ourself or retreats from the world. Britain’s interest – trading a vast share of our GDP – is to be in those markets. Not just buying, selling, investing, receiving investment but also helping to write the rules. If we were outside, we wouldn’t be able to do that…’

      I won’t quote the rest but he goes on about how bad it would be for the UK to be like Norway or a ‘Greater Switzerland’….John, can you imagine the terrible conditions we would live under if we had to live like they did…?

      ”I think that would be a complete denial of our national interests.”…and of course his own interests.

      Do you have enough evidence now to understand that other tactics might be needed to achieve a Conservative Party which could achieve what you want….because you have no chance of any renegotiated deal with Cast Elastic in charge because they will threaten to expel him and he will melt like chocolate….

      But maybe he’s right because of course if we are not in the EU, we will have no influence, no-one will trade with us or buy our things and we will walk around the streets sleeping in cardboard boxes, just like we did before we were in the EU I am sure that he will soon say….

      zorro

  17. Alan Wheatley
    Posted July 19, 2012 at 7:59 am | Permalink

    I agree totally and wholeheartedly with all you say.

    “Smarter” is key, and that starts in the schools. The whole education establishment needs to work smarter.

  18. Stewart Knight
    Posted July 19, 2012 at 8:01 am | Permalink

    Some years ago I carried out tacit research on how the minimum wage affected wages overall, not just at the bottom.

    The value of an hours labour in Jobcentres varied from £1.80 right through to £20, and the average came out at something approaching £7. What affect the min wage had was to rationalise the hourly rate far lower than the average. The minimum wage devalued n hours labour overall, and that was a scandal ignored.

    Pre min a wage person who mopped a floor for one and a half hour a week part time was paid accordingly, now that persons mopping is valued at the same level as a skilled person as everyone, at least initially, is offered the min wage.

    Does anyone care or is everybody happy to bring the level of value don to the lowest common denominator?

    This is the main difference between Labour and Tory; Tory would see everyone brought UP to a certain level, while Labour would bring everyone down to a certain level.

    • Adam5x5
      Posted July 19, 2012 at 9:12 am | Permalink

      The solution of course is to scrap the minimum wage and let the market forces sort themselves out. People should be paid what their labour is worth, not what they think they are entitled to.

      This won’t happen though as the lackadaisical would end up with massive wage drops and would cry about how it’s unfair. Never mind that the current system is unfair to those whose labour is devalued.

      • uanime5
        Posted July 19, 2012 at 6:56 pm | Permalink

        All your solution will do is reduce wages to such a low level that only immigrants who live 15 to a house will be able to afford to work in these jobs. While cheap labour is good for businesses it’s neither good for UK citizens or the economy.

        • Bob
          Posted July 19, 2012 at 9:05 pm | Permalink

          @uanime5

          Well it is true that the immigrants take jobs that could be given to locals, but that’s because the Labour Party flooded the country with third world immigrants.

          And who voted for the Labour Party?

          The very same people that are today complaining that pay levels are being depressed by third world immigrants.

          • Bazman
            Posted July 20, 2012 at 5:29 pm | Permalink

            They did not vote for a Labour party that got into bed with the bankers and told they could put up with immigrants undermining the working classes jobs as uanime5 says by living 5 to a room, 5 to a car and living on sacks of pasta doing jobs with no security or H&S.

        • Adam5x5
          Posted July 20, 2012 at 5:28 am | Permalink

          That’s Reductio ad absurdum.

          People with skill and valued workers will still be paid what their labour is worth. Some would probably see an increase in income as the employer wanted to retain the better staff and could afford to raise wages by not having to pay over the odds for low skilled labour.

          You might also see a return of manufacturing as the lower wages would allow companies to have low skilled manufacturing here, instead of in Asia, and save the transport costs.

          • Bazman
            Posted July 20, 2012 at 5:25 pm | Permalink

            Naive does not cover it.

          • uanime5
            Posted July 20, 2012 at 5:25 pm | Permalink

            Actually what I demonstrated was simple logic.

            You, however, have failed to grasps two important points. Firstly that without the minimum wage those working in low skilled labour will see their wages drop to such a low level that it makes working in these jobs unaffordable for everyone except immigrants.

            Secondly as millions of people work in low skilled labour (shelf stackers, cleaners, burger flippers) if their wages are reduced too such a low level that only immigrants can afford to work in these jobs then this will cause unemployment and welfare cost to sky rocket.

            You’re truly deluded if you believe that cutting the wages of the lowest paid will result in anything other than increasing welfare costs. You’re also deluded if you believe raising the salaries of those who don’t claim welfare will somehow lower the welfare bill.

            Also as unskilled workers in China are paid 80p per hour don’t expect any unskilled jobs to return to the UK unless you’re paying an equally low wage.

    • Bazman
      Posted July 19, 2012 at 5:31 pm | Permalink

      No the skilled person is valued the same as the person mopping the floor. The rise immigrants often young and desperate has made the minimum wage a necessity. If it where not for this legislation you would see all the low paid jobs being fought, for the least amount of money. The British would quite rightly not join in this bidding war as they have not done so far.

    • uanime5
      Posted July 19, 2012 at 6:54 pm | Permalink

      Given that Labour introduced a minimum wage, while the Conservatives introduced an apprentice wage to undercut the minimum wage it’s clear which party is trying to bring people’s wages up to a certain level and which is dragging wages down.

      • alan jutson
        Posted July 19, 2012 at 8:44 pm | Permalink

        Unanime5

        If you are undertaking a “proper skilled apprenticeship” when qualified you will earn much more than the minimum wage, and quite right too.

        Thus the low wages at the start in some way pay towards the cost of your your training and additional education . This way you earn as you learn, the alternative of University is very expensive and does not produce any wage at all, but simply personal debt.

        The problem is, we have too many micky mouse apprenticeships, like we have had too many micky mouse university degrees.

        It is up to those who are choosing to do some homework on the later benefits, before they make a choice.

        • uanime5
          Posted July 20, 2012 at 5:32 pm | Permalink

          In my opinion almost all apprenticeships are micky mouse apprenticeships. After all most companies only offer them because they’re a source of cheap labour.

          Perhaps if employers had to pay apprentices minimum wage they would stop all the micky mouse apprenticeships and start creating proper jobs.

          • Bazman
            Posted July 21, 2012 at 5:01 pm | Permalink

            The pay has always been low when I was an apprentice my first weeks pay was £37.50. rising ten pounds on ones birthday. Late birthday? To bad. The governments job creation scheme was £25 and a labourer could earn £100+ in the same town.
            A proper apprenticeship is difficult to get and to go through with, and if the employer is not coming up with the trade training then the first lesson will be learning to tell an employer to ram it. Your very first ram it! Greater things or shelf stacking and wasted life beckon young fella me lad. No one is promised tomorrow.

  19. Brian Tomkinson
    Posted July 19, 2012 at 8:04 am | Permalink

    I thought productivity was decreasing in the UK. If that is correct I fail to see how increasing wages is going to do anything other than further stoke inflation. That will not be a virtuous circle but an acceleration of this country’s decline.

    • lifelogic
      Posted July 19, 2012 at 8:28 am | Permalink

      Indeed productivity is declining the size of the largely non productive state sector virtually ensures that.

  20. Iain
    Posted July 19, 2012 at 8:15 am | Permalink

    Well welcome to the club, this is a point I have been making for sometime, its not so much that people have a good living on welfare, its that they have such a rotten standard of living being employed, something you lot in Westminster realised but not understood, for Tax Credits are a clear statement that wages are too low, but rather than do something about it by driving wages up, you lot in Westminster have chosen to subsidise rotten wages with Tax Credits.

    “I do not think you can legislate successfully for higher pay. ”

    But you lot in Westminster have legislated to force people into low pay, you have done this by rigging the labour market with mass immigration. If you believe in market forces of supply and demand, and you have swamped the market with a supply of cheap labour you don’t have to be a rocket scientist to figure out what has happened to wage rates from the middle and below, and though our political classes choose to ignore the bleeding obvious you choose to ignore to correlation between mass immigration and our young people not getting a start in life.

    But then you lot in Westminster , your mates, and your party backers are alright jack.

    As to the effects of the minimum wage I would agree with you that it has a distorting effect in the market. Having seen the effects of UN market stabilisation schemes, where floor and ceiling prices act like magnets, which is not surprising really, when trying to judge and balance the pros and cons of the price of a commodity when there is a floor price set then its there where the market is going, not some intervening price that could have been a true value of the commodity. This I believe is what has happened with the minimum wage.

    But you cannot get rid of the minimum wage with out calling a halt to mass immigration, and allowing the corporates rig the labour market.

    One further point about mass immigration. Tickle down economics don’t work when you have mass immigration, as we have seen over the last decade, the GDP growth failed to trickle down at all, all the benefits of economic growth was swallowed up at the top. So when you politicians say we need economic growth, not surprisingly people ask what is in it for them, for economic growth hasn’t benefited them, so why should they put up with new roads, rail , airports and the like, if the economic growth it generates only goes to a few people?

    And finally mass immigration is an addiction that is damaging our economic prospects. If employers are guaranteed a supply of cheap labour they will get lazy and complacent about productivity, as it seems they are. Higher wage rates forces companies to invest in productivity.

  21. Bob
    Posted July 19, 2012 at 8:38 am | Permalink

    Employers in the UK are currently competing with unemployment benefits.

    If the employers and employees were not paying so much money to the government to fund the benefits system the employer would be able to pay more and the employee would be able to keep more of their earnings to spend however they see fit, rather than passing the money through layers of government bureaucracy before handing it to someone to allow them to stay in bed until the pubs open.

    It’s so obvious that the solution to most of our problems is less government interference, but unfortunately the people running the crackpot welfare system will fight to preserve it because it’s their livelihood.

    Turkeys don’t vote for Christmas.

  22. JimS
    Posted July 19, 2012 at 9:04 am | Permalink

    Do we need to change the way the profit is shared?

    Back in the day’s of Henry Ford and the Model T, Ford ploughed back the profits into new plant. He was able to pay his workers more and reduce the price to the customer. This had the effect of increasing the customer base, creating more profit which could be fed back into newer and better plant etc.

    Now one gets the impression that the first priority is to ‘retain’ the top management with ever larger perks, (is there any evidence of the top people jumping ship for more money?).

    I’ve always thought that a nice way around the minimum wage problem is to insist on, say, a maximum of 10:1 ratio of top-to-bottom wages; sure you can pay £5 per hour but only if you take just £50. As an aside why do the highly paid “earn’ their money but the lowly just get “paid” in every media report?

  23. English Pensioner
    Posted July 19, 2012 at 9:08 am | Permalink

    You overlook the fact that many school leavers are not fit for work and no one will touch them with the proverbial barge pole.
    Until we get discipline in the schools and instil the work ethic (which includes turning up on time) and until we insist that our schools until we start teaching the basics that are required by employers, we will have a large number of people who are only capable of menial tasks and prefer to live at the state’s expense.
    I’ve been having work done on my home recently (spending my savings whilst they still have some value) and all the good workers were foreign. The bricklayer was Irish with a Romanian labourer, the kitchen fitters were Estonian, the plasterer was Polish – only the organiser was British. So there is work there, but our youngsters have neither the inclination or skills – the latter possibly as a result of the closure of all the old Technical Colleges and the like where these skills were taught, along with some academic work which would allow them to get on further if they wished.
    We need a total re-think about our education in this country aimed at providing the skills that the country needs, which is certainly not “degrees for everybody”.

    • alan jutson
      Posted July 19, 2012 at 8:46 pm | Permalink

      EP

      Nail head, spot on !

  24. The Prangwizard
    Posted July 19, 2012 at 9:14 am | Permalink

    I have written a number of times urging an abolition of the minimum wage and removal of hire and fire restrictions. It seems that you are saying Mr Redwood that at least in regard to the minimum wage you agree. I do hope that is what you are saying. There can be no right level and it wrong on so many fronts. Hire and fire however must be made easier to encourage mobility of labour further, and to encourage business to take risks, either in start-up or expansion. Get differentials back in the system according to ability. We must be courageous. We are slipping further down the world’s league tables with every day that passes, and the end of that process is poverty. We must swallow hard, lose our pride, stop living off past glories and get to grips with building businesses again. That is businesses that make things. We don’t make any of the modern products, smart phones etc., or for that matter many of the older ones, so we should get our hands dirty too. It should be a matter of pride. And where are our big brand names now. ICI, Pilkington, the list is a mile long. Why did we sell them? The short-termist barrow boys of the City wanted to make money. Maybe the present turmoil and the reaction against ‘bankers’ will encourage a change of mindset, to think more long-term, and to put the National Interest first. But unambigous things must be said. We need decisive leadership and example. In addition we must make it almost impossible for any more to be sold, because it is still going on – Aegis, a ‘media’ group, is the latest I’ve heard of. Could it not also be possible for the ownership of their patents to revert to the Crown, and then revocable conditional Licences granted to use them only if production and the tax base stayed here. There will be a million reasons why regulations and foreign laws say ‘it can’t be done’ no doubt, but how about it? What say you to any or all of the above?

  25. Simon
    Posted July 19, 2012 at 9:22 am | Permalink

    Wages tied to productivity would be a great idea.

    (All numbers based on inflation adjusted money.)

    ‘Blue collar’ productivity has increased by roughly 80% since 1980 – i.e. each worker accomplishes almost twice as much per hour today as they did 30 years ago. Of course, most of this has been possible because of improvements in technology, rather than people working harder.

    Unfortunately, the wages of those workers have increased by less than 10% over the same time.

    Meanwhile, the pre-tax income of their employers (loosely speaking) has risen by 300%, while their direct tax rates have just about halved – not that many of the very rich actually pay even that.

    To those suggesting lower taxes, please remember that to someone on a minimum wage, this will have zero affect, they simply don’t pay enough tax for rate reductions to increase their income by more than a few pounds a year. They are also the people who will be most affected by reduction in social spending by the government.

    On the other hand, scrapping employers NI, and increasing the top rate of tax (for earnings £150k+) to compensate would be a great way of encouraging companies to employ British workers.

    • David Price
      Posted July 20, 2012 at 7:56 pm | Permalink

      Lower taxes isn’t just about lower income tax but includes fuel duty, VAT and the energy levy so the cost of living would decrease for everyone with the biggest proportionate savings being for the lower paid.

      Performance related pay is an interesting topic – if I invest in a computer/machine which (say) doubles the productivity of my employee, why should I give the employee a higher salary or a bonus? I took the risk and invested the capital so shouldn’t I or my shareholders receive the rewards, unless you suggest I give the computer/machinery a bonus?

  26. Lord Blagger
    Posted July 19, 2012 at 9:30 am | Permalink

    Let me make common cause today with the labour movement. Wages in the UK are too low.

    ===========

    No they aren’t. They are perfectly fine.

    However they are too low after you have taken your wack out of people’s wages to fund what ever mad cap schemes you have in mind.

    Min wage earners pay nearly 3K in income related taxes last time I looked.

    That’s their biggest cost by a long way. Funding MPs getting home fast on HS2 and other mad cap schemes.

    • waramess
      Posted July 20, 2012 at 10:14 am | Permalink

      Quite. Sometimes difficult to believe JR really believes what he writes.

      Wages are a cost of production in the same way that all taxes are. If low wages were truly an issue then companies would be making excessive profits, which they are not (except perhaps the banks).

      So, increase production if you can find new customers or reduce something else. Like taxes.

      It should be remembered that all taxation falls upon employers and all increases in taxation serve to make producers less competetive.

      Less competetive producers find it difficult to find new customers so, there you have an answer to a bleeding heart question

      • uanime5
        Posted July 20, 2012 at 5:57 pm | Permalink

        Given how much profit the supermarkets are making it seems that they’re benefiting from low wages.

  27. David Price
    Posted July 19, 2012 at 9:45 am | Permalink

    Not sure I agree that wages are too low. The problem is that the cost of living is too high and disposable income is too low. If you focus only on increasing wages then you facilitate inflation, reduce competitiveness and clobber those on fixed incomes/pensions.

    As others have suggested the focus should be on cost reduction which is more predictable than increased revenue anyway. Cut taxes and duty then you won’t have to increase wages so much.

    What is your view on the latest comments from Ed Milliband concerning pension charges in the context of comparisons with Holland for example?

    • zorro
      Posted July 19, 2012 at 6:36 pm | Permalink

      I agree with you….taxes should be lower and the housing market should be allowed to find its true level allowing people to redistribute their income into the productive economy.

      zorro

    • A different Simon
      Posted July 20, 2012 at 4:27 pm | Permalink

      David Price ,

      One of my customers is based in Israel and they tried to recruit another guy from the UK .

      Their target took a non-descript management post at a local council instead which paid more than the I.T. director who was trying to recruit him was making from a multi-national company based in Israel .

      Agree we need to bring the cost of living down and enact measures to reserve housing for British citizens to keep it down .

      Councils are selling of farm land at bottom of the market so expect our locally produced food to become more expensive too . You can always trust the Tories to flog off the family silver , what is left of it .

      The cost of energy needs to come down too . The bets are that France will overturn it’s moratorium on hydraulic fracturing and will have got extraction of shale oil , gas and natural gas liquids underway before us .

      David , hope I’m wrong but I don’t think you will have any joy getting an answer out of John on plebs pensions .

      • David Price
        Posted July 20, 2012 at 6:19 pm | Permalink

        Uncompetitive payscales in the public sector really aren’t a surprise anymore though always irritating as we foot the bill. It is clear our representatives either can’t or won’t address the situation and we can’t even starve the public sector of funds, perhaps by working less, since they feel it is legitimate to borrow what they see as a shortfall and dump the borrowing charges on us.

        I’m not sure what you call that sort of behaviour, there’s bound to be some PPE label for it, but I don’t believe it is ethical.

        On the pension question I am not sure what to expect, masking hidden pension charges seems to be the same kind of corrupt practice as the libor situation but as you suggest probably won’t attract much attention as none of the “adults” are likely to be embarassed by it.

  28. Robert Taggart
    Posted July 19, 2012 at 9:57 am | Permalink

    ‘Pay’ is indeed far too low…
    c.£63.00 per week – for a scrounger ! (with savings).
    Result ? – Even more scrounging needed !!
    The Universal Credit – one awaits its implementation in anticipation of less still !!!
    Result ? – UC+ ?!!!!

    • uanime5
      Posted July 19, 2012 at 6:59 pm | Permalink

      Given that someone working 40 hours per week in a minimum wage jobs gets £243.20 I don’t seen how being unemployed pays more than working.

      • a-Tracy
        Posted July 19, 2012 at 9:25 pm | Permalink

        You didn’t add in the housing benefit for those eligible. Council tax rebates and a host of benefits for your children – more so if you are a single parent. I know several people that once on the benefit roller coaster have no intention of getting off and even plan gaps between children births to maximise eligible years.

        • Robert Taggart
          Posted July 20, 2012 at 9:58 am | Permalink

          Indeed, oneself knows of just such.
          Moi ? – Single, sprog-less (by choice), and living at parental home still !
          Council Tax Benefit ? – claimed, but, that only benefits our elders.

        • uanime5
          Posted July 20, 2012 at 6:01 pm | Permalink

          You can claim housing benefit and child benefit if you’re working in a low paid job so both can be excluded.

      • Electro-Kevin
        Posted July 19, 2012 at 10:06 pm | Permalink

        A huge difference if a house is provided and bills paid.

        • Robert Taggart
          Posted July 20, 2012 at 9:59 am | Permalink

          Indeedy !

        • uanime5
          Posted July 20, 2012 at 6:01 pm | Permalink

          You do realise that you can get this if you work part time or in a low paid job.

  29. David John Wilson
    Posted July 19, 2012 at 10:18 am | Permalink

    If legislation is implemented it should be about establishing a relationship between minimum pay within a company and average (not median) pay in that company. While maximum pay should never be allowed to exceed seven times median pay in a company, minimum pay should never be less than half the average pay.

    If these rules were implemented then any extra costs to the company could be reduced by removing employers’ NI contributions at least at lower levels of pay, say below the minimum living wage. Any loss to the exchequer would be retrieved from increased income tax receipts and reductions in tax credits.

    In fact there is a very strong case for reducing tax credits by increasing minimum wages.

    • zorro
      Posted July 19, 2012 at 6:38 pm | Permalink

      ‘In fact there is a very strong case for reducing tax credits by increasing minimum wages.’….This is true, tax credits distort the market as does untrammelled immigration in a welfare society. We subsidise corporations by topping up employee wages so that they can pay their useless CEOs large salaries and big bonuses.

      zorro

  30. Winston Smith
    Posted July 19, 2012 at 10:29 am | Permalink

    We don’t need higher wages, we need lower tax, a smaller more efficient State, free from the universal, corporate socialists. We won’t get that with LibLabCon.

    • Brian Tomkinson
      Posted July 19, 2012 at 3:47 pm | Permalink

      Winston,
      Agreed. I’m beginning to worry about our host’s views he seems to be wanting to take us back to those dreadful corporatist days of the 70s!

    • Bazman
      Posted July 19, 2012 at 5:33 pm | Permalink

      Removing the tax on six quid an hour is not going to raise it much.

      • norman
        Posted July 20, 2012 at 3:19 am | Permalink

        Thats because you have a blinkered view and only think of income tax. What does that person do with his £6 (plus tax credit) per hour? Think about it.

        • Bazman
          Posted July 20, 2012 at 9:41 pm | Permalink

          How much do you work for? Ram it.

  31. David
    Posted July 19, 2012 at 10:30 am | Permalink

    Stop giving our money to parasites.
    I know people who don’t work who live in nicer houses than people who do.
    Reduce benefits to pro single mums use the money to increase the threshold for paying income tax.

    • Adam5x5
      Posted July 19, 2012 at 11:41 am | Permalink

      Not going to happen, the government likes to throw money at lifestyle choices it approves of (single motherhood, layabouts) and penalises ones it doesn’t (single, childless men).

      Yay for equality!!

      Of course a flat tax rate of 20% with an allowance of £10K, no tax credits, etc would be incredibly simple to administer, (so the HMRC could be shrunk), but would be deemed to be unfair on those who make certain lifestyle choices (kids, lack of education). So we’ll keep the system that punishes lifestyles that the politicians don’t approve of (no kids, education & success, being a banker).
      After all, if you make a lifestyle choice like one of the latter ones, you must be inherently evil and are therefore deserving of punishment, right?

      Free country? Equality? Yeah, right.

      • Adam5x5
        Posted July 19, 2012 at 11:43 am | Permalink

        Slightly Off topic – just wondering why my post on Security Rules thread at 05:33 is still awaiting moderation? Or is my browser just being weird…

        • Bob
          Posted July 19, 2012 at 5:44 pm | Permalink

          @Adam5x5

          Same here. I submitted a comment at 8:38 this morning and it is still being suppressed, despite many later comments being cleared.

          Have I been (adversely-ed) listed because of my comment about Ted Heath a couple of weeks ago?

          It’s like treading on eggshells with all this PC stuff nowadays.

          Reply: If I have to edit or read a long piece it may take longer. It’s just a question of how much time I have to do it.

          • Bob
            Posted July 19, 2012 at 9:30 pm | Permalink

            Reply to reply:

            “adversely listed”

            Why didn’t I think of that?

            I need to get myself a phrase book of politically acceptable terminology.

      • uanime5
        Posted July 19, 2012 at 7:02 pm | Permalink

        You do realise that a flat tax rate of 20% with an allowance of £10K and no tax credits would leave people working in minimum wage jobs with much less money. What you’re proposing will only benefit medium to high earners, not the lowest paid.

        • Adam5x5
          Posted July 20, 2012 at 5:42 am | Permalink

          You do realise that a flat tax rate of 20% with an allowance of £10K and no tax credits would leave people working in minimum wage jobs with much less money.

          I fail to see how. Before tax credits are applied, lets look at the numbers. On a minimum wage of £6.05, working full time, you’re earning £226.875 per week, or £11,797.50 per year.

          Current allowance is £7,475, leaving a taxable income of £4,322.50 at a basic rate of 20% – meaning the basic earner pays tax of £864.50.

          Under my proposals, the basic earner would have a taxable income of £1,797.50 and would pay tax of £395.50, which would be a 58% reduction in tax burden.

          The tax credit system is too variable to take into account, but you’d have to get a lot in credits to offset this.

          • uanime5
            Posted July 20, 2012 at 6:23 pm | Permalink

            Under the present system a basic taxpayer would pay £864.50 in tax per year and under your system they would pay £395.50. Therefore if their tax credits are greater than £469.00 per year they will be worse off.

            Using the tax credit calculator a single 25 year old, with no children, who isn’t receiving any benefits, who works 37 hours per week, and earns £11,797.50 per year gets £363.89 in working tax credits per year. So under your system they are £105.11 better off per year.

            However if this person had a 5 year old child and doesn’t pay for any child care providers they are eligible for an annual Child Tax Credit of £2,306.20 and a working tax credit of £1,754.89 (£4,061.09 in total). So under your system they are £3,592.09 worse off per year.

            So your plan will provide a minor benefit for single people working in low paid jobs but will cause a major loss to those who have children. You really should have taken tax credits into account.

            http://www.hmrc.gov.uk/taxcredits/payments-entitlement/entitlement/question-how-much.htm

  32. Neil Craig
    Posted July 19, 2012 at 10:34 am | Permalink

    When electricity costs the average household £1300 a year, £1200 of which is government parasitism (intended to rise to at least £2000) and 2/3rds of electricity is non-domestic one can see where industry has to spend on other than wages.

    We would be out of recession in days if the politicians didn’t prefer all this parasitism. Every serious politician or journalist knows it.

    • David John Wilson
      Posted July 19, 2012 at 11:02 pm | Permalink

      Anyone who pays £1300 a year for electricity and doesn’t use it for heating, needs to very seriously look at how much they are wasting.
      My usage is less than £300 per year and that includes everything except heating (which is gas).
      Some time ago I reduced it by £200 a year simply by not leaving devices on standby and switching off lights that weren’t being used. The family now understands that when you leave a room you turn the light off.

  33. Sue
    Posted July 19, 2012 at 10:56 am | Permalink

    Germany has no minimum wage and they’re doing very well. If we abolish the minimum wage, many Britons would be given the jobs which are now done by foreigners “off cards” and employers would take on many more staff.

    The problem here in the UK is, we are taxed too highly and rents are far too high. In the US certain areas are rent controlled by the state, it stops unscrupulous landlords from charging the earth for accommodation. The competition for rentals with an extra few million people in the UK has become a disaster for many British working families. They simply can’t afford them and the prices they are being charged for energy to run these homes is phenomenal. I’m surprised that many of them have enough left at the end of the month to actually eat. We don’t live in a nice warm climate and our summers are often non-existent which makes it essential for us to heat our homes or freeze our children and elderly to death. We have no choice!

    “The UK property market is so dysfunctional, it forces one in six families to spend over 40% of their income on rent or mortgages, research reveals.

    Britain is now the third worst off when it comes to housing costs, only just above Greece and Denmark, according to an EU report.

    “Even countries with famously troubled economies such as Spain, Italy and Portugal fared better – in Portugal only 4.2% of people are spending over 40% of their income on housing, four times less than the in UK,” the report found.

    This is in contrast with our nearest neighbour France, where only 5.2% are overburdened by their rents and mortgages”

    http://www.politics.co.uk/news/2012/07/18/housing-in-the-uk-unaffordable?

    Kill the minimum wage, cut taxes, cut energy bills and cap rentals. It’s either that, or build more social housing for those that are struggling or the only thing that will be left are families in debt.

    • Sue
      Posted July 19, 2012 at 5:14 pm | Permalink

      Obviously the foreigners “truth” has stopped me being published. No matter, we know the truth. Many of them are illegally employed for low wages and not declared. You’re just as much a coward as the rest of your party.

    • norman
      Posted July 20, 2012 at 3:32 am | Permalink

      I recently helped someone who was going on benefits with forms and such. I was astonished to find that the same flat was costing £650 pcm if the person was getting benefits an £400 if not. The benefits in question came to £300 to help with rent so as far as I can see the only person benefiting was the landlord.

      Staggering situation. Am completely baffled why this is allowed to happen. Surely government could undertake to guarantee any undue damages compared to private tenant and recoup from benefits rather than pay over the odds pm God knows how much decent tenants who find themselves in the unfortunate position of applying for help with housing costs but are otherwise no different from you or i?

      • Bob
        Posted July 20, 2012 at 1:15 pm | Permalink

        @norman

        This is a classic case which proves how the welfare system is distorting rents and house prices.

        Drop the housing benefit amounts and the rents will follow – they’ll have to.

        Drop the “assitance” given to single mums and their numbers will also decline.

        Reduce the burden on taxpayers and their numbers will increase.

        It’s amazing isn’t it?

        It’s not rocket science.

        • uanime5
          Posted July 20, 2012 at 6:29 pm | Permalink

          Given that ending housing benefits will cause millions of people to become homeless, including many who currently work, don’t expect it to ever happen.

    • uanime5
      Posted July 20, 2012 at 6:28 pm | Permalink

      In Germany they have collective bargaining where the unions and the company decide the wage. I trust you have no objection with this being introduced if the minimum wage is abolished.

    • A different Simon
      Posted July 21, 2012 at 10:03 am | Permalink

      Sue ,

      You say it’s either rent controls or build more social housing .

      If we ever managed to create a surplus of housing rents and house-prices would have to fall to a sensible level .

      We might need rules to restrict monopolisation of housing with massive BTL portfolios but if a surplus can be created , the price should take care of itself shouldn’t it ?

      I feel the solution is more houses and an immigration policy . Social housing building could be funded by a state pension FUND instead of the doomed NEST scheme and the rents collected ploughed into further building .

      • sm
        Posted July 21, 2012 at 11:10 am | Permalink

        I like the housebuilding being funded by the a state pension fund, its probably better than placing your funds in the trust of our current setup where it can just vaporize or be subject to all manner hidden charges, taxes and restrictions.

        Those contributors to NEST could even be given priority in being able to rent the properties as they are built. Now there is a thought.

      • David Price
        Posted July 21, 2012 at 2:31 pm | Permalink

        There’s likely to be a fair amount of building land becoming available with the reduction in defence forces. Won’t cost the government a penny and most of the utilities are already laid in.

  34. Gary
    Posted July 19, 2012 at 11:50 am | Permalink

    Stop inflating the money supply and distorting prices, including those for wages. Stop using inflation to rig prices to gain short term export advantages while you mask productive inefficiencies. In other words get the govt and their quangos, including the BoE, out of the market.

  35. forthurst
    Posted July 19, 2012 at 12:18 pm | Permalink

    “I do not think you can legislate successfully for higher pay.”

    There is a swathe of legislation which has promoted lower pay, poorer education and training, the offshoring of manufacturing, higher crime, social alienation, less personal autonomy and self-respect and the inevitable decline of this country into an ungovernable, unsafe, third world banana monarchy and the English blue colour worker will have been the primary sacrificial victim.

    Keep allowing the EU to make our laws with free access for EU ‘citizens’, keep allowing people like Ashcroft or ‘Mainframe Computer’ to be ‘relaxed’ about immigration or the EU whilst posing as Conservatives, keep on importing people directly from the third world with very different cultural norms whilst trying to stifle opposition by smearing and prosecuting dissenters with having committed thoughtcrime, keep rewarding people for making no positive contribution and keep raising personal and business taxation to pay for an increasingly bloated state, unhealthy economy and sick country. Can our Financial Services’ industry save us with ‘trickle down’? No. When people whose work is not ‘socially useful’ earn absurdly high salaries in comparison with almost anyone else apart from the heroes of popular culture by legally and illegally syphoning off our resources, it’s more aptly termed ‘trickle up’. The official population count has inceased massively but GDP fails to respond significantly; does anyone smell a rat?

  36. Phil Richmond
    Posted July 19, 2012 at 12:21 pm | Permalink

    I would love just for once a politician to stand up and say every penny we save in waste we will convert into raising the tax threshold. Never happen though.
    By the way Cameron has now stated he will never campaign for us to leave the EU. I notice he never mentioned that in his Tory leadership bid against David Davies.
    John when will you rid us of this lying Europhile quisling. Im voting UKIP for the first time in the next election (after 25yrs of voting Conservative) and I hope the Tories lose! You deserve it for electing Cameron!

  37. Bernard Juby
    Posted July 19, 2012 at 12:28 pm | Permalink

    Please remember that some 98% of ALL UK businesses are micro or small employing less than 20 people. This goes for the EU as well. These are the ones that employ most of the work-force. Don’t fall into the Labour/LibDems trap of “living wages”. A lot are part-time jobs and often used for pin-money by families – no more since the advent of the minimum wage.
    I spent a lot of my time at all Party Conferences explaining that, so far, employers would only employ people if they could afford to. It is all too easy to price some-one out of the labour market. God forbid the scenario of “Atlas Shrugged”!
    Concentrate more on getting the climate right for these enterprises to flourish and then they can pay higher wages and allow the staff to share some of the profits.
    Start by having a full Department for Micro & Small Businesses, with a full Cabinet Minister – akin to, e.g. the US’ Small Business Administration which has the power to block any disadvantageous laws against their sector.
    Past National Chairman of the F.S.B.

  38. Conrad Jones (Cheam)
    Posted July 19, 2012 at 12:54 pm | Permalink

    I think just putting up all wages generally will not help as it will increase inflation.

    It is not the numeric quantity of money that someone has, it is the differential between what most people earn and those who obtain vastly more.

    After the LIBOR “scandal” Bob Diamond will leave Barclays with two million pounds.
    Despite possibily being involved in rigging markets to help the value of Derivatives held on the Assets sheet, and the Banking Industry being heavily subsidised and Protected by Tax Payers money and the Law, he will still end up with what most people would consider to be a Lottery Win.

    I don’t think putting up wages is going to address the issue of “something for something” as those who are subsidised and protected – “Too Big To Fail”, will just increase their Salaries and Bonuses even more to maintain the differential difference in their purchasing power.

    There are some outstanding Union Leaders as there are some exceptional Politicians who grasp the nature of money, but – unfortunately, there are too few of them.

    Even very senior Politicians like Gordon Brown use to be, cannot even get funadaments right. It is now clear that we are losing our importance as a Nation as many Central Banks around the World are buyng Gold. Whether we like it or not – we may return to a Form of Gold Standard as Artificial Assets lose their gleem.

  39. James Reade
    Posted July 19, 2012 at 12:58 pm | Permalink

    I think you can legislate for higher pay, but perhaps not in a way that you intend to talk about here.

    What determines pay is a bargaining process between the employer and the employee. When governments tinker with the laws regarding organised labour, they affect the bargaining power of labour, and the only consequence of that is that the pay for labour ends up lower than it would otherwise be, and almost certainly lower than the marginal revenue product of those workers.

    Of course, once workers are paid less than they believe they are worth, they start shirking, stealing on the job etc. But who is to say that were they paid what they believed was a fair wage in the first place, they wouldn’t engage in those kinds of behaviours? Is the loss in paying more in wages enough to outweigh the gain in productivity and non-stolen workplace items?

    Why is it we still have such rancourous wage bargaining processes here? Are they this fraught in Germany, for example, or Japan? Is it because of the way we legislate for the whole thing, is there no alteration in the process that could lead to things being a little more mature and maybe yielding better outcomes for all?

  40. Samuelson
    Posted July 19, 2012 at 1:35 pm | Permalink

    To say UK labour productivity is falling is an understatement – it seems to have fallen off a cliff in recent years. Is ONS data even roughly accurate? If it is, then there is a serious problem. As all good economics textbooks tell you, productivity determines a country’s standard of living.

  41. Lola
    Posted July 19, 2012 at 1:41 pm | Permalink

    The problem with minimum wage legisaltion is if you set it too high you drive jobs away, and if you set it too low it has no benefiical impact” Quite. And neither you or any other functionary or politician has any idea at all what that wage, aka price, is. But I know who does……..the market.

    Minimum wage laws are simply ‘compulsory unemployment laws – “The law says, it is illegal, and therefore criminal, for anyone to hire anyone else below the level of X [pounds] an hour. http://mises.org/daily/6097/The-Crippling-Nature-of-MinimumWage-Laws

    • Bazman
      Posted July 19, 2012 at 5:34 pm | Permalink

      What use would millions of jobs paying a pound an hour be to anyone other than the employer?

      • sm
        Posted July 19, 2012 at 11:13 pm | Permalink

        As long as the government via tax credits brought it up to the minimum why not?

        It might actually allow a choice to those denied any chance of work?

        The subsization of the difference must be worth it? After all what is £6/per hour come on!

        • uanime5
          Posted July 20, 2012 at 6:34 pm | Permalink

          The problem is that rather than have a company pay someone £6 per hour you have a company paying someone £1 per hour and the taxpayer paying them £5 per hour.

          Given that the Government is trying to reduce the welfare bill I can’t see this happening.

    • uanime5
      Posted July 19, 2012 at 7:06 pm | Permalink

      What this article fails to mention is that states with high minimum wage laws have lower levels of unemployment, while those with lower minimum wage laws have higher levels of unemployment. I guess when people have more money to spend more jobs are created.

      • David Price
        Posted July 20, 2012 at 6:39 am | Permalink

        Norway, Sweden, Finland and Germany don’t have a national minimum wage … which states were you thinking of?

        • uanime5
          Posted July 20, 2012 at 6:37 pm | Permalink

          I was referring to US states. It’s also nonsensical to compare countries that have minimum wage to those that use collective bargaining instead of minimum wage.

          • David Price
            Posted July 21, 2012 at 9:34 am | Permalink

            To take your last point first; you attempt to assert a rule that, universally, states with MW laws have lower unemployment than those that don’t. I gave examples of states in the EU which don’t have MW laws and yet have low unemployment. Germany certainly has lower unemployment than we do, I haven’t looked at the rest but that one exception disproves your assertion.

            I suggest these are a fair set since they operate under the same laws and market as we do in the UK. The point here is that some states do quite well with their markets setting the wages rather than having it dictated by the state.

            But what bearing do individual US states have on the UK MW or unemployment? They do not operate under the same laws, government or market as the UK.

            In any case, I understand that in the US there is a federal minimum wage which applies to all states although some states have set minimum wages above or below that figure.

  42. Credible
    Posted July 19, 2012 at 3:16 pm | Permalink

    John,

    You’re almost sounding socialist these days.
    What’s all this about more pay for ordinary workers, avoiding corporate brands and insisting train companies stop capitalist practices.
    Is that a red flag your waving?

  43. Leslie Singleton
    Posted July 19, 2012 at 3:19 pm | Permalink

    You are giving way to un-Vulcan sentiment in that of course individual recipients think they would like higher salaries but surely the wonderful economics that we are everywhere hit with these days (unlike something sensible like the feudal system wherein before you laugh there was no such thing as unemployment, even the village idiot being fed and housed and given a job such a mucking out the stables) would indicate that wages should be lower so that we are more competitive, to the undeniable benefit of the country of which we are all a part (says me).

    • uanime5
      Posted July 19, 2012 at 7:07 pm | Permalink

      Real economics has shown that if an industry doesn’t pay a living wage it will end after one generation. Try to guess why.

      • Electro-Kevin
        Posted July 19, 2012 at 10:01 pm | Permalink

        It depends how you define ‘living’.

        I can’t help but think that most of us are in for a nasty shock on our standards of living.

        • Electro-Kevin
          Posted July 19, 2012 at 10:04 pm | Permalink

          I look at the litter, filth and indolence that characterises much of this country and wonder if it wants (or deserves) to survive.

        • uanime5
          Posted July 20, 2012 at 6:42 pm | Permalink

          According to Adam Smith in The Wealth of Nations a living wage was enough to raise a family.

      • norman
        Posted July 20, 2012 at 3:41 am | Permalink

        As fine a case against the minimum wage as has been made so far. Brief and to the point and irrefutable. A lesson to us all.

        • Bazman
          Posted July 21, 2012 at 1:30 pm | Permalink

          Millions of immigrants competing against each other to work for the least amount of money living five to a room and five to a car to make this possible is reason enough for a minimum wage norman. You need to read the posts instead of just coming to a conclusion. A conclusion that you would never have to live with.

        • Bazman
          Posted July 23, 2012 at 9:42 am | Permalink

          Another one post wonder. Changed your bigoted belies now norm?

      • David Price
        Posted July 20, 2012 at 8:12 pm | Permalink

        Which industries do you have such data on?

        However, real economics has shown that if workers force local wages above those paid in other countries then that industry tends to move to those other countries – shoes, cotton goods, food, cars, televisions, computers, telecommunications, drugs, etc. I don’t think the NMW has stopped the transfer of jobs to China, India, Eastern Europe …. so what is the point of it if all it achieves is raising taxes and therefore the cost of jobs that are still here?

  44. Ian
    Posted July 19, 2012 at 3:41 pm | Permalink

    If it wasn’t for all those crony capitalists on welfare the private sector would thrive.

  45. Lindsay McDougall
    Posted July 19, 2012 at 3:57 pm | Permalink

    Would somebody please tell me what on earth is going on with the British economy. GDP is gently declining whilst unemployment is also declining. This suggests decreasing productivity. On the other hand, the number of long term unemployed and the number claiming job seeker’s allowance are still rising. Also, the number of self employed people is increasing.

    So let’s try to square the circle:
    (A) Apprentices, immigrants and people who have recently priced themselves back into employment have low productivity AND/OR
    (B) The Office for National Statistics is not measuring GDP growth accurately. How are they sampling the output of start up businesses and the newly self employed?

    It’s certainly a puzzle and unusual for a recession.

    • bob webster
      Posted July 19, 2012 at 5:44 pm | Permalink

      The number of people in employment may be rising but most of the new jobs are part time. The “under employed” may no longer be on the dole, but many remain dependent on the state for tax credits to help make ends meet. Same with many of the new business start ups that the Government has been crowing about lately. How many people turning to self-employment in a time of recession are reliant on the same tax credits to compensate for low earnings? It would be good to see the kind of “virtuous circle” you describe in fast developing countries replicated in the UK, but it aint going to happen while we are shackled to the EU, and led by a PM with no intention of stopping the slide towards ever closer union.

    • zorro
      Posted July 19, 2012 at 6:43 pm | Permalink

      More employment because of huge immigration and higher numbers of indigenous unemployed….probably.

      zorro

    • uanime5
      Posted July 19, 2012 at 7:13 pm | Permalink

      Allow me to tell you the answer. The Government has several programmes for the unemployed, one of these is the Work Programme which lasts for 2 years. While people are on the Work Programme they aren’t considered unemployed even though they still claim job seekers allowance. The Government plans to have the Work Programme help 2 million people, even though the private companies involved only have to get 5% into work and are currently only getting 3.5% into work.

      So not only is the number of people unemployed being manipulated but the Government is paying private companies millions of pounds to hide the true extend of the problem.

    • Bazman
      Posted July 19, 2012 at 9:49 pm | Permalink

      Many jobs are low paid temporary and without any benefits other than the legal minimum. In a town near where I am from over 700 peole applied to work in a well known coffee shop chain. Is this supposed to be proper employment. The jobs that were considered pocket money job have been turned into’ career opportunities’. I can’t afford to have a ‘career’. Ram it.

      • David Price
        Posted July 20, 2012 at 8:25 pm | Permalink

        So 700 people had the gumption to try for a relatively low paying job rather than whine about the lack of opportunity, training or work experience?

        That’s excellent news, it suggests there may be hope for this country after all.

        BTW: was the job paying above national minimum wage?

        • Bazman
          Posted July 21, 2012 at 1:32 pm | Permalink

          Pure spin. It show that 700 peole are out of work in that area and will apply for any job. Excellent news? Idiot.

          • David Price
            Posted July 21, 2012 at 2:56 pm | Permalink

            How can it be spin, it was your information? You chose to interpret it negatively whereas I felt it was a much more positive event.

            You sneer at those 700 people who wanted to work rather than fester on benefits whereas I am more of an optimist and applaud their enterprise. I would rather my taxes support those who at least try to help themselves rather than whine about circumstances and expect everyone else to give them what they want.

        • Bazman
          Posted July 21, 2012 at 5:08 pm | Permalink

          I admire your ‘can do’ attitude Dave. Unfortunately I have a ‘can’t do’ aptitude and as you will not be doing any coffee shop work except for my own amusement. I suspect you do to.

  46. BobE
    Posted July 19, 2012 at 5:01 pm | Permalink

    Im afraid that Mr Cameron is an empty man.

  47. Bazman
    Posted July 19, 2012 at 5:53 pm | Permalink

    Many of the answers seem to revolve on removing the minimum wage reducing benefits and reducing workers protection in the belief that they will somehow become incentivised to find a job by being desperate. This causing a bidding war between the poor and desperate young immigrants further making them more desperate to further incentivse them. They will in return pay less tax on their low wages and employers will also pay less tax employing them in the laughable belief that these cost savings will somehow be passed onto them via higher wages due to the higher profits generated.
    Companies already making billions in profits refuse to pay any more than they can get away with and they can get away with this as the commutable distance for these jobs is limited and the number of cleaners unlimited.
    They on the other hand have to pay large wages to attract the right employee. A fact not reciprocated thus making it a lie. As I have said, they ain’t going to share. As soon as they see anyone else other than them selves making money from the company they try to do the activity on the cheap and call it cost savings.
    Is it right that a company making billions in profits in this country using the educations system, political stability and workforce should be subsidised by being allowed to pay so low as to allow the worker to claim benefits to raise their pay to a living standard applicable to Britain? If anyone thinks anyone should do skilled work for unskilled money and the minimum wage is somehow causing the unskilled to be overpaid at six quid can ram it and guess what? I for one will not be doing any work. Tell that gas fitter minimum wage is only siix quid and he is charging £50+. Get back to us on what does not happen.

    • uanime5
      Posted July 20, 2012 at 6:46 pm | Permalink

      Don’t forget that while a lot of the posters believe that minimum wage should be abolished so that companies aren’t “burdened” with the cost of low skilled workers they also feel that skilled workers deserve to be paid more money and have lower taxes. I wonder which group these posters belong to?

      • Bazman
        Posted July 21, 2012 at 1:36 pm | Permalink

        Quite right. These will be the same peole telling the boss to cut the next guys wages believing this is a pay cut for themselves and can be spent in Tesco. but in reality if the next guys pay can be cut, so can yours.

  48. uanime5
    Posted July 19, 2012 at 7:16 pm | Permalink

    Perhaps the Government should examine how much the average person working full time in a minimum wage job gets in the form of tax credits and other benefits (preferably on a region by region basis to account for the cost of housing). This amount will be the difference between minimum wage and a living wage. Basically if someone working full time doesn’t earn enough to live on then the taxpayer is effectively subsidise low wages.

    Also cutting taxes won’t have much effect on low wages because those who claim the most benefits tend to pay the least taxes because they earn the least amount of money.

    Also the IMF’s growth figure for this year has been cut from 0.8% to 0.2%. Given that the original budget expected over 2% growth this means the Government will have to borrow more money.
    http://www.telegraph.co.uk/finance/financialcrisis/9412012/Debt-crisis-IMF-calls-on-Coalition-to-draw-up-Plan-B.html

    • norman
      Posted July 20, 2012 at 3:58 am | Permalink

      Sigh. Probably wasting my time but here goes. List all the items you spend money on. List all the items companies spend money on. List all the taxes associated with those items. Scary, huh?

      Now you could take the attitude that all companies (even though most are small and not multinational banks which no doubt are foremost in your mind) are simply out to rob their employees and if a small haulage company e.g. Saw his fuel duty, road tax, etc reduced to sensible levels he’d simply pocket all the extra and not invest or try and grow his company.

      anyone who had ever worked for a small company (and I have) knows this is nonsense but believe what you want. We can all see what a success Labour’s / Cameron’s policies have been.

      If you really do work for a company that treats its employees like something out of Dickens I suggest you place a higher value on your dignity even if it means moving to another area of the country. Only get one shot at this life and we spend far to long of it at work to work for someone we despise.

      • A different Simon
        Posted July 20, 2012 at 4:39 pm | Permalink

        Agree .

        More to life than work , or there should be .

        I just find it amazing that we’ve gone full circle back to serfdom .

        I thought I’d seen the destruction of the class system only to see it re-emerge in concentrated form .

      • uanime5
        Posted July 20, 2012 at 6:51 pm | Permalink

        While some companies will try to grow if they have more money it would be a fallacious to assume that they all would. No everyone wants their small company to grow into a large one as some people are content to make enough to live on, while others don’t want the additional hassle associated with larger companies.

        • a-tracy
          Posted July 23, 2012 at 10:05 am | Permalink

          Uanimie5.

          All businesses no matter how small how to work hard even to stand still in the past five years. Contracts close down, companies close down that you are doing work for and you have to sell hard to trade to make up the lost revenue and try keep your staff in work and your own head above water. Selling is a costly endeavour.

          I really don’t understand why you don’t try working for yourself if you think it’s so easy. I object to your ’employers are just out for themselves’ mantra.

  49. Kenneth
    Posted July 19, 2012 at 8:20 pm | Permalink

    I believe the minimum wage law has had a detrimental effect on employment in the UK. The increase in unemployment that would have resulted when it was introduced was masked by heavy public sector recruitment and by moving the unemployed to other benefits (which is being painfully and slowly reversed).

    I do not see why we cannot enjoy a full range of wage rates. A 19 year-old living with his parents may accept much lower wages. A prisoner in a prison factory may accept wages which can help us win back markets we lost long ago (and therefore not threaten domestic markets). A productive worker should be earning decent money.

    We need to allow employment to be a free market, something we have never achieved in the UK, even in Mrs Thatcher’s time. At the moment employers have the upper hand and the unemployed are forgotten, especially by the Labour party and unions.

    Surely the public sector must take a lower share of our GDP. This will allow the productive economy to breathe life into our country.

    As most others on this site are saying: we must reduce taxes. If we do not we will be relying more and more on the grey and black economies which are almost the only areas left where there is something resembling a free market.

    • uanime5
      Posted July 20, 2012 at 6:58 pm | Permalink

      The minimum wage for a 19 year old is lower than that for a 21 year old, so they will be paid a lower wage than an adult.

      Do you want productive workers to earn decent money or as little as possible? According to your post seems to believe that both are possible but employers who can pay as little as possible don’t reward productive employees, they work them harder and throw them on the scrap heap when they can’t work.

      Finally low wages will increase the grey and black economies because if people have lower wages (less money) they will buy cheaper but more illegal good.

      • waramess
        Posted July 21, 2012 at 10:26 am | Permalink

        uanime5 Your comment ignores the fact that there is a free market for employment and if the worker does not like the way he treated he is able to offer his services elsewhere.

        I know this is difficult at the moment because there are few job around but this would explain why employers are able to pay less.

        The only inhibition to a worker offering his services on the free market is the minimum wage restriction which will not permit him to offer his services at a lower level, as accepting such an invitation would leave the employer in breach of the law.

        The system is now totally skewed against both employer and employee and is resulting in some very unintended consequences

        • Bazman
          Posted July 21, 2012 at 1:37 pm | Permalink

          I will work of half a potato a day and run the company whilst you work on your golf. Outbid that.

          • a-Tracy
            Posted July 21, 2012 at 7:25 pm | Permalink

            Bazman have you ever tried setting up your own Company? If it’s so easy to run a business from the golf club as you imply someone like yourself should be able to steal their market and use your social credentials to help out others by offering them better terms and conditions and stealing your competitors best staff. I know people that started up their own businesses with a bucket and scrim, and another a borrowed lawnmower and shears, expanded and grew- you don’t have to provide your labour for other people.

  50. BobE
    Posted July 19, 2012 at 9:32 pm | Permalink

    I think that MPs should take a 10% wage cut as an act of solidarity to the nation!

  51. Chrispy
    Posted July 20, 2012 at 7:17 am | Permalink

    “The UK’s problem is we do not have enough companies with enough power in the marketplace to command the prices and sell the volumes we need to pay more people higher pay….” Perhaps if we were more fully committed to Europe we would have more such firms. If we withdraw we will certainly have less!!!

    Reply: Most UK multinationals expand and invest in Asia and the US. They normally find the continent restricts their expansion by cultural and non tariff barriers, or they conclude that thay make things here to export there. They would be able to do that from outside as well as from within the EU. Can you name big UK companies that have expanded only because of our membership of the EU?

  52. Derek Emery
    Posted July 20, 2012 at 9:43 am | Permalink

    There’s a quantum shift taking place where the uncompetitive EU is lowly transiting downwards from being a first world economy to a second world economy. At the same time some other countries are moving up the economic chain. China is predicted to have a larger economy than the US in about 4 years.
    To have increasing wages requires an economy that is growing and producing more trade-able assets high requires a booming private sector. World economic activity will be centred on the Pacific rim with the EU being an outlying backwater. Hence wages are not going to become high.

    The EU is not interested in its economic strength or competitiveness but rather in its political policies. The Tobin tax will reduce EU GDP growth by around1%. Having high priced renewable energy in place is seen as drastically more important than any downside effects on the EU economy. The EU is primarily a political union where politics easily trumps any economic or financial factors.

    If cannot be co-incidence the the EU has had low economic growth compared with the rest of he world for decades. As part of the EU we have to expect permanent low growth to continue indefinitely into the future and therefore being steadily overtaken technologically and economically by Far Eastern countries.

    I would not be surprised if in a decade or so some professionals are earning more and living better in China than in the EU. That the power of strong GDP growth which the EU can never offer.

    • uanime5
      Posted July 20, 2012 at 7:06 pm | Permalink

      What do you mean by larger economy? A higher GDP? A larger population? A higher GDP per capita? At present to have a higher GDP than the USA China will need to double it’s GDP; China already has more than 4 times the population of the USA; and to have a higher GDP per capita they will need to sextuple it.

      Given that many of the developing countries are rapidly industrialising it’s no surprise that they have had high GDP growth.

      Your comment about the “being steadily overtaken technologically and economically by Far Eastern countries” is laughable. Only Japan is anywhere near the standard of living in Europe; even China is decades away from this standard.

  53. sm
    Posted July 20, 2012 at 1:20 pm | Permalink

    After tax wages are too low to support living costs particularly for those not receiving any subsidy via social housing provision or other discrimination.

    1) Rents/House Price housing costs
    2) Local government taxes eg Council Tax.
    3) Service charges associated with freeholder’s who can effectively extract funds from captive leaseholder residents for mandatory communal services and via planning agreements other costly obligations for the general public gain.
    4) Utility bills, gas,electric and water, Vat, etc etc
    5) Never forgetting travel costs to and from work either using a car or sometimes even more expensive public transport.

    Add to that government policy of
    a) mass immigration policy to flood the UK labour market with surplus labour to drive costs down.
    b) maintenance of QE and ZIRP to backstop the FIRE industry and high property prices. This effectively allows an inflation tax to extract further spending power to fund other favoured programs.
    c) policies favouring investors in property rather than first time buyers.
    d) effectively allowing different tax rates to apply to a large swathe of society except the average low paid paye worker.
    e) pension apartheid where those who have less pension protection fund those that have more via local and central taxes.

  54. peter davies
    Posted July 21, 2012 at 7:49 am | Permalink

    It also comes down to the tax rates which have gotten way too high. I always felt that under labour everything went up (in the public sector) – wages etc but this was negated by huge increases in things such as fuel which in turn was fed to us all making it more expensive to work, etc or anything else.

    If we start with a lower tax take and good business conditions one would hope that more high ticket industries will pop up leading the better wages etc. We’ve seen the Jaguars/McLarens/JCBs and how well they are regarded, unfortunately there are just not enough of them.

  55. Bazman
    Posted July 21, 2012 at 1:46 pm | Permalink

    Take away all benefits and let the poor slog it out for themselves. No job? No healthcare, no housing, not even food money for their children. What do think would happen fantasists?
    Would they suddenly just find work? I bet they would, but not the type of work you are thinking off. Then what? What would we do then. Do tell us.

  56. Becca@endofleaseclea
    Posted November 13, 2012 at 2:41 am | Permalink

    A lot of people are keep on asking to raise their wages… but this is for real that many of those who ask for more are not wise enough in spending their money in right way.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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