The Budget 2015 – 12:30

scorza said:
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Some good points. I guess it's difficult to gauge with any accuracy, and the suck it and see approach could be disastrous.

I bet a lot of people are caught up between minimum wage and theoretical living wage, I suppose the best time to introduce such jumps would be when economy is doing well? (i.e businesses can take the hit on their bottom line).

After the recent budget, and all the remarks on how well our economy is doing, maybe we will see this being taken in a more serious light soon?
 
Mr Jack said:
Well, that's such a low standard it doesn't seem to be much of a challenge. I think Ed Balls will be a better chancellor than George Osborne because he's not irrationally, or ideology, wed to an agenda of needless austerity in a doomed effort to get rid of the deficit on unnecessarily short time period. I also think he's less heartless and shows little sign of wilfully targeting the poorest for cuts. He's also got a much better economic background.

I don't think Ed Balls would be a great chancellor; but better than Osborne? Of course.

Incidentally, just because he's shadow chancellor doesn't necessarily mean he'll be chancellor under Miliband or chancellor for that long. It wouldn't be the first time the shadow chancellor hadn't gone on to be the actual chancellor after an election.
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So basically he ideologically fits your political persuasion?

The reality is a labour chancellor will increase tax for the better off and increase spending and the conservative chancellor will cut tax and decrease spending. Neither will actually do what is right if that goes against their ideology.
 
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scorza said:
The other argument against living wages is that it'll cause inflation, well again I feel this is overstated. Most companies these days tend to set their prices according to their value on the market, not simply a cost-plus-profit calculation. That means that even if their employment costs go up they cannot alter their prices to the same extent or sales will fall. Essentially their profit margin will suffer either way, so in effect the living wage will have redistributed money from executives and shareholders, to low income workers, which is pretty much the point. Inflation would probably go up, but only because of a boost to the economy as low-income workers spend more.
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Most companies will set the prices based on what people will pay and seeing as everyone has just had a pay rise...hmmm. There might be a hit on profits in the short term but prices will quickly creep up to readjust.

Back to square one except the numbers are bigger.
 
Amp34 said:
So basically he ideologically fits your political persuasion?
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Osborne has failed by all of his own measures so it's not like you need to be politically against him to think he's a rotten chancellor.

The reality is a labour chancellor will increase tax for the better off and increase spending and the conservative chancellor will cut tax and decrease spending. Neither will actually do what is right if that goes against their ideology.
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I don't think this is a true as you suggest. If you look at a competent Tory chancellor, like Ken Clarke, you find that when faced with balancing the books through a recession he took a far more sensible 50/50 cuts/tax-rises approach and, partly as a result of that, did much better at guiding the country through it's recovery.
 
balky12 said:
So from your experience and knowledge you think that if they UK simply raises it's minimum wage from £5.13/£6.50 to a living wage £8 - £9.50 (depending on what you read / live) the economy would be fine with that and we would solve the problems with low incomes people / families?
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It is, in no way, a complete solution since the truly low income groups aren't working but I think it's a better way to help the working poor. In terms of introduction, I think a staged introduction would be better, since any large shock is likely to hurt the economy. But I would raise the minimum wage at a rate above inflation so that it reaches the living wage over 5-10 years: monitoring the effects all the time, of course. I'd also look at how Australian-style sector based minimum wages could function over here.

Sorry; but from my understanding of economics that would cause many businesses to collapse and ultimately just push prices up, not solving very much and short term causing more issues. (increased unemployment, etc.)
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The trouble with this is that it's been said before every minimum wage introduction or rise ever and it's never once turned out to be true. Some of the reason for this probably lie in the work rate of money, in that by shifting money from the top to the bottom, as minimum wage rises do, that money actually works more effectively in the economy.

There is some evidence of a very mild increase in youth employment during downturns as a result of the minimum wage but I think it is better to address through targeted schemes than abandon the benefits of general wage rises.
 
Mr Jack said:
Anyone see the extraordinary farce that was the Lib Dem alternative budget? What a mess! They looked utterly stupid and amateur.
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I'm trying to think of a time when I cringed more in politics. I actually feel a bit sorry for Danny Alexander, even his party leader walked out. Utterly embarrassing, I suppose the only bright side is that Alexander won't be an MP for very much longer.
 
Mr Jack said:
The trouble with this is that it's been said before every minimum wage introduction or rise ever and it's never once turned out to be true.
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The introduction of the minimum wage in France DID have a negative impact on jobs. In the UK, and the US though it did not. You will be unsurpised to learn that this is because the minimum wage introduced in France was considerably higher than in the UK, which was in turn higher than in the US.

It is also not a surpise that countries such as France and Germany, which have hgiher minimum wages, have higher unemployment. It should be noted that these countries do not pay a "living wage".

It is not then a stretch to assume that a high minimum wage, does corrolate with higher unemployment.

We are currently increasing the minimum wage faster than other wages are growing, this puts us on a course to eventually have higher unemployment. I believe there is some slack before this occurs though.
Evidence suggests that a "living wage" would increase unemployment. Though this should not necessarily prevent implenting one.
 
balky12 said:
I'm not saying it is. We do already have a minimum wage. Obviously. Tiny increases (like we do already) are easy on the system. But to increase it to a level where everyone working would be on a 'living wage' would be quite an increase. The results would be devastating; I fear it would do employment more damage than good.
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Not as much as expected.

An increase in the wages for the population increases demand & allows for greater expansions & economic activity. There is also the fact that an increase in the minimum wage will increase total wage costs by that amount, but people seem to forget that wage costs of minimum wage employees do not account for 100% of the total costs to produce goods or provide a service.

"Total labor costs, or percentage of gross revenues spent on payroll, vary dramatically by industry. Highly automated oil refineries and semiconductor plants might have labor costs of less than 10 percent, whereas restaurants average around 30 percent labor costs. Retail businesses generally have higher labor costs, usually at least 10 percent and ranging up to 15 to 20 percent. According to the Food Marketing Institute, the average U.S. food retail business had total labor costs of 14.6 percent of sales in 2007"

While these figures are from US studies, the trends should be indicative of ours - with a key point being that not all staff for these organisations are in-fact on the minimum wage to begin with.

It's a percentage of total staffs costs, which is percentage of total turnover. A 10% increase in the minimum wage will in no way increase total prices by 10%.

So assuming a business spends 20% of the total turnover on staff costs a 10% increase in minimum wage would result in a total net increase of 2% in costs (in reality it would less due to a number of staff already surpassing the minimum wage).
 
elmarko said:
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I agree, and to some extent agree.

My issue was that at this present time the difference between the current minimum wage and the theoretical living wage being what it is (60-80% increase) would be too much for the economy to handle.

Even if a fraction of that does affect a company’s bottom line (Use your example of 20% correlates 2%; so 10%) a 60%-80% increase still would drive prices up by 6-8% which is a big point difference.

Something does need to be done though, but like I said earlier I don't think there is anything immediately short term. Hiking prices up with a suck it and see approach could be disastrous.
 
Judgeneo said:
The introduction of the minimum wage in France DID have a negative impact on jobs.
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I am somewhat confused by this claim. France has had a minimum wage since 1950, and I can find no evidence of a linked fall in employment, in fact I can't find any figures going back that far; perhaps you can do better? The published evidence on whether the minimum wage impacts unemployment in France seems to be a bit mixed but, as far as I can see, the overall picture suggests a neutral effect on adult employment and, at most, a very mild effect on youth unemployment.

It is also not a surpise that countries such as France and Germany, which have hgiher minimum wages, have higher unemployment. It should be noted that these countries do not pay a "living wage".
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Huh? Germany only introduced a national minimum wage at the start of this year making it rather too early to judge but it hasn't shown a sharp change at the very least. And it has lower unemployment than the UK, anyway.

Evidence suggests that a "living wage" would increase unemployment.
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I don't think the evidence is as clear as you suggest. International comparisons are hard due to the large number of confounding factors, of course, but, in any case, I don't think anywhere could be said to have pushed a minimum wage in the manner that I advocate.

Doubtless there must come a point where a minimum wage increase does kill employment, but whether that is below the living wage? I don't think we can be sure. One thing I think is very clear from the evidence is that it could rise from the current level without hitting employment.

Though this should not necessarily prevent implenting one.
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This is an important point, I think. Even if there is a trade off between employment and paying people a higher wage I don't think it's clear that the optimum point on that trade-off is the one with lowest unemployment.
 
balky12 said:
My issue was that at this present time the difference between the current minimum wage and the theoretical living wage being what it is (60-80% increase) would be too much for the economy to handle.
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The living wage is £7.85 outside of London and £9.15 inside London compared to a minimum wage of £6.50. That's an increase of 20-40% not 60-80%.
 
Don't forget those 18-20 year olds on £5.13. Can't deny then a living wage.

And living wage varies from source to source.

But still, I bet anyone here would love a 20%-40% wage increase regardless of circumstance. It's a big jump.
 
balky12 said:
Don't forget those 18-20 year olds on £5.13. Can't deny then a living wage.

And living wage varies from source to source.

But still, I bet anyone here would love a 20%-40% wage increase regardless of circumstance. It's a big jump.
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I would indeed be higher for a living wage increase of say 40%.

But that would increase the cost of goods by the same proportion. To give a another example, assuming the cost of wages for a business is 20% of total turnover (a higher than average estimate).

If they wanted to to a flat 40% wage increase (your higher estimate), at that absolute most it would increase the cost of goods by at most 8%. In reality it would be lower of course as a percentage of the staff for a given business are on more than a living wage. The other aspect would be the increase in sales from the people who are now able to participate in the local economy.

A 40% wage increase for the poorest in society would be off-set by a minor increase in goods for everybody else, but with the added advantage the government can reduce it's expenditure on tax credits & top ups.
 
mid_gen said:
How about bringing the living wage down by turning property into a place for people to live instead of a get rich quick scheme....
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I would argue it's only a get rich quick scheme if you are already rich.

Save for a deposit can take years, then you have to live there whilst house prices increase (whilst paying a mortgage).

Unless your house price roughly doubles in value over 25 years (standard mortgage rate). You won't make any money against what you have paid off on the mortgage.

But I agree with your underlying message; something needs to be done with the housing crisis. However, whilst the majority of voters are house owners there is no way they will vote for a Government that will seriously tackle the housing crisis (thus devalueing their homes/ retirement plans)
 
mid_gen said:
How about bringing the living wage down by turning property into a place for people to live instead of a get rich quick scheme....
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Another issue that needs dealing with. Even if we start working hard towards it today, we're probably looking at 20 years to really bring the problem under control.
 
mid_gen said:
How about bringing the living wage down by turning property into a place for people to live instead of a get rich quick scheme....
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It won't happen. There are tens of millions of home owners in the UK, all of whom would lose a fortune if prices came down to realistic levels. Bringing house prices down is pretty much the worst solution to the problem.

There is no overnight solution. The fairest way to fix the system would be to freeze prices while working to increase wages. Over time, inflation would rectify the problem, and without wrecking the finances of millions of home owners.

That ain't going to happen right now though. Rapidly rising house prices form a key part of our current economic 'recovery'. For the time being, government schemes like Help to Buy, and working with employers to raise wages, are the best (temporary) solutions to the problem.
 
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