[Closed] "Living Wage" = Inflation?

You mean something as dynamic and as inherently unstable as capitalism isn't the pinnacle of human development?

We haven't reached the end of history?

This is not a living wage.

Indeed Dr, the world is very complex and if you ignore the basics (truisms) you make it even more so. The € project being one of the most obvious examples. Labour markets come a close second.

THM if you just get the SNP into this debate I can call HOUSE

Sweaty references are acceptable [ and deniable]as we all know.

Footflaps - lend us a tenner?

Increasing wages without increasing productivity less[sic] to higher salaries for fewer people - labour economics 101

Increasing wages for the poor benefits the rich through an increase in demand since they operate with a high marginal propensity to consume. Increasing incomes for the rich is much less economically productive as they have a low mpc and a high marginal propensity to import. Keynes dealt with these arguments a long time ago. Anyone seriously interested in the contemporary consequences of rising or falling inequality should check out people like Michael Marmot, Richard Wilkinson, George Davey-Smith, Danny Dorling, Thomas Piketty.

Yes thanks and a 100% A*/A hit rate with tutees. Why?

Assuming (?) that we still want consumption to be the main driver of aggregate demand (doubtful?), there are better ways of achieving this than the blunt tool of fixed minimum wages. That's one thing old Cleggie (remember him?)was good at.

Do you actually have an economics degree, teamhurtmore?

Maybe. But he can only remember the bit that got taught in Economics 101.

Assuming (?) that we still want consumption to be the main driver of aggregate demand (doubtful?), there are better ways of achieving this than the blunt tool of fixed minimum wages.

We want decent minimum wages so people can have a proper life. Humanity 101.

Economics 101:
'Today class we are going to practice talking about the recent past as though we had a prophetic foreknowledge despite having got it completely wrong'

Indeed we do but there is "a whole world of complexity beyond that" (apparently) which suggests that fixed minimum wages are a blunt tool for achieving the objective.

Of course for politicians and headline writers they offer a easy solution (false panacea). Guess which solution gets chosen? And the results...(clue is in the basics)

Nurses unions for example are irate that the starting salary for a nurse (with the responsibility and qualification associated with the role) will be pennies an hour higher than a shelf stacker

My heart bleeds. £9 an hour is 18720 for a 40 hr week.

A nurse starts at 21692. So, yes, only 150 pennies an hour more. But it is a Starting salary. Will many nurses not get unsocial hours top ups as well. I predict no £9 an hour shelf stacker will get an unsocial hours payment. Average basic pay for a nurse is £30713. Some earn much more with overtime.

http://www.telegraph.co.uk/news/health/news/3536757/NHS-nurse-takes-home-100000-salary-thanks-to-overtime.html

http://www.independent.co.uk/life-style/health-and-families/health-news/nhs-nurses-see-their-wages-fall-over-the-past-year--while-senior-managers-enjoy-a-pay-rise-10268012.html

Yes thanks and a 100% A*/A hit rate with tutees. Why?

I can only assume you use a different pedagogical style than hinting, in a patronising manner, at the answer whilst talking down to them.

Yes thanks and a 100% A*/A hit rate with tutees. Why?

Indeed like simple questions KB such as

So where does the money come from?

Higher prices?
Lower profits?
Shift of activity overseas?
Replace workers with machines?
Increased employment of ineligible staff?

Some/all of the above?

Or what happens when you increase wages without increasing productivity. Fortunately students have the ability/willingness to address the questions not the person setting them (except those who cannot answer them of course - they need a diversion)

Those who cannot answer them are the ones you need to teach the most IME as a teacher. Last time I checked letting them know[ its a bit pointless teaching folk who already know the answers] they are stupid and did not know was neither helpful nor best practice.
Its pretty clear that STW has some knowledgeable folk in almost every area imaginable. What folk do when they have this knowledge is either impart it on the hive mind or just pose question they know the majority cannot answer then call them [ politely obvs] thick. Whilst chuckling at their own wit and wisdom.
Why not just explain the answers, rather than pose questions, as we are not studying for A level economics?
Peterfile did a wonderful thread on PPI funding recently as an example
Its just how you like to roll to be smart and smarmy rather than helpful.

Unbelievably I have both an O level and an A level in the dismal science. My teacher was not to your standard so I have an A and a B respectively. Amazing what you get without effort sometimes eh

You clearly know a lot in this area why not impart it rather than do this?

Yes, in a simple world, some/all of the above. None of which is an argument for not doing it.

ok - so who would rising prices affect most (since studies show this is where the impact if felt most) - relating to earlier point on MPC?

The lower paid or the higher paid?

who loses when labour is replaced by machines?
who loses when jobs are relocated?
who losed when jobs are offered to those ineligible for the minimum wage?

All perfectly valid reasons for not jumping on the easy bandwagon.

And those cheap pints in 'Spoons????

In a world of multinationals where it is increasingly difficult to get them to pay taxes, anything that increases direct pay and reduces state wage subsidy (which are paid for out of taxation) is going to benefit individuals and small business to the detriment of big business surely - assuming no more money in or out of the system.

Now individuals and small businesses will tend to spend in your economy, while multinationals will tend to send funds to CEOs and shareholders (possibly even your pension fund) - these folks seem less likely to spend in your economy.

So it may increase the money working in the economy slightly - at the margins.

Where did I get that wrong? The multinationals might shut up shop? Not convinced.

Enlighten me.

PS a bit of inflation might assist my mortgage - so long as interest rates stay below 2.5% (which they won't for ever)

Mixed evidence on job creation but the HM Treasury analysis for one points to reduced levels of employment. But that (in theory and practice) [b]depends on what happens to productivity [/b]- again mixed evidence supporting the idea that there is "a whole world of complexity out there!"

On inflation that would be good for reducing debt and better than financial repression (theft from savers) but again not good for international competitiveness - more complexity 😉

Good job we have a historian making these decisions - lets hope he gets the basics and avoids political stunts. Opps, too late

Hmmm. Poverty is not just stopping people having a few more cheap pints in the middle class pub. It prevents people having healthy housing, having education, having security, keeping out of debt to pay day lenders, not being a financial burden on relatives'' pensions. None of which figure in your simple linear models. There's been plenty of chance to solve the problem with non-blunt tools. It's time to do something new.

Nothing new about blunt instruments of policy - either in terms of ideas or results. That's where history may be relevant as long as the lessons are learned.

As old Cleggie said, the best way out of those problems is work itself ie employment. So you decide whether that is the result of the policy or not. Which oddly enough comes back to the basic notion of productivity - how strange! May be the world isn't really that complex after all - especially if we can avoid MPs muddying the waters.

Britain is rapidly becoming a low-wage low-productivity economy. Higher pay eg in Germany produces 20 odd per cent more productivity. Pay peanuts, get monkeys.

With inflation at all but zero and about as much headroom on interest rates as possible we can afford a bit of inflation.

I lean to the left when it comes to finance / economy but this idea that Jeremy Corbin idea that the minimum wage should be £10 per hour is just silly - we shouldn't dismiss the value of 'crap jobs'.

£10 a hours is £20k a year full-time (give or take), when you're straight out of school and starting out in your career, even more so these days if you're not wading into battle with a fancy degree from a good Uni you're going to need a 'crap job' on your CV to show someone that you can be trusted to turn up in the morning and not set fire to the place. Who the hell is going to open a Call Centre, Warehouse, factory or other low-skilled working place if you've got to pay John "two Fs and a D at GCSE" Smith straight out of school £20k a year to stuff grommets in a bag.

It's very commendable to declare that John works hard, why shouldn't he be paid £20k a year - this is after all what someone has worked out what you need to have a decent lifestyle these days - well Dave "10 years work experience and a glowing references" Jones his Supervisor - thinks if John gets £20k, Dave wants and deserves £25k because otherwise what's the point of working hard and furthering your skills so there will be an escalation of wages throughout the ranks - yes employers like to keep salaries confidential but with something and headline grabbing as this, it's pretty clear.

Okay, so the theory and hope is that employers will absorb the extra cost, thus reducing their own income, closing the gap between rich and poor and making life more fair again - unfortunately life isn't fair - they will increase prices, and why not - because if the likes of John is earning £20k a year these days, he can afford to pay 10% more for his food, goods and services - hence the inflation, on the plus side it means that our national debt and personal debt effectively decreases as the value of our currency decreases - but the down side is our currency grows ever stronger against the rest of the world and the trade deficit grows ever wider - it's very difficult to manufacture in the UK already - lets not make it impossible because whilst it might be nice to think that John should earn £20k a year, I'm sure he'd take £15k a year and a secure job, than £20k on the off chance someone will employ him, which counts for nothing when in a short amount of years inflation will make £20k worth what £15k is now.

The £10 a hour minimum wage is just another artificial stimulus to the economic system and just as dangerous as the one that caused the low-income problem in the first place, namely allowing for a housing market to boom during growth periods, but not correct during recessions - we're not poor because we all work for Evil Dickensian Factory owners, we're poor because whilst in (slightly wealthier) Germany the average rent for a family home is £400 a month, that wouldn't get you a 1 bed flat in most of the UK, never mind actually buy a place. If we built more homes and stopped protecting the people who over-borrowed in the 2000s prices would fall and disposable income would rise. the actual amount of money doesn't matter, it's the value of it.

The employment market is the same as any other market, supply and demand dictate price - during the 'great recession' with high unemployment and a lack of confidence between suppliers (aka employees) prices are kept low, they is no incentive for employers to offer good wages, when people will queue around the block to apply for crap ones. That is now changing, as employment goes down and opportunity increases skilled labour becomes harder to find and employers will have to compete to get the best workers, wages go up, inflation rises, but it's a natural progression and things improve.

Maybe that is the problem, since the end result of that thinking is that wages go down until they meet India/China levels.

 

DrJ - Member

The employment market is the same as any other market, supply and demand dictate price

Maybe that is the problem, since the end result of that thinking is that wages go down until they meet India/China levels.

What would be the problem with that? We devalue the £ until it reaches global levels, or at least to the point where is viable to make stuff here, we re-balance the economy and the trade deficit so we're not reliant on Financial Alchemy and Debt to pay for things, we have an industry that allows the working class to work, we could still have a nice lifestyle, we could still work hard and improve that lifestyle it's just we couldn't buy a cheap plastic toaster in ASDA for £3 and grow again from there?

China's unit labour cost is rocketing - major problem for them.

If you have no skills, then that is exactly what will happen. We need to educate and train people properly not put fingers in dykes - but that's a little too long term for most MPs

The government intends to reduce in work benefits as the minimum wage increases so it is not automatic that there will be a notable increase in inflation as there is an element of offsetting. There is an argument (which I support) that we are paying too little for many things with prices held down via low wages and phenomenums like "offshore internet shopping". We should be paying more for food produced locally and sold in smaller independtly run shops, same for bike stuff. Increasing sales tax is inflationary but it doesn't mean it's the wrong thing to do in certain circumstances

What would be the problem with that?

I can't imagine.

[img] [/img]

P-Jay - Member

we have an industry that allows the working class to work

And if we are in direct competition in manufacturing with India, as you suggest, it might give kids an opportunity to earn a living too.

[img] http://www.zoriah.net/.a/6a00e55188bf7a8834011570198751970b-pi [/img]

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P-Jay - Member

I lean to the left when it comes to finance / economy ...

You ol' leftie.

If you have no skills, then that is exactly what will happen.

No. If you have no skills that cannot be replicated by someone in India then that is what will happen. So, call centre workers, plastic toy workers, engineers, economists, will all be seeing a change in their standard of living under that scenario.

I really, really resent the fact that people are referring to all low paid jobs as unskilled.

They are not.

Thank you.

The government intends to reduce in work benefits as the minimum wage increases so it is not automatic that there will be a notable increase in inflation as there is an element of offsetting.

That's a good point.

Can we stop calling economics a 'science'. It clearly isn't. If it was then the bankers who caused the economic crash would have easily seen it coming by the mathematics.

Perhaps we could have a new degree for economics? Bachelor of Makingitallupaswegoalong perhaps?

If we built more homes and stopped protecting the people who over-borrowed in the 2000s prices would fall and disposable income would rise. the actual amount of money doesn't matter, it's the value of it.

Indeed Rusty
I would wager most MW jobs cannot be moved abroad- we barely make anything any more and where we do it is highly skilled anyway
Retail
Care work
Security industry
Basic Admin/Office Work
Cleaners
bar workers
Hospitality
Catering
ETC

They cannot really be relocated abroad as they have to be done here.
Its just more of the same from the RW if we improve the lot of workers be it holiday pay, maternity pay, equal pay, the 6 day week, ending child labour its the poor that will suffer

The reality is that this, in the main, is just BS and they are not motivated by concern for the weakest in society but concern for the bottom line and their own profits.

@DrJ - Germany manages to 'out export' and 'out manufacture' India despite having a tiny proportion of it's population without having to employ children or use Poor Houses. Devaluing (a massively inflated) currency to make it competitive on the world stage isn't the same an underpaying and exploiting people.

Lots of Indians are poor because despite the size of their industry, there are 2bn people sharing it and they have 10% unemployment (not to mention a lack of employment laws which we enjoy).

There are many studies which say 50% of all jobs will go over the next few decades as automation and robotics really takes off,now smart software is putting traders and clerical workers out of a jobs so well educated white collar workers are also in the line of fire.

just slagging of the so called unskilled does not help even skilled workers are going to lose out solidarity is whats needed.

someone needs to start thinking outside the box and voting outside the box.

wrecker - Member

If we built more homes and stopped protecting the people who over-borrowed in the 2000s prices would fall and disposable income would rise. the actual amount of money doesn't matter, it's the value of it.

You'd be talking about bringing about a worse financial catastrophe than the last one. All of a sudden everyone who has bought a property in the last 20 years cannot afford their mortgages (due to the huge rise in interest which undeniably would happen) and the banks being left with assets which are not worth what they have lent on them. It would make the crunch look like a blip.

No, I'm talking about the correction which we should have made during the crash and didn't - we postponed the problem rather than fixing it - and anyway, interest rates can be raised slowly and house building takes time it would be a gradual correction - frankly if anyone who self-certed themselves into a too big mortgage in 2007 hasn't put their house in order by now, they only have themselves to blame.

If the crash had been allowed to happen wealth would have been redistributed its the way capitalism is meant to work but the wealthy scared the politicians into believing it would mean chaos, well for them it would have but it would have produced opportunity for others.

So, call centre workers, plastic toy workers, engineers, economists, will all be seeing a change in their standard of living under that scenario.

Very true, so they keep needing to be better at what they do or do something else or accept wage deflation. I spent part of my career working in and specialising in India (90s) but bloody obvious that there were people with similar skills who were paid 50% of what I was paid. Moral of the story, change quickly and do something else.

Good news these days is that it is becoming more expensive to locate many operations in India, SA, China and Brazil, so plenty of jobs moving back to the UK, Europe, especially in manufacturing.

No, I'm talking about the correction which we should have made during the crash and didn't - we postponed the problem rather than fixing it

And steal off the prudent (savers) while massively mis-pricing risk. All in the name of capitalism (sic)

No, I'm talking about the correction which we should have made during the crash and didn't

- we postponed the problem rather than fixing it -

frankly if anyone who self-certed themselves into a too big mortgage in 2007 hasn't put their house in order by now, they only have themselves to blame.