Monday, 4 June 2012

National Minimum Wages ...

An article I read here on Yahoo, suggests that scrapping the National Minimum Wage may stimulate business and boost job creation. I don't think it is anywhere near that easy. For one thing, the NMW has already pushed prices and expectations up, but it has, it must be admitted, also cost jobs and, as I was recently reminded, things like fruit crops are rotting on the trees and the ground, because the price paid by the supermarkets is below the cost of harvesting them at the minimum wage.

This is a very complex issue, not one that can be addressed in 'sound bites' or with all the attendant emotive utterances that usually accompany any attempt to address it. The principle of a "fair wage for a fair day's labour" is one that Marx identified and which is also found in Adam Smith's treatises. The problem with Marx and Jung's ideologies is that they make no allowance for a more mobile society and do not recognise the manner in which a dynamic society changes. They failed to recognise that, as even they wrote, the economic situation of the growing echelons of the upper end of the working class and the even wider spectrum of white collar workers was already hugely different to the position of their parents and grandparents and that process has accelerated through the 20th Century.

The concept of setting a minimum wage sounds good in theory, but in practice it forces employers to adjust ALL wages and salaries upwards. As a former 'employer' in my role as Church Warden of a very large Parish Church with a big staff necessary to maintain it, it became a nightmare each time the Chancellor generously gave the Minimum Wage Earners an increase, I had to make an across the board adjustment of all wages paid to the whole of our staff. In the end we had, as our income was declining and our other costs rising, to make redundancies - and if you want to see an expensive way of shedding staff - try that one! 

The effect of the Minimum Wage is to drive wage inflation. By pushing wages up, you drive costs up. Increasing costs mean a rise in prices and the vicious circle begins. As prices rise, so do the demands for a rise in wages ... In any given business, the cost of labour is always the largest single charge on the business and the largest single part of the price charged for the goods or services provided. That is a simple business fact. Nor is it simply a case of paying the employee. The government adds some charges to this in the form of "Employers Contributions" for National Insurance and State Earnings Related Pension contributions which add between 30% and 40% to the cost of employing a worker. 

Sadly, history shows that any attempt to level the playing field in terms of wealth by "redistribution" through tax or through government regulation of the wage market inevitably fail and wind up destroying economies and impoverishing many more than they help. I now live in Germany, anyone who wants to know how "successful" the 50 years of communist economics was in the former GDR, Poland, Hungary or Romania, need look no further than their levels of unemployment, government borrowing and the out dated and totally inadequate infrastructures left behind for those nasty, evil Capitalists to replace and rebuild ...

I'm now a Pensioner, living on a small Pension after almost 50 years of employment, paying into a non-existent fund mismanaged by the same political classes and civil servants now desperately searching for new ways to raise money they have promised, but don't own. No government in the world "owns" the wealth of the nation or that of any individual within them, that belongs to the people. The only money a government has is what it can legitimately charge through tax for the services it provides in return - and we have now reached a point where the charge on the individual exceeds the benefit we receive in return. Those who think that all wealth in a nation belongs equally to everyone should reread Marx, that is not what he says and certainly not what he meant.

Perhaps, at this point, a better solution to this wage spiral would be to make it illegal to award "across the board" increases based on percentages of an individual's wage or salary, since this only widens the gaps between top earners and those at the bottom. A fairer method of evening things out would be to introduce a median increase based on a percentage of the average between top and bottom scales. That would ensure that the lowest paid would get a larger boost than those at the upper end and it would, over time, also reduce the disparity and self level so that the "steps" between scales would still be maintained. Logically it makes more sense than imposing a "Minimum" which simply impacts all the way up the tree - and, as many commentators on the article point out, has now become a "maximum" level for everyone in a particular field.

1 comment:

  1. Sigh. Wonder what will be next in our world of insanity before the 'revolt'.