Unemployment falls to 7.4%

Generali

dktreesea wrote: »

Demand for goods and services is a big problem. People are steering away from debt. With rents going up, not to mention essential goods and services like food and energy, people are finding it harder over time to cover the essentials, let alone the "nice to haves".

Then there's sites like this one http://themoneycharity.org.uk/debt-statistics/, telling us every day between July and September 2013, 1,359 people were made redundant. Not to mention every 5 minutes and 3 seconds someone goes bankrupt/is declared insolvent.

What if the people being laid off are relatively well paid, and those being taken on, while outnumbering those being laid off (hence the fall in the number of unemployed) are going into minimum wage jobs?

If wages were at least keeping pace with inflation, maybe there would be grounds for optimism, but so far they are still lagging behind, for the 5th year straight.

All true however you're only seeing part of the story

Unemployment is falling and wages, while falling a little in real terms, aren't falling very fast. Also GDP, one measure of which is profits + wages + government spending + net exports, is rising.

As a result, people can't be replacing high wage jobs with low wage ones as if they were we'd see that reflected in both wages and GDP data.

Loughton_Monkey

Generali wrote: »

All true however you're only seeing part of the story

Unemployment is falling and wages, while falling a little in real terms, aren't falling very fast. Also GDP, one measure of which is profits + wages + government spending + net exports, is rising.

As a result, people can't be replacing high wage jobs with low wage ones as if they were we'd see that reflected in both wages and GDP data.

I agree it's complicated. But it is useful to look at HMRC figures for full years to 2011, 2012, and 2013.

http://www.hmrc.gov.uk/statistics/tax-statistics/table2-5.pdf

The main problem with these figures is that clearly they apply only to those above the changing tax threshold.

My own 'take' on this is two main things:

1. The constituency of tax payers seem to be earning +6.2% in 2012, and +3.5% in 2013.

2. The number of taxpayers is declining while elsewhere unemployment stats tell us that the working population is increasing.

As I have said in the past, wages for the very large constituency of [what I would call] the stable workforce are not necessarily leaping ahead, but certainly seem to be keeping up with inflation or more. It is essential to understand that average wages (unlike inflation figures) do not measure the impact on individuals accurately. Any large group of employees can all see 'healthy' rises each year, while the top older employees retire, to be replaced by spotty youths, and the average wage will show no growth at all.

I also deduce that the extra jobs we are seeing all tend to be at the lower end of the pay scale and/or part time. But I suppose that anyone moving from "benefits only" into "benefits plus small wage" are also better off.

I wouldn't try to be complacent about this and state that everything is rosy because is isn't. At least not by comparison to the 'good old days'. But I reckon the majority are getting better off slowly and slightly. Those remaining on benefits only clearly aren't doing better and will shout louder and louder.

What we are seeing is more opportunities for just about everyone to do better. And I'm sure that this will continue. If that leaves the hardcore of workshy behind, then so be it.

dktreesea

Generali wrote: »

All true however you're only seeing part of the story

Unemployment is falling and wages, while falling a little in real terms, aren't falling very fast. Also GDP, one measure of which is profits + wages + government spending + net exports, is rising.

As a result, people can't be replacing high wage jobs with low wage ones as if they were we'd see that reflected in both wages and GDP data.

Not replacing directly, but say you lose one manager, on £60k a year, and take on five factory hands at £12k each per year. The employment figures look better. GDP looks better too. But the income tax take has dropped massively. So the government has less to spend, but instead of spending less, borrows more. Britain's debt goes up. The pound falls. Maybe the cost of borrowing goes up, but not if it's the government lending to intself via the BofE. People are poorer. Even though there is a higer GDP and better employment figures.

CLAPTON

dktreesea wrote: »

Not replacing directly, but say you lose one manager, on £60k a year, and take on five factory hands at £12k each per year. The employment figures look better. GDP looks better too. But the income tax take has dropped massively. So the government has less to spend, but instead of spending less, borrows more. Britain's debt goes up. The pound falls. Maybe the cost of borrowing goes up, but not if it's the government lending to intself via the BofE. People are poorer. Even though there is a higer GDP and better employment figures.

Whether the country is poorer or not depends upon whether the 'real' goods and services produced by your five factory hands is greater than that produced by the one manager.

Your flow of money is incomplete as you have ignored the reduction in benefits bill for the previously unemployed, tax on the products the workers have produced, the greater propensity to spend for the lower paid workers etc

Generali

CLAPTON wrote: »

Whether the country is poorer or not depends upon whether the 'real' goods and services produced by your five factory hands is greater than that produced by the one manager.

Your flow of money is incomplete as you have ignored the reduction in benefits bill for the previously unemployed, tax on the products the workers have produced, the greater propensity to spend for the lower paid workers etc

What he said.

Presumably a company would sack a manager to be replaced by workers because they think output would be higher as a result (companies try to maximise turnover as a rule not profit, contrary to economic theory).

dktreesea

CLAPTON wrote: »

Whether the country is poorer or not depends upon whether the 'real' goods and services produced by your five factory hands is greater than that produced by the one manager.

Your flow of money is incomplete as you have ignored the reduction in benefits bill for the previously unemployed, tax on the products the workers have produced, the greater propensity to spend for the lower paid workers etc

Yes, I would agree with your assessment if the 5 people taken on are on benefits. But what if they're not? What if they have just arrived at Victoria Bus Station, on the bus from Romania? Not everyone who gets a job is on benefits. Sometimes they are unemployed with a working partner, so don't claim any benefits.

dktreesea

Generali wrote: »

What he said.

Presumably a company would sack a manager to be replaced by workers because they think output would be higher as a result (companies try to maximise turnover as a rule not profit, contrary to economic theory).

I would say companies try to maximise cash flow rather than turnover. And sure, if they are swapping a highly paid manager for 5 factory workers, it's likely to be because they believe they will be better off as a result.

We have far too many managers and not enough hands on deck workers as it is, so maybe that isn't such a bad thing anyway. But I do think there are situations where following that approach can result in a lower rather than a higher tax take.

It's like the French and their 75% top taxation rate for the rich. They can drive all the rich offshore that they want - Luxembourg beckons - but if you get rid of too many higher rate tax payers from the PAYE ranks, then at some point you are also going to have to cut public spending as well.