Living wage - does good politics result in bad economics?

CLAPTON

borkid wrote: »

This is my, perhaps naive, way of thinking. I would rather pay slightly higher prices in the shops ( if that's where some of the money is needed to be raised) and be able to choose where my money goes than subsidise the likes of Tesco etc via WTC.

but you may choose not to pay the increased prices so causing people to lose their jobs

borkid

True clapton but why is altruism always forced on 'Joe Bloggs' just because he/she has no choice over the taxes they have to pay whereas large companies get away with paying low wages and taxes. Something has to change. I believe the 'man in the street' shouldn't be subsidising large companies.

michaels

borkid wrote: »

True clapton but why is altruism always forced on 'Joe Bloggs' just because he/she has no choice over the taxes they have to pay whereas large companies get away with paying low wages and taxes. Something has to change. I believe the 'man in the street' shouldn't be subsidising large companies.

But in a competitive market a subsidy that is open to all suppliers will reduce the price but not increase profitability, so it is not Tesco who are being subsidised but shoppers like you and I.

(I would also add it is only a subsidy if they would have to pay more otherwise - is there any evidence that without tax credits wages would increase - surely if this were the case then the govt would not need to increase the minimum wage merely reduce tax credits which would force employers to pay more to get staff - otherwise it is not a subsidy)

CLAPTON

borkid wrote: »

True clapton but why is altruism always forced on 'Joe Bloggs' just because he/she has no choice over the taxes they have to pay whereas large companies get away with paying low wages and taxes. Something has to change. I believe the 'man in the street' shouldn't be subsidising large companies.

the only and sole income a company has comes from the man in the street

WTC are a political decision supported by the man in the street

Something is changing : we don't yet know the consequences

martinsurrey

michaels wrote: »

But in a competitive market a subsidy that is open to all suppliers will reduce the price but not increase profitability, so it is not Tesco who are being subsidised but shoppers like you and I.

(I would also add it is only a subsidy if they would have to pay more otherwise - is there any evidence that without tax credits wages would increase - surely if this were the case then the govt would not need to increase the minimum wage merely reduce tax credits which would force employers to pay more to get staff - otherwise it is not a subsidy)

lets not worry about what we call it.

It's a benefit to a company who is least efficient with respect to labour. Increase labours cost and a new level will be found, either the labour inefficient company will be replaced by labour efficient ones, or they will change their business practices.

Yes, it is shoppers who benefit, but they then pay through VAT and PAYE, and each stage of these taxes is inefficient, they cost money to implement and distance the activity from its true cost as a nation (not private cost).

A minimum wage internalizes the external cost of a society expecting a certain level of lifestyle for a days work, which is currently met by the taxpayer through complex layers of income support and taxes, a minimum wage will lead to a socially acceptable allocation of that resource, it may also lead to an unacceptable level of unemployment, in which case the level would have to be reassessed.

CLAPTON

martinsurrey wrote: »

lets not worry about what we call it.

It's a benefit to a company who is least efficient with respect to labour. Increase labours cost and a new level will be found, either the labour inefficient company will be replaced by labour efficient ones, or they will change their business practices.

Yes, it is shoppers who benefit, but they then pay through VAT and PAYE, and each stage of these taxes is inefficient, they cost money to implement and distance the activity from its true cost as a nation (not private cost).

A minimum wage internalizes the external cost of a society expecting a certain level of lifestyle for a days work, which is currently met by the taxpayer through complex layers of income support and taxes, a minimum wage will lead to a socially acceptable allocation of that resource, it may also lead to an unacceptable level of unemployment, in which case the level would have to be reassessed.

of course we could scrap both WTC and minimum wage

martinsurrey

CLAPTON wrote: »

of course we could scrap both WTC and minimum wage

We could, if, as a society we decided that we didn't care about the income of the poorest working people, just like we could abolish the old age pension, if we didn't mind old people freezing in winter, the health service if we didn't care about ill people...

After all its about the efficient allocation of resources, where the definition of efficient is vague.

Do you go for economically efficient, where if you don't have a private pension you go hungry, and if you don't do a valued job your pay wont pay for life's essentials?

Do you go for socially efficient, where what society deem to be reasonable is provided, if you go for this, do you provide food banks for old people, or a pension? Do you tax people and companies and then give it back in tax credits, or impose a minimum wage?

CLAPTON

martinsurrey wrote: »

We could, if, as a society we decided that we didn't care about the income of the poorest working people, just like we could abolish the old age pension, if we didn't mind old people freezing in winter, the health service if we didn't care about ill people...

After all its about the efficient allocation of resources, where the definition of efficient is vague.

Do you go for economically efficient, where if you don't have a private pension you go hungry, and if you don't do a valued job your pay wont pay for life's essentials?

Do you go for socially efficient, where what society deem to be reasonable is provided, if you go for this, do you provide food banks for old people, or a pension? Do you tax people and companies and then give it back in tax credits, or impose a minimum wage?

nonsense

juxtaposing a several loads of nonsense together doesn't make any of it make sense

martinsurrey

CLAPTON wrote: »

nonsense

juxtaposing a several loads of nonsense together doesn't make any of it make sense

https://www.pinterest.com/pin/316096467571024126/

michaels

Social justice aside, would companies be forced to pay more to fill their vacancies if tax credits did not exist? If not I don't see how it can be called a subsidy?

And I think we are already agreed that the 'subsidy', if it does exist is not going to boost Tesco profits but to the reducing prices for those who shop in Tesco so it is far from clear what the redistributional effects of the 'subsidy' are - I would suggest that tax credits are paid for most by tax payers (generally the top 20% of the income disctribution are net tax payers) and their benefit goes directly to the lowest earners with dependents and (possibly) indirectly to consumers of goods associated with low wage (UK) employees which may well be those on below average incomes (for example fewer Waitrose employes are probably tax credit recipients).

This means that switching away from tax credits to a higher minimum wage is unlikely to be progressive.