Tax Credits

daveyjp

Increasing minimum wage looks very responsible, but how often can the minimum wage be increased before those who currently earn just above it for doing jobs with more responsibility start to realise and demand pay rises?

Linton

zagfles wrote: »

No, the people most affected are those who earn the most, assuming of course they are eligible for tax credits. You can be eligible for tax credits on quite high incomes eg if you have lots of kids/high childcare costs/disabilities.

Someone on around £11k would lose about £1550, someone on £25k would lose over £2500.

So from a % point of view who loses the most?

Another way of looking at it: people need a roughly fixed amount to cover the barest essentials, anything left over provides a better living. Knocking £1550 off someone on £11000 is far more significant than someone on £25K losing £2.5K.

Thrugelmir

daveyjp wrote: »

Increasing minimum wage looks very responsible, but how often can the minimum wage be increased before those who currently earn just above it for doing jobs with more responsibility start to realise and demand pay rises?

What value should be given to any job? Perhaps it's the existing differentials that are at fault to an extent.

zagfles

Linton wrote: »

So from a % point of view who loses the most?

Another way of looking at it: people need a roughly fixed amount to cover the barest essentials, anything left over provides a better living. Knocking £1550 off someone on £11000 is far more significant than someone on £25K losing £2.5K.

The person on £25k easily loses most in % terms of net income. Because income after tax/NI/tax credits/child ben would be much closer than the gross wage.

Quick example - two children, no childcare costs.

Person on £11k, £10567 after tax/NI, add £9007 tax credits, £1789 child ben, total £21363.

Person on £25k, £20087 after tax/NI, add £3267 tax credits, £1789 child ben, total £25143

So the person on £11k loses £1553 of £21363, ie 7.3%.

The person on £25k loses £2533 of £25143, ie 10.1%

gadgetmind

daveyjp wrote: »

Increasing minimum wage looks very responsible, but how often can the minimum wage be increased before those who currently earn just above it for doing jobs with more responsibility start to realise and demand pay rises?

There is a lot of debate about this in both the private and public sectors. State subsidies are clearly distorting the market, but so does minimum wage, and living wage even more so. Why study hard and work hard if someone who hasn't bothered to acquires any skills will earn the same amount?

We're caught with a combination of not wanting people to live in poverty and but also having a lot of people without the skills to justify more than a poverty income without someone somewhere footing the bill.

michaels

I don't see state subsidies as distorting the market, people will work for what is available. State subsidies are absolvig the conscious of the higher paid who can not bear to see the unskilled living on what their labour is actually worth.

The minimum wage does distort the market, but the distortion is for the same reason.

gadgetmind

michaels wrote: »

see the unskilled living on what their labour is actually worth.

And there's the rub, but it's complicated. Unskilled people have never had a happy life, but the definition of "unskilled" keeps on rising.

Leaving school at 14 (or earlier, or not going at all) was common in the UK (my parents both did) and still is in many parts of the world. You gained skills in life, and/or on the job, and fast.

But modern jobs require more skills, hence to push to get more people through university, but this has backfired as many people do "cruise through" A levels and degrees just to get the bit of paper.

Meanwhile, employers want people with real skills, and real degrees. Upskilling is essential and the UK really doesn't have it right.

Meanwhile, at the bottom end of the market, those who no skills and no aspirations face "be worth minimum wage or forget it" while those prepared to apply themselves get "accept minimum wage or lump it".

Distortions.

kinger101

Linton wrote: »

From that point of view all benefits to the fully employed are a subsidy for wages. But whether they are subsidy to the employer to get cheap staff or a subsidy to the staff to make up for their failure to be economically viable is an interesting question. If you believe the former presumably you would expect market forces to require employers to have to pay increased wages to compensate for their employees loss in Tax Credit. If its the latter then the people currently dependent on Tax Credits just get poorer.

An interesting article here in The Independent indicating that it appears to be more a case of acting as a subsidy for employers...

http://www.independent.co.uk/news/uk/politics/low-wages-force-britain-to-spend-900m-more-on-tax-credits-than-planned-9919035.html

Kind of makes sense. Why would I bother paying someone a decent wage when I know the Government will top it up?

We all heard lots of businesses protesting when the minimum wage was introduced, but it didn't lead to the widespread job losses they claimed.

Blue22

michaels wrote: »

All the more reason for me to top up my pension in a single 60k 'hit' this year and probably next than to spin it out at 12k a year for the next 10

Working Tax Credit and Pupil Premia. I wonder how this works.

Children eligible for free school meals get the pupil premium for 6 years after they were last eligible.

You get free school meals if you get full child tax credits but no working tax credits.

I wonder if I could reduce my hours to 23.5 for the last month of this tax year which removes my eligibility for wtc and thus in theory qualifies my kids for free school meals.

Then restore hours for next year, lose the free school meals, get the wtc back and benefit the kids schools with 900pa per kid for the next 6 years (16.2k). Cost to me 8 days unpaid in March and loss of 350 quid of wtc. Then each time the PTA approached me to run a stall at the school fayre I could refuse, comfortable in the knowledge I had contributed much more to school funds than any of the do-gooders.

I can't be the only person who thinks your abuse of the system and your greed absolutely stinks

michaels

Blue22 wrote: »

I can't be the only person who thinks your abuse of the system and your greed absolutely stinks

Apparently hours need to change for more than 4 weeks to be considered a permanent reduction, next March has 23 working days - sorted