Saturday, April 26, 2008

Polly is right! And then wrong (no surprises)

Bugger me, but it appears that Polly is beginning to understand, at last.
Next, why not lift personal allowances to take the low paid out of tax altogether?

Yes, a very good idea. Can it be that Polly has finally got it?

Well, yes, partially. However, she just can't resist fucking up.
It is a good idea to raise not just the youth minimum wage rate, but all of them, as they fell below inflation again this year: half of poor children are in working families, which are only poor because of low pay.

This is foolishness. There is now an excellent essay on the LPUK website about why the Minimum Wage is stupid and counterproductive.
What is rarely explained is that minimum wage laws are a prohibition, they ban most low skilled workers from getting a job, creating a situation where employers may want to employ workers, and workers may want to be employed, but the law prevents them from doing so. Supposedly, this is for their own good. It is better, they say, that they be forced from employment at the barrel of a gun and on to state benefits. To make matters worse, this dependence on benefits is often long term: because low skilled workers need to work to gain skills and experience, if they are banned from working they can't gain what they need to command higher wages. Instead of short term low paid employment, people find themselves on low income benefits long term.

One can sum it up by saying this: if the minimum wage is £5, then someone whose labour is worth less than that will never get a job. And with no job, then it is nigh on impossible to raise your human capital to a point where you will ever get a job.

Anyway, go and read the whole thing...

5 comments:

Mark Wadsworth said...

Indeedy.

Has anybody else noticed how Nulab, having verifiably fucked up everything else now have a two-pronged defence "We introduced tax credits and the National Minimum Wage'?

That's all they've got to say for themselves after eleven years? Two totally shit policies?

Diablo said...

Don't forget SureStart - that other total waste of public money. Or the vast expansion of public sector make-work - Oh! and all those bloody quangos, never mind all the 100 or so stealth taxes as well as ripping off the pension schemes. I could go on.....

Polly bloody Toynbee hasn't really got it - just like NuLab never will.

Anonymous said...

It's not as clear cut as this. You've got to balance the cases you're talking about with the mass amount of people whose pay would be abused if the minimum wage did not exist - probably a gigantic percentage of the people who currently receive it.

Devil's Kitchen said...

Which is why I urged you to read the whole thing, Anon.

Employment is a voluntary contract: if you don't like the pay, don't take the job. If no one takes the job, then the employer will have to raise the pay.

Further, as Worstall has consistently argued, if we, as a society, think that low pay is a problem then we, as a society, should do something about it.

In the US, for example, they use tax credits to help the low paid. This is a better solution [gags at the thought of endorsing government interference] than the distortion of the market that is the National* Minimum Wage.

DK


* The "National" bit is also a travesty. Whereas £5.42 an hour might be perfectly acceptable in the wilds of Yorkshire, you would be hard-pressed to live on it in London.

Miller 2.0 said...

"One can sum it up by saying this: if the minimum wage is £5, then someone whose labour is worth less than that will never get a job."

exchange value.

If the use value is higher than £5, but the exchange value (demand) less, then the minimum wage rise will have the effect of raising demand value while the employment process will still return a profit for the employer.

Thus conditions and returns will raise for the employee, but they will not be less likely to get a job.

Speaking as a socialist, any discrepancy between between use and exchange value outrages me in the first place. It amounts to little more than a deception of millions of employees, obviously denied the luxury of political economy courses.