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minimum/living wage


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#21 JohnM

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Posted 03 February 2014 - 09:17 AM

Yeah right, if you say so.

 

The only downside I can see to the minimum wage is that it has also become the defacto standard wage for the unqualified and unskilled so that some employers just use that figure rather than thinking about how much they should really be paying.


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#22 ckn

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Posted 03 February 2014 - 09:32 AM

Yeah right, if you say so.

 

The only downside I can see to the minimum wage is that it has also become the defacto standard wage for the unqualified and unskilled so that some employers just use that figure rather than thinking about how much they should really be paying.

You're absolutely right on that.  I remember having that discussion with the rest of the HR committee on the council a few years ago when they really couldn't understand why I'd ever want to pay a member of the bar staff higher than NMW, same with the janitorial staff in the council hall.  MInimum wage is just that, the lowest you can legally earn in the UK, it's not a target or a benchmark.
 

One of the arguments put to me was that the likes of Primark can sell their stuff so cheaply because they can exploit cheap labour globally meaning lost British jobs.  Again, they didn't get that some of the hands-off suppliers that Primark and other clothing companies use pay wages that have been assessed as worse than slavery, at least under slavery the slave owners provided housing and food, while these clothing suppliers paid so little that a 70-80 hour working week often didn't give enough to pay for both food and weather-proof accommodation, it was pick one of the two while ensuring your entire family worked to just survive day-to-day.


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#23 Northern Sol

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Posted 03 February 2014 - 09:50 AM

You're absolutely right on that.  I remember having that discussion with the rest of the HR committee on the council a few years ago when they really couldn't understand why I'd ever want to pay a member of the bar staff higher than NMW, same with the janitorial staff in the council hall.  MInimum wage is just that, the lowest you can legally earn in the UK, it's not a target or a benchmark.
 

One of the arguments put to me was that the likes of Primark can sell their stuff so cheaply because they can exploit cheap labour globally meaning lost British jobs.  Again, they didn't get that some of the hands-off suppliers that Primark and other clothing companies use pay wages that have been assessed as worse than slavery, at least under slavery the slave owners provided housing and food, while these clothing suppliers paid so little that a 70-80 hour working week often didn't give enough to pay for both food and weather-proof accommodation, it was pick one of the two while ensuring your entire family worked to just survive day-to-day.

Just to nitpick. You can't get worse than slavery. Salve owners actually debated whether it was more profitable to care for slaves and thus extend their working life or whether to work them to death quickly and rotate the "stock". Depending on where you were based and who you worked for, you might only survive 2-3 years as a slave.



#24 Garvers

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Posted 03 February 2014 - 01:05 PM

It's textbook economics and he's right. It's not IMO the full picture but there is nothing that he has said that isn't economically sound. He has clearly studied economics.

 

If the textbook was a colouring book.  

 

Any half-decent A level course would explain why such an understanding of wages and labour markets was simplistic at best - let alone grad level study.

 

The fact he claimed: "A simple and one of the most fundamental economic principles is that people tend to buy more when the price is lower and less when the price is higher. Yet advocates of minimum wage laws seem to think that the government can raise the price of labour without reducing the amount of labour that will be hired" proves he hasn't studied economics at all - or didn't pay much attention in class.



#25 Ackroman

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Posted 03 February 2014 - 02:00 PM

is it a good thing? should we abolish it?

Political crusades for raising the minimum/living wage are back again. Advocates of minimum/living wage laws often give themselves credit for being more "compassionate" towards "the poor." A simple and one of the most fundamental economic principles is that people tend to buy more when the price is lower and less when the price is higher. Yet advocates of minimum wage laws seem to think that the government can raise the price of labour without reducing the amount of labour that will be hired.Switzerland is one of the few modern nations without a minimum wage law.Switzerland's unemployment rate was 3.1 percent. (It does have collective bargaining agreements between its workers and management and almost the entire population is covered by it).Most people start off in entry level jobs that pay much less than they will earn after they get some work experience. But, when minimum/living wage levels are set without regard to their initial productivity, young people are disproportionately unemployed ie priced out of jobs.Unemployed young people lose not only the pay they could have earned but, at least equally important, the work experience that would enable them to earn higher rates of pay later on.Many advocates of minimum wage laws usually base their support of such laws on their estimate of how much a worker "needs" in order to have "a living wage" — or on some other criterion that pays little or no attention to the worker's skill level, experience or general productivity. So it is hardly surprising that minimum wage laws set wages that price many a young workers out of a job.Minimum wage laws can also even affect the level of racial discrimination. In an earlier era, when racial discrimination was both legally and socially accepted, minimum wage laws were often used openly to price minorities out of the job market. In 1925, a minimum wage law was passed in the Canadian province of British Columbia, with the intent and effect of pricing Japanese immigrants out of jobs in the lumbering industry. In South Africa during the era of apartheid, white labor unions urged that a minimum wage law be applied to all races, to keep black workers from taking jobs away from white unionized workers by working for less than the union pay scale. People whose wages are raised by law do not necessarily benefit, because they are often less likely to be hired at the imposed minimum wage rate. Labour unions have been supporters of minimum wage laws in countries around the world, since these laws price non-union workers out of jobs, leaving more jobs for union members.

 

I'm repeating myself from another thread and I'll take you at your word but essentially if you make labour so cheap, you have to remove the benefit system and no politician in a first world country is going to do that. 

 

The argument for increasing to a living wage is actually well founded based on historical situations where the price of a man's labour was less than the cost of the food he needed to live. The Speenhamland system from the late 1790's strove to create minimum labour costs to ensure labourers could afford their daily bread. When the price of goods was more than what they could earn they essentially relied on the state for food and shelter so didn't bother to work at all.

 

Coming back to now, what we have is a system of benefits that far outweigh what you can buy on the minimum wage. It is not a system based on supply and demand as you infer, it is based on minimum standards. The benefits system provides support for far more things now, including food and housing. Considering the crippling size of mortgage deposits and bonds for renting, a typical person on the minimum wage has no chance of affording shelter, his best chance of getting a roof over his head is to fake an injury, become a druggie or even an alcoholic.

 

Sadly work is not the route to getting the basics, society now expects them by right. 

 

So it is no surprise that the bedroom tax is now in force and that we have 1 million less people on disability benefit. The incentive for these people if they want a 3 bedroom house, is to work for a good wage but paying them a fiver an hour isn't the answer, it's paying them a tenner an hour.



#26 Northern Sol

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Posted 03 February 2014 - 04:03 PM

If the textbook was a colouring book.  

 

Any half-decent A level course would explain why such an understanding of wages and labour markets was simplistic at best - let alone grad level study.

 

The fact he claimed: "A simple and one of the most fundamental economic principles is that people tend to buy more when the price is lower and less when the price is higher. Yet advocates of minimum wage laws seem to think that the government can raise the price of labour without reducing the amount of labour that will be hired" proves he hasn't studied economics at all - or didn't pay much attention in class.

I agree that economics always comes with caveats about the fact that models are approximations and not perfect. But I think you are being overly harsh. Despite such reservations mainstream economics does predict negative consequences i.e. higher unemployment and a one-off inflation shock.

 

Mainstream economics emphasises that government interference in the economy creates distortions that lower national income. What is often overlooked is that the labour market already has significant distortions from the existance of the welfare state and perhaps a minimum wage would not introduce new distortions. But I wouldn't expect someone with an A-level or maybe the first year of a degree to know see that.



#27 Trojan

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Posted 03 February 2014 - 06:50 PM

I recall a story (maybe apocryphal) that I believe Alistair Cooke told on one of his Letters from America.  The boss of GM was crowing to the Union negotiator about how he'd be able to drive wages down with his new automated machinery.  The Union leader is said to have remarked "and when you've driven everyone's wages down, who's going to buy your cars?"


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#28 Northern Sol

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Posted 03 February 2014 - 07:10 PM

I recall a story (maybe apocryphal) that I believe Alistair Cooke told on one of his Letters from America.  The boss of GM was crowing to the Union negotiator about how he'd be able to drive wages down with his new automated machinery.  The Union leader is said to have remarked "and when you've driven everyone's wages down, who's going to buy your cars?"

I'm not sure that GM car workers were ever anywhere near 1% of GM's market.



#29 johnmatrix

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Posted 03 February 2014 - 07:11 PM

There are 7 EU countries with no minimum wage (Austria, Cyprus, Denmark, Finland, Germany, Italy, and Sweden). If we compare the levels of unemployment in these countries with EU countries that impose a minimum wage, the results are clear – a minimum wage leads to higher levels of unemployment. In the 21 countries with a minimum wage, the average country has an unemployment rate of 11.8%; whereas, the average unemployment rate in the seven nations without a minimum wage is about one third lower – at 7.9%



#30 Northern Sol

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Posted 03 February 2014 - 07:21 PM

There are 7 EU countries with no minimum wage (Austria, Cyprus, Denmark, Finland, Germany, Italy, and Sweden). If we compare the levels of unemployment in these countries with EU countries that impose a minimum wage, the results are clear – a minimum wage leads to higher levels of unemployment. In the 21 countries with a minimum wage, the average country has an unemployment rate of 11.8%; whereas, the average unemployment rate in the seven nations without a minimum wage is about one third lower – at 7.9%

That's a bit crude. For instance that list contains many of the richest countries in the EU (Germany, Austria, Denmark, Sweden, Finland) but only one country that is poor by EU standards (Cyprus). You would need a rather more in depth analysis to draw a conclusion e.g. is unemployment higher in countries with a minimum wage than you would "predict" based on their income per capita?



#31 Phil

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Posted 03 February 2014 - 08:14 PM

If you can't afford to pay your workforce a decent wage ( I know we can discuss what that is later) then you shouldn't be in business


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#32 Northern Sol

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Posted 03 February 2014 - 08:30 PM

If you can't afford to pay your workforce a decent wage ( I know we can discuss what that is later) then you shouldn't be in business.

Unfortunately we'd never have got out of the feudal age with that one. Actually we'd never have entered the feudal age either. Unfortunately we need to be able to walk before we can run.



#33 Bob8

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Posted 03 February 2014 - 09:54 PM

There are 7 EU countries with no minimum wage (Austria, Cyprus, Denmark, Finland, Germany, Italy, and Sweden). If we compare the levels of unemployment in these countries with EU countries that impose a minimum wage, the results are clear – a minimum wage leads to higher levels of unemployment. In the 21 countries with a minimum wage, the average country has an unemployment rate of 11.8%; whereas, the average unemployment rate in the seven nations without a minimum wage is about one third lower – at 7.9%

Wages in Scandinavia would be horrendous by your thinking.  They are very high wage economies, with strong investment in labour and an affluent working class - not something Britain had in the late 80's early 90's


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#34 Phil

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Posted 03 February 2014 - 09:56 PM

Unfortunately we'd never have got out of the feudal age with that one. Actually we'd never have entered the feudal age either. Unfortunately we need to be able to walk before we can run.

 

 

 But we are out of the feudal age. There is really no excuse for business to not pay decent wages.


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#35 gingerjon

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Posted 03 February 2014 - 09:59 PM

If you can't afford to pay your workforce a decent wage ( I know we can discuss what that is later) then you shouldn't be in business

 

Correct.

 

But, sadly, some people take pride in believing their economics textbook beats basic humanity.


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#36 Saintslass

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Posted 03 February 2014 - 10:20 PM

 But we are out of the feudal age. There is really no excuse for business to not pay decent wages.

Isn't the issue here though what qualifies as a 'decent wage'? 



#37 shaun mc

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Posted 03 February 2014 - 10:32 PM

Where I work, the HR/Finance departments are almost apoplectic at the thought of having to pay a raise in minimum wage.
They are now working full time trying to find ways to alleviate the increase by whatever means - increasing hours, removing bonus payments, makung employees pay for uniform etc.
The employees this applies to will not have had a wage raise for 2.5 to 3 years

Edited by shaun mc, 03 February 2014 - 10:33 PM.


#38 Northern Sol

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Posted 03 February 2014 - 10:42 PM

 But we are out of the feudal age. There is really no excuse for business to not pay decent wages.

Human societies are generally only capable of incremental increases of a few percent a year. Not much but it adds up over time. But much better than "since we can't double this salary, we'd better shut the business".



#39 Northern Sol

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Posted 03 February 2014 - 10:48 PM

Correct.

 

But, sadly, some people take pride in believing their economics textbook beats basic humanity.

No, I believe that reality beats ideology.

 

If you believe that you can run a business and pay a fair wage then good luck to you. But it seems rather odd to run down those with businesses that don't meet the standards that you shy away from yourself.

 

In reality, economic progress is measured in small percentages - situations slowly get better - if you want dramatic change, you'd better discover oil.

 

The thing that you don't get is that you don't really know what economics is. Economics is simply a framework for evaluating the consequences of a particular action so that you can see whether it is likely to achieve what you hoped it would and what the side effects are going to be. The point is to make people's lives better. If the results aren't quite as predicted then take the data and go and make a better model.

 

Does a minimum wage make people's lives better or not? Are the downsides to it worth any gains? If the answers are "yes" then fine but otherwise to hell with "basic humanity"!

 

Now if you think you know a better way of running an economy than actually using data and models then I'd like to know what it is. Certainly economies that are based on doing something deemed "moral" whilst ignoring economic theory and real life data have tended to end badly.


Edited by Northern Sol, 04 February 2014 - 12:11 AM.


#40 Northern Sol

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Posted 03 February 2014 - 10:50 PM

Isn't the issue here though what qualifies as a 'decent wage'? 

For me, the issue is whether the concept of "decent wage" improves or hinders the situation. Social protection wins lots of platitudes but it doesn't always make people's lives better. For me the point is whether you can improve the lives of everyone, the poor included.






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