Friday, 8 November 2013

A Wage for Living.


In an article last week Polly Toynbee listed some of the items which the living wage is designed to support:

  • a man should have a pair of shoes and a pair of trainers
  • a child should have four outings a year (eg to a zoo, farm or Christmas pantomime)
  • for each child parents should be able to afford a £50  birthday present plus £50 for a party.
The male footwear allowance seems a bit on the stingy side, and the children's birthday allocation wildly lavish.

However, to bring the latter into perceptive I apply my "divide by 40" rule.  This is based on the fact that when I began teaching in the late 1950s we new recruits were paid just under £500 a year.  Today they are paid around £20 000 a year, or 40 times as much.  In other words today's pound in my mental calculation of the true value of things, is equivalent to the old sixpence (that's 6d, not the modern pence.  There were 20 shillings  in a £ and therefore 40 sixpences).

On that scale a birthday present worth just over a 1950s pound doesn't seem to way out.  Similarly my current pre 09h30 bus fare to Bradford, £2.90, is reasonably near to the 1/3d or so that it used to be, although  the Guardian, now at £1.40 (= about 8d) is almost three times the 3d it was in my college days, when I started reading it.

It is argued that the national minimum wage, now £6.31 an hour, is insufficient for families to achieve the socially acceptable standard of living and a "living wage," now deemed to be £7.65 an hour (more in London) is needed.  Employers are to be urged to pay this living wage and Labour leader  Ed Miliband has suggested  that employers who do this should be given a temporary tax break as a carrot

Although I'm sure that any increase in wages will be a help to those at the bottom of the pile, mostly, I believe, women in such jobs as cleaners, it would not be sufficient to maintain  that socially acceptable lifestyle if the employees were on a zero hours contract or working part-time when they really want a full-time job.  Weekly or annualised rates for the living wage, £298 and £15, 496 respectively outside London,  are more meaningful.

Ed Miliband's suggestion of a temporary  tax-break has caught the headlines.  If this is administratively feasible (and doubts have been raised:  will it, for example, go to employers who already pay the living wage, or just those who up their ante in order to get the allowance,  and do we have enough civil servants to do the checking when we don't seem to be able to employ enough in HMRC to collect the taxes already owed?) it may be a good temporary nudge, since once wages have been raised they are difficult to lower again.

However, although negative income tax (now called working tax credit)  was the Liberal policy from the 60s and 70s to top up low incomes, I have reservations about the state's subsidising employers, thus lowering their costs and increasing their profits.  What is really needed is Keynesian pump priming to stimulate the economy to provide all the jobs that are needed at decent wages.

4 comments:

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  2. Thanks, Daniel, for your kind comments and the tip about another good blog, but I'm happy to say that I'm reasonably satisfied with my "dating, financial and emotional lives" (or beyond caring) so won't find it of much use.

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  3. If it was all so easy , that you pump a load of money into the economy to solve all our problems, we wouldn't be in this mess. And then when a the government does adopt a Keynesian scheme - Help to Buy - Keynesians condemn it.

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  4. Pumping "a load of money into the economy" is precisely what the government has done, Bernard, via QE, and it has largely gone into shoring up the banks' reserves and inflating asset prices rather than into the real economy.

    What is needed is carefully directed government expenditure to stimulate the real economy. Permitting local authorities to issue bonds to finance the building of social or mixed housing, (preferably on brownfield sites) would be a good example. Expenditure on improving the existing railway network (rather than HS2) would be another. Both would create employment fairly quickly and stimulate demand.

    As for "Help to Buy," the main reason that it is criticised is not that it is a piece of Keynesian pump priming but that it will help stimulate another housing bubble and lead to a lot of unsustainable private debt: the very problems that caused the crash in the first place. In terms of stimulating demand the main beneficiaries are the estate agents and lawyers specialising in conveyancing.

    In addition, "hope to buy" wil do very little to stimulate the real economy, since it applies to existing houseing rather than just new ones (so only a limited stimulus to the building industry) and I believe it can even be used fo second homes, thus not helping the "first time buyers" for whom it was intended.

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