A living wage

Well, you wouldn't start from here would you. What a bizarre place the modern UK has become. Gordon Brown's huge extension of tax credits and the general extension of welfare benefits has led to a large percentage of wages effectively being subsidised by the State. The damage that this has done cannot be under-estimated. Brown was a brilliant marxist economist, he knew full well what he was doing. Now so many people are dependent on state hand-outs that any threat to take them away can result in protest groups like UK Uncut being formed.

Ed Milliband's weekend whimsy has been to suggest that companies pay the living wage rather than the minimum wage. the difference is quite a lot, but far less then people imagine when taxes are taken into consideration - almost half the increase would go in NI and income tax anyway, plus benefits would be reduced for the higher income - leaving receivers of ed Milliband's promise probably no better off. The companies too would benefit for one year, so hardly and incentive to change or much of a reward for doing so. all this smoke and mirrors avoids the key question in any event, why are wages so low?

Well, firstly, free movement or labour has not helped the lowest paid as they face the heaviest competition for work from unskilled immigrants. Secondly, with input costs rising as the Pound has de-valued 25% since the recession, businesses have had to cope with increase costs, with prices hard to rise in a deep recession, wages took the brunt of the crunch. Thirdly, there are taxes, it is very expensive to employ people, less so at the bottom, but still expensive. This is why firms have moved to zero hours contracts and other ways of trying to avoid full-time recruitment, because the costs are prohibitive. Fourthly and finally, taxes are too high, this is related to the third point for employer taxes but also applies to the employees, too much of their wages go on taxes on council tax, fuel duty, VAT at 20% and so on - even though income taxes are low and nearly non-existent for low income households, other taxes are high, reducing their disposable income to be spent on real goods and services.

What is interesting is that Labour are sort of trying to come up with a partial solution to point three, but ignoring the other three. Current politics has become a game of band aid policies, with seemingly little attempt to alter under-lying dynamics. Above I have laid out the obvious, immediately changeable issues, with even mentioning the standard or schooling or the type of jobs being generated by the economy, both of which are harder for a 5 year Government to do too much about.