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Marc
(last edited May 27, 2015 03:33AM)
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May 27, 2015 03:33AM
nothing like standing by and believing in your principles eh?
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Will wrote: "How easy life is at the bottom, according to the press...Or maybe not, actually.
http://www.theguardian.com/society/20..."
And one thing that jumped out to me was
Her husband Micha is a manual worker in a nearby factory on the minimum wage, and has been doing overtime to try to bridge the financial gap. As a result, the £52 a week working families tax credits the couple used to receive has been cut to £26. At the same time their rent, council tax, and utility bills have increased. Now it’s a struggle to make ends meet.
My lady wife once calculated that because of various circumstances, like a daughter at university and whether or not she got a grant etc, plus whatever the equivilent of tax credits was at the time, I was paying 86p in the pound on every extra pound I earned.
And that was as a basic rate tax payer!
Blair/Brown produced a horribly expensive system of not helping people who actually wanted to work :-(
Marc wrote: "nothing like standing by and believing in your principles eh?"In politics, the first thing that gets trampled into the ground is principles.
To quote the great Groucho Marx: "Those are my principles, and if you don't like them... well, I have others."
That doesn't balance anything at all, it just shows that some people don't know the difference between absolute poverty and relative poverty.
Jim - I don't know if there is an easy answer to that one. It's the welfare trap. On the one hand, we we want to pay people who can't work a decent amount to allow them to live. But if we pitch this at too high a level we can dissuade them from working. If we pitch it too low then their quality of life would suffer.That's where the minimum wage comes in, but it too has its problems. Set the minimum wage too high and it will make goods and services more expensive. This could push employers to look for things like automation to reduce the number of workers that they employ or transferring jobs to countries with lower wage levels.
China makes 90% of the world's computers and 70% of the world's mobile phones. The average factory worker in China earns $1.36 an hour. Your iphone, ipad or apple watch? It would have been made by someone in China being paid $1.50 an hour for an 11 hour shift - conditions that would be illegal in America or the UK.
That invented-in-Britain Dyson vacuum cleaner? They have been made in Malaysia since 2002.
We all want cheap goods. But the only way they can be this cheap is by making them in sweatshops, which in turn makes it difficult for UK companies to compete paying UK workers at a higher level.
To be fair, I don't think this problem is confined to the Blair/Brown government. No Government has cracked this one yet, and I think it's only going to get harder.
Michael Cargill wrote: "That doesn't balance anything at all, it just shows that some people don't know the difference between absolute poverty and relative poverty."Sorry Michael, I wasn't saying that the article itself is unbiased, I was presenting it as a balance to the previous two Guardian articles that were left wing biased.
Will wrote: "That's where the minimum wage comes in, but it too has its problems. Set the minimum wage too high and it will make goods and services more expensive. This could push employers to look for things like automation to reduce the number of workers that they employ or transferring jobs to countries with lower wage levels."One of the problems with having a low minimum wage is that there is no incentive to improve productivity. The result is British companies using equipment that has been replaced twice or more by nations with higher productivity per capita.
The other point you mentioned Will is that employers automate to reduce the workforce. Whilst this is true of some organisations, others take it as an opportunity to increase output and therefore profits.
In the 1970s we failed to do either - BL, Lucas, GKN, the names roll on, which gave our competitors in Europe and the Far East our car market. We continue to do this. The Pendelino was developed in the UK. We are now importing the same technology built into Hitachi trains.
That's a good point, Geoff. It still rankles with me when I see what BMW have done with the Mini brand. Admittedly, the bigger Minis look a bit ... odd. But there is no denying how successful it has been.Why couldn't the UK have done something approaching that? We had a potentially world-beating car but we did next to nothing to develop it from 1960 to 2000 other than trying to replace it with the horror that was the Metro. Meanwhile the Germans turn it into an aspirational lifestyle brand, covering everything from coupes to 4x4s.
It's a bit of a cliche, but we often seem to have the original ideas but then not get the implementation right.
It's worse than that, Will. Austin-Morris and later BL sold the Mini at a loss until 1969. I may be a little out with my amounts here, but they were selling the Mini 850 (The first one) for £320 when they were costing £360 to make.The amazing thing was they were doing this when there was no competition for the car.
There is a very good book here - http://www.amazon.co.uk/British-Leyla...
that is a very good outline of the successes and failures in British Leyland. My suspicion is that this was a thesis by a man in the motor trade for his MBA, who decided to offer it as an ebook. It is a very well researched piece that puts the company in the context of the greater industry boundary of the 1970s and early 80s.
For someone who was born and raised in Solihull, it is truly heartbreaking and like the feces and the rotating object, everybody gets some.
I'm actually a fan of substantially raising the minimum wage.The benefits trap operates at the margin where a working family is getting top up tax credits to raise their income to a decent level. If the employer paid that in the first place, then:
1) The benefit trap falls away and longer hours pays benefits.
2) The welfare budget pays out less
3) The Revenue take from PAYE increases
The argument that it costs jobs is specious. If the need for the employee exists, then he/she needs to be remunerated adequately. Otherwise they are simply there as government subsidised labour to massage the employment statistics.
Automation has been coming for many years - we have just never bothered to address the social issues it is going to raise, and continue to raise
and yet for all the automaton, those in work are working longer hours not shorter, through fear of being culled.
Will wrote: "The argument that it costs jobs is specious. If the need for the employee exists, then he/she needs to be remunerated adequately. Otherwise they are simply there as government subsidised labour to massage the employment statistics....."I think this depends on the sector. Take for example a Nurse, a road sweeper, a dustbin man. Here the need for the employee exists (These people are vital) and can only be met within the UK.
However there are some areas where we face international competition. Take vegetable production. Because our costs are higher than those of our international competitors, UK vegetable self sufficiency has dropped by 20% (figures from memory so don't trust them)
If I had to pay someone £15 an hour rather than £10 a hour to do the job, the job wouldn't get done. I cannot produce the goods at less than my foreign competitor and the retailer will buy from the competitor. To an extent my business over the last twenty years is a tale of expanding with hired staff, then being rejigged to run without staff. Yes we produce a lot less, there's two less jobs, but I'm no worse off, in fact I'm actually better off because I have less hassle. My quality of life is better. Whether literary critics in the future will decide that literature would have been better served had I stuck to milking cows is a question only the future can answer :-)
There are areas that need dealing with, a friend of mine is a carer, who'll end up on less than minimum wage because travelling time is paid at a lower rate.So her job is essential and it's a growing industry (for want of a better term).
But her contract is negotiated between her company and the local authority, so the local authority is obviously happy to have people providing their services at less than minimum wage.
Marc wrote: "and yet for all the automaton, those in work are working longer hours not shorter, through fear of being culled."In agriculture it's pretty obvious when you look at it closely that automation came in to replace men who moved out of the industry into other sectors that paid better.
Put the man you've got left on a tractor and he can replace the two ploughmen who're now working in the Ship yard.
I'd be interested to know how much automation in other sectors replaced people who'd already left
I agree with Jim. UK manufacturing companies find it incredibly difficult to compete with companies producing goods overseas. Goods are much more expensive to produce in the UK because we pay more than the £1.15 per hour that Chinese employers pay.Politics aside, that was the root cause of the Miners' strike of the 1980s.
It's also one of the reasons why 3D printers could be such a game-changer.
Those UK manufacturers could benefit from an increased minimum wage.Our economy is based on spending and lower earners spend more of their income than higher earners, so increasing the money in those people's pockets would boost the economy.
Michael Cargill wrote: "Those UK manufacturers could benefit from an increased minimum wage.Our economy is based on spending and lower earners spend more of their income than higher earners, so increasing the money in t..."
The economy as a whole would benefit. The problem is that individual businesses might or they might not. Experience shows that with food, whatever people say, 90% buy on price. Organic sales show that, we have less land in organic now than we had in 2009.
So if I were to pay my staff more, they would go out and spend, but as the population buys food on price, my income falls and I lay people off.
Basically it doesn't help the economy if all that happens is we suck in more cheap imports produced by cheap labour abroad.
There are forces pulling in several different directions. If we had a higher minimum wage then, sure, some individuals would have more money to spend. Money that they would then plough back into the economy.But those higher wages have to be paid for with higher taxes (for workers in the public sector) or higher prices (for workers in the private sector). And that would counteract the extra money that the low paid workers would have to spend. Their wages have to come from somewhere.
Sorry, but it's not as simple as it might seem.
Of course it isn't simple.There will, of course, be an inflationary effect, but it certainly wouldn't be on a 1:1 ratio that would leave everyone exactly as they were before.
No, it would be worse than 1:1. Let's say that we give an imaginary worker a pay rise of £1,000 per year. That pay rise has to come from somewhere. If the employer is a private sector worker then the extra money has to come from increased prices or sales.
This person then takes that £1,000 and spends it. Some of it will go in taxes, which contributes to the exchequer and so is good.
Let's say that the person spends the rest of the money on an ipad. Part of his money will go to pay the salary of the salesman or woman plus some VAT. Both of which are good.
But the bulk of the cost of the ipad will go to Apple. That will generate profits for an American company and help to pay the salaries of the Chinese worker who made the ipad.
So it has cost the UK economy £1,000 to give this person a pay rise. It hasn't affected their productivity - they aren't working any longer hours or producing more value. Some of that pay rise comes back to the UK and some of it goes abroad.
It's a net loss for the UK. It has very little to do with inflation.
What we really need is for that employee to generate sales which bring money into the economy, either through increased productivity or exports.
The minimum wage is important for humanitarian reasons. There is also a moral argument for the redistribution of wealth. But just giving everyone a pay rise does not help the economy. It could and should be part of a wider package of economic reforms but on its own it's not a solution.
Will wrote: "There are forces pulling in several different directions. If we had a higher minimum wage then, sure, some individuals would have more money to spend. Money that they would then plough back into th..."Will, your argument is incomplete as it leaves out the effect on the economy of reduced welfare spending and higher tax revenues. Tax rates would not in fact need to rise as a result of these factors, because the increased PAYE revenue takes care of the increased spend by public services.
On an unrelated matter, whilst on the train on Tuesday, I saw a piece claiming that a government department had been fined several thousand pounds for over spending on outside consultants.Can anyone tell me (as the leader writer clearly could not) just what is the point of that exercise? Who is doing the fining, who actually pays it, and why?
Will, raising the minimum wage isn't giving everyone a pay rise, only those who were earning below the threshold beforehand.Your imaginary worker's payrise would be paid for by the increased economic activity that would be generated as a result of the increased spending.
If a company employs 500 people, not all of them will be earning below the minimum wage. If increasing the minimum wage causes their wage bill to increase because 50 of their staff are now earning more, they will benefit because of the extra money coming in from the thousands/millions of other workers who now have more money in their pocket.
Will - I left several factors out to keep it simple. Increasing the minimum wage might take some people out of benefits (positive), but it could also prompt some employers to reduce the number of people they employ (negative).Then we have the inflationary effect of increased wages (negative) versus reduced overdrafts and credit card debts (positive).
Plus increased spending on activities with negative health benefits such as cigarettes and alcohol (negative) versus the increased spending on healthy activities such as exercise (positive).
In other words, it is complicated. Economists have been debating it for hundreds of years. Try googling "minimum wage" or "redistribution of wealth" to see the arguments on both sides.
Michael - ah no, sorry. It's not that simple. An increase in the minimum wage is a redistribution of wealth. Someone has to pay for it. So while your low-paid worker will have more money in his pocket, that money will have to come from other people having less.If our economy was a closed system, then an increase in minimum wage would mean a transfer from the wealthy to the poor. If we gave a pay rise to fruit pickers, apples would become more expensive. Then we might argue that there is a net economic benefit because the poor fruit pickers would spend a greater proportion of their income on goods and services than the rich spending money on cider. That's a classic argument for the redistribution of wealth.
But our economy isn't a closed system. We buy a lot of foreign goods and use overseas services such as call centres. This means that some of that redistribution of wealth isn't just from the UK rich to the UK poor, it is from the UK to China or America.
Think about Dyson vacuum cleaners. A great British product, yes? Er, no. More than 10 years ago, Dyson moved its production from the UK to Malaysia where production costs are 30% lower. That lost around 800 British jobs.
There are arguments for increasing the minimum wage. I happen to think it's the right thing to do and I'm proud that we have a minimum wage. But it's not as simple as people make out. There are both gains to the economy and disbenefits.
No-one, least of all me, is claiming that anything is simple when it comes to the economy.
Will wrote: "On an unrelated matter, whilst on the train on Tuesday, I saw a piece claiming that a government department had been fined several thousand pounds for over spending on outside consultants.Can any..."
Yes it is about as stupid as fining a hospital or Rail track.
They ought to just sack those who screwed up
Michael Cargill wrote: "No-one, least of all me, is claiming that anything is simple when it comes to the economy.":-)
One of the wisest comments on the tread
I studied Economics at A-Level and hated it. Seemed to me no one, least of economists, had a Scooby what they were supposed to be able to analyse let alone predict. First assumption of microeconomics, that the consumer is rational. Falls down right there at the first hurdle. Politically, seems to me that as we are in a global market, a government can do very little to influence things positively at home in the economy, but certainly has the capacity to bring things crashing down.
Apropos of manufacturing, I've just installed my latest ebay purchase. It's a solar powered fountain for my pond, includes both the pump and the solar generator.No, the flow of water is a little less than i had hoped for: but it cost me a whole £ 14, delivered.
How much must it have cost to build? If it is chinese, then the cost of shipping it over here must be more than the materials!
ask an MP how much a non-solar powered one cost. Pretty sure that's one of the expenses claimed for last time round re a duck pond in his garden
Will wrote: "How much must it have cost to build? If it is chinese, then the cost of shipping it over here must be more than the materials! ..."Shipping, as in moving by ship (as opposed to truck or rail) is cheap. (And at the moment amazingly competitive)
One quote I saw was "Freight cost from Shanghai / Ningbo to Felixstowe for a 20ft container is just under GBP1000." The load is 18 to 21 tons. By my reckoning that's about 5p a kilo
I haven't a clue about the costs of parts and materials but the labour for assembling is probably very cheap.
Working for Apple they're on $1.50 and hour so a pound an hour is probably about right. With the components fed to them how many of your pumps can they build in an hour?
My daughter is off to study economics at uni in September. I reckon she'll sort us out actually.
Rosemary (The Nosemanny) wrote: "My daughter is off to study economics at uni in September. I reckon she'll sort us out actually."She's probably still young enough to know it all :-)
Yup. Scary thing is she does (brain the size of a planet)
Jim wrote: "Michael Cargill wrote: "No-one, least of all me, is claiming that anything is simple when it comes to the economy.":-)
One of the wisest comments on the tread"
Our Mikey? Wise?
Now there's a first.
Jim wrote: "Will wrote: "How much must it have cost to build? If it is chinese, then the cost of shipping it over here must be more than the materials! ..."Shipping, as in moving by ship (as opposed to truc..."
Funny that. Friends here who are leaving are being quoted $9000 for 8 cubic feet to America.
I told them it'd be a quarter of the price if they'd use metric. :D
Patti (baconater) wrote: "Funny that. Friends here who are leaving are being quoted $9000 for 8 cubic feet to America. I told them it'd be a quarter of the price if they'd use metric. :D p..."
Will your friends be flying stuff out? Remember this is sea freight all the way.
I see in the news that Boy George plans to sell income producing Capital Assets belonging to the nation, and describes this as a 'saving'.Which school of economics is this, then?
It's the "tory shaft'em and to hell with the future" school of economics Will.
Income producing assets such as the Royal Mail ... when we are all using the internet more and sending less by post? Hello?Getting out of the postal business is one of the smartest moves that the Government could make. The bigger question is whether anyone would want to buy the Government's share.
Letter volumes are of course significantly decreasing but parcel post volume is going up by 4% pa - all that internet shopping!Somehow this all spookily reminds me of Dr Beeching.
Sorry Rosemary, the two cannot be compared. The deliveries business is very competitive indeed, as proven by Citylink going out of business at the end of last year. Beeching on the other hand, tried to beat the Pareto Curve. This is otherwise known as the 80:20 rule. Beeching observed that 80% of the Rail business was conducted on 20% of the track. He thought that he could beat the odds by closing the smaller branch lines. Unfortunately, as always happens with these attempts, the 80:20 rule merely resets itself but at a lower level.
This happened in the case of the railways. People were forced to drive to a mainline station instead of getting on a branch train and changing. Those people, once they were in their cars, didn't bother to go to the main stations. Instead they drove straight to work, reducing business on the main lines.
To be fair Geoff I am sure you are probably right but nothing will convince me that any government thinks beyond the next general election. How refreshing would it be to have a system that was more forward thinking :)
Oh and how much do I wish I had invested in a cardboard packaging and boxes business 20 years ago??
Good analogy. It reminds me of Beeching too.Before Beeching we had a frankly unsustainable rail network. It had largely grown up in a chaotic way, as different rail companies competed against each other. This meant that we had many parallel lines between two destinations. It was a system heading for utter collapse.
Beeching realised this. He pruned the network down to something more manageable and sensible. In some cases he may have pruned too far. In other cases he didn't go far enough. Although he is much derided, history will show that he was right.
If we hadn't had the Beeching rail cuts we probably wouldn't have any rail network at all now. It would have collapsed under the weight of its operating debts.
Beeching is a popular hate figure - except to people who understand the rail industry. If we put sentimentality to one side we can see that a Beeching style adjustment was inevitable.
I agree Rosemary, government is like a pendulum, it swings right or swings left but there's never any forward movement.
That's why we need a benign dictatorship.
Michael Cargill wrote: "That's why we need a benign dictatorship."Are you suggesting monarchy?
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