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Minimum wage
Former Member
Posts: 1,876,323 The Mix Honorary Guru
Does the minimum wage restrict the allocation of jobs? I.e. an employer would hire an extra staff member and an unemployed person would work for the lower fee, but because of the minimum wage this 'transaction' never takes place.
I think it does and so does more harm than good in some cases (like mine where I would be happy shelf stacking for £4 an hour as a stop gap but there we are!) :grump:
I think it does and so does more harm than good in some cases (like mine where I would be happy shelf stacking for £4 an hour as a stop gap but there we are!) :grump:
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I see your point perfectly, but everyone would only work for what they thought was an acceptable wage. The current system 'sells short' or something in the market, just based on a level economics.
In a boom its not so bad as real incomes (and profits) are rising and so jobs are being created so unemployment remains relatively low. But try to force high wage prices when the economy is in a slump and people will just find themselves out of work
TBH that's an extremely selfish attitude. You might be a middle class student who lives with their parents and can afford to work for £4/hour in the holidays --- but, what about people on the existing minimum wage already finding it extremely difficult to pay rent, food bills, etc?
And what if some people, probably immigrants from a poorer part of the EU, were willing to work for even less than £4/hour? The minimum wage is a very important safeguard.
The minimum wage is low as it is anyway - so I don't think it's an obstacle to employers taking people on. We've had it for nearly 10 years and none of the predictions of the original doomsayers, the Conservatives, CBI, etc have come true. Things might be looking grim at the moment but scrapping the minimum wage isn't going to help the economy: but it certainly would impoverish those already on a very low income.
The argument is that on one side, minimum wage prevents exploitation of labour. That is a fair and valid point. The other argument, is that it sets a price floor and so marginally there are people who would have worked for a little less and employers who would have employed for a little less that never happen, that is lost employment / income for the whole of society.
It really does depend on your perspective though, and I personally have always believed in a free market approach. It's just more at the front of my mind -now- that I am in the position I am. I feel like the UK is somewhat of a welfare state where it can be difficult for many people (and I have lots of friends and family who have experience etc. who are evidence of this, but thats just my 'circle' so may not necessarily be true for the whole of the UK, but thats how we make our opinions isnt it
Plenty of times I've seen on this forum people asking for job advice and being told they're better off not working because they will lose many of their benefits.
Again, I resent your implication of selfishness, everyones opinions are formed by their own circumstances, I'm not blaming it on asylum seekers or some other nonsensical reason, I'm acknowledging the economy is slowing down and also conjecturing that price floors may restrict the ability of the free market to react to this leading to unneccessary unemployment. Of course, if I was in a job this thought is never really going to cross my mind. And I'd probably be arguing the opposite if I was on the minimum wage.
To an extent, but their is a difference in the margins.
Take a farmer, without paying minimum wage he might employ ten people for ten days to pick his strawberrys and get 100%
However if it costs more to employ people, he might decide 90% is enough and he'll employ 9 people for ten days.
As I said it's marginal, but the marginality depends on how high the minimum wage is.
Why would he do that? Assuming that the tenth worker picks as many strawberries, the only thing that is effected by the minimum wage is the percentage profit. A lower percentage means you need to do more volume, not less. So an increase in wages means that he'd need to increase his production to make the same absolute profit, not reduce it. You would also assume that his other costs would remain fairly constant whether he picks 90% or 100%, so it's even more important to run at capacity.
Even the USA has a minimum wage (admittedly extremely low - although varying between states). Before the minimum wage in Britain, under the 'free market approach' you believe in, there were a lot of people getting paid £1-£2 per hour - sometimes even less.
It's nothing personal - but of course, it's selfishness and I'm surprised you can't see that.
I agree there needs to be intervention in order to make sure that people do get a fair deal but my main point is that where is the right place to draw the line? I think on a boom you get more leeway with it because you're essentially chasing growth (so the freemarket tends to outpace minimum wage anyway) but in recession with the market shrinking it creates a price floor that in natural circumstances the price would drop but its artifically held high. An example could be the price of onions. Recession means less income means less demand for onions so shops with onions and farms producing onions accept a lower price for them to achieve maximum revenue on the onions they have and avoid where possible waste. But then the government has stepped in and said the price of onions is fixed, so even though shops have loads of onions they cant shift and people cant afford to buy them (well, in marginal cases), they are prohibited from reducing the price.
In the same way a shop sells onions, an individual sells his labour. So despite me being willing to sell it for less than the minimum because there is a shortage of willing buyers and tbh my labour is just being wasted as is, (more on that in a moment) the government has imposed restrictions. These are fine normally because they stop people being conned into a low price but when the market is shrinking... people are negatively effected.
It was supposed to be an argument looking at the state of the economy. Why is it that we have generally high paying jobs with highish levels of tax (22% I think of what you earn, then 17.5% of what you spend, more on fuel, more on alcohol etc. - not that i implicitly disagree however) that goes into providing lots of welfare for 25% of the working population.
The problem is wider than just whats best for each individual, its that 25% of people of working age who are not working (I don't know whether this includes housewives/husbands - it should because they are working / contributing) are not putting anything into the economy. The official unemployment is around 5% which means people who are actively seeking employment (so you must have applied for a job within 6 weeks and be signed on - although many unemployed people do not necessarily fit that criteria - me for example), so this 5% are able and willing to work (and, if they are doing nothing with their labour, why not sell it for £1 an hour, or £2 an hour? Surely better than sitting at home) but because of the way the system works they're better off at home.
I do not see what would be wrong with income top ups working roughly like this (as an example, dont take figures literally):
Base receiving: £50 income support
If you earn £30 a week regardless of hours you lose half of that in income support i.e. £30 earned income + £35 income support = £65 --> you are better off for having worked (which cost you nothing in real terms since you were just wasting your labour anyway and potentially de-skilling). This would go up until when you earn £100 you have no income support.
Minimum wage perpetuates this situation because it is unlikely someone will be able to work for £25 a week because of the fixed prices of income. So it becomes a decision of either full time happy employment (that becomes limited due to demand) or staying on the social completely because anything else you lose out. In the meantime you are becomming a less and less attractive option to an employer because you haven't been in work for x weeks.
I see it more of an issue has aroused my thinking based on my own self interest and situation, I always think selfishness implies ignorance of others situations and don't think that's necessarily true.
The minimum wage is not artificially high. People are struggling on the minimum wage - recession or not, people on already low incomes cannot easily afford a cut in their minimum wage... and if it doesn't keep up with inflation the minimum wage will fall.
I see your point - but I think that the hardship abolishing/freezing the minimum wage would generate, outweighs any possible benefits.
I think we're all selfish to some extent, it's not an attack. However, whilst is impossible to entirely separate our own personal interests from our beliefs, the 'right' thing may not accord with our own personal interests. i.e. it would be in the interests of students living with their parents and unable to find a job for the summer to work for a bit less (and therefore get a job) - that doesn't make freezing, or even abolishing the minimum wage 'right'. I think you're right that there is a case for greater flexibility with regard to benefits and working - but any compromise on the fundamental principles behind the minimum wage means a return to the very dark days of people getting paid £1 or £2/hour.
The people needed to get the 95% make him the profit, an extra person to pick 5% doesn't earn him any profit, because the 5% he picks pay the wages. The reason is that very seldom is every extra person added on going to equal the same amount of work
So for example the first person he employs can clear 15% of the field, the next person clears 14% (because he's sometimes ging over ground picked by the other). by the time you get to the last person he's only add 5% value. Depending where the wages are set that 5% may be worth more than the person wages, but the higher the wages are the less likely that the extra 5% becomes worthwhile.
Because the wage is determined by the marginal product of labour. As fg says the person on the margin produces the least due to diminishing returns but he also sets the wage. Its efficient for the value of the last unit produced to be equal to its cost which means the last person earns what he produces. When the minimum wage goes up the wage is no longer equal to the marginal product and a farmer will not pay money to a person who is producing less than is being paid.
What Shyboy's talking about is the ability to undercut everyone else. Because if you're willing to do the job for £4 an hour, and so want the minimum wage reducing to £4 an hour, then all of the existing staff wages would just go down in line with that (maybe over time), and there'd still be no jobs.
Incidentally, £8 an hour picking butternut squash. :thumb: I sawd it on the tele.
But few firms do hire the number needed to do the job to perfection. I often go shopping and the shelves aren't 100% full. usually it's minor enough not to matter and I buy an alternative instead (or my wife does - I just push the trolley). Tesco could hire more people, though and keep these shelves 100%. however they've worked out that the extra staff needed to keep them at 100% costs them more than the extra profit they get by having them at 99% full. If the staff cost more they might decide to reduce them and keep the shelves 98% full.
As I say, it's at the margins and in macro-economic terms the the minimum wage is low enough it doesn't make much difference. There's other things which have more impact (which is why France with better employment protection has less people employed who can take advantage of it).
But if the minimum wage goes up, people have more money to spend in Tesco, and so they can afford to put their prices up accordingly (which they will have to do to maintain the same profit margins). As long as there's a direct relationship between the amount people earn and the amount Tesco charges for food, the exact amount of the minimum wage isn't especially important. If the minimum wage (and the wage bill) goes down, the Tesco has to drop their prices accordingly or risk losing all of their business. And in that instance, they're keeping their margins, but their absolute profit is less, and the market share shifts slightly towards the higher end of the market.
My sister was working for £2 an hour on a work placement which was a lot like slave labour, but the benefits really outweighed the negatives (except in her circumstance she got picked on by one of the bosses):
- on the job training, shes now a level 2 hairdresser whatever that is (she can do cuts, dyes, etc. but not advanced perms like afros)
- some spending money at the end of the week, you dont get that at college!
- learning what it is about to be in a job 9 - 5 and having to work hard for a living, my first job was hell and I stand by that, but if I went back now it might be different because I've a very different work attitude
I think you have missed a major, if not the major, element out. Prices are measured in paper, and the supply of that paper has been accelerating over the last few years.The last figure I saw published officially was 14% per annum !
There's no point. You'd just kick off some bad ass inflation and upset the economy until it found equilibrium again at the same-ish place it's at today, only diffrence that you've got higher numbers.
Like when I was doing my shitty low end job I got paid 900 ISK, once 50 ISK was a stellar amount. It's always going to be the same shit, just different numbers.
That's only true if they spend it in Tescos. Likelihood is people are more likely to spend it elsewhere. the wealthier you get the smaller proportion of your money goes to Tescos or any food shopping and the more goes on other things.
Minimum wage is so low, I still consider it exploitation.
I am currently on £6.50 per hour and that is not enough to realistically live in London. Minimum wage is lower than that.
I think that either people on under £13K should be taxed less, or minimum wage in London should go up to £7 per hour.
Invariably every proposal for a decent annual rise is met with similar warnings of doom. Invariably all such warnings are greatly exaggerated or plain lies.