Monday, 5 November 2012

The Living Wage

A £7.20 per hour minimum wage?
So, I see that, at last, Labour's 'blank sheet' finally has something written on it. They finally have a policy. This policy is the 'Living Wage' - a proposal to increase the minimum wage to a whopping £7.20 an hour.

Fantastic, I hear people say. Brilliant. What better way to support the lowest paid than to give them more money? No one should be working on less than that, anyway!

There are two reasons why this policy is crap. The first one is that it will force employers to pay everyone working for them £7.20 an hour. If they consider that someone working for them is not worth £7.20 an hour, they will sack them. Good one, Labour. You will successfully put lots of poor people out of work, thereby making them even poorer.

It also means that people cannot sell their own labour at a rate the market will pay. If people out of work have skills which the labour market deems are worth less than £7.20 an hour, they won't be able to get a job. They will be imprisoned in poverty, dependent on State handouts, because the Government has price-fixed their only asset, i.e. their ability to work. It sucks.

Next reason that it sucks is the tax system. Currently, the Income Tax personal allowance is £8,105. Which means that, if you are earning £7.20 an hour, working 40 hours a week, 52 weeks a year, you will get paid the grand sum of £14,976. The first £8,105 of this is tax-free - the rest will be taxed at 20%. So you will owe the Government £1,374.20.

Still, that's not so bad, I hear you say. True - it wouldn't be, but it's not the end of the story. Enter the second Income Tax - National Insurance.

The personal allowance for National Insurance is £107 per week, or £5,564 per year. A lot lower than the threshold for Income Tax. So your excess over that will also be subject to National Insurance at 12%. You will therefore owe the Government a further £1,129.44. This gives Labour's total proposed tax bill to someone on minimum wage at £2,503.64.

So the net wage that such a person would receive, after the thieving Government have taken their slice, is £12,472.36. Which equates to £6.00 an hour. The current minimum wage is £6.19 for people aged 21 and over.

So, therefore, the difference between Labour's 'Living Wage' and the current minimum wage is the tax paid. Labour's position is therefore: 'we are too fucking stingy to cut tax on the poorest people in society, we'd much rather spend that money on our self-aggrandisement projects. Therefore, as a sop, we'll make their employers fork out for it instead, which will act as an extra cost to businesses during a time when many of them are already struggling. Not to mention that, by virtue of this plan targeting the lower-paid, it will also affect smaller companies much more.'

How about just exercising some fucking restraint in public spending so that you don't have to rob poor people? Fuck's sake.