In a report due to be published by the Economic Research Council it will be argued that the minimum wage and unemployment benefit should be set at level reflective to the area in which they are received. The argument is, essentially, that the poorer areas are being subsidised by the ricvhers arears, and, because of the disparity in living costs the system actually maintains dependency in some parts of the country.
Now clearly such an argument will upset the sensibilities of the Left in terms of the idea of universal benefits. Additionally there would I expect be those on the Right that would be wary of promoting such reforms given the electroal political ramifications.
It seems self-evident to me that in some parts of the country the welfare system that we have does actually create depdnency whereas in others it does not. The phrase "making work pay" used to be calling card of New Labour until Frank Field was fired. The question of course is if such localisation of benefits was introduced would we be the effect?
If for example the minimum wage was lower in Wales than in London, would that encourage business to move to Wales? The result of that inward investment would, would it not, be to create a rise in living costs in that area? At some point the business would move on again to a place where labour was cheaper once more.
Business would not be wrong to do that of course, but what would happen in the area it had moved to and then deserted? It seems to me that whilst such a proposals sounds, on the face of it, entirely sane, it's implmentation would be logistically odd with potentially strange and unpredictable outcomes.
This is not to say of course that the premise about the dependency culture the we have due to differences regionally isn't accurate. I'm just not sure how workable the proposed solution would actually be.
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"If for example the minimum wage was lower in Wales than in London, would that encourage business to move to Wales? The result of that inward investment would, would it not, be to create a rise in living costs in that area? At some point the business would move on again to a place where labour was cheaper once more."
If there wasn't a minimum wage at all then what would we call this? A market perhaps?
So, err, what's the problem?
A fair point of course. But there is a minimum wage, and, to be fair, scrapping it is not something any party will do particularly quickly.
I doubt very much whether the minimum wage affects the location of investment within the UK - because a few percentage points' variation is nothing compared to foreign wage competition.
The key thing about getting people from welfare into work is to make sure that benefits aren't generous enough or too quickly withdrawn to make getting a job undesirable.
The easiest way to 'make work pay' would be to do something to stimulate the creation of worthwhile jobs. You know, the sort of work that disappeared along with the heavy industries to be replaced by stocking shelves in supermarkets or answering phones in a call centre in many parts of the country. It's damned depressing to go see what's in the job centre in some parts of this country, it really is.
With the near infinite supply of migrant labour that this government allows it is scary to think how low wages would fall if there was no minimum. The migrants tend to be young and willing to put up with squalid accommodation or even none at all. This is not just a problem for low and no skilled jobs. It is finding its way to all skill levels.
Labour has caused massive damage that will take generations to play out. Those on the right say, “It’s the market”. However, with infinite supply, prices would drop to zero.
differential rates of income tax, national insurance, VAT and IHT, CGT would also be a good idea.
Dear all, Dan Lewis from the ERC here, many thanks for all your interest - the links to the original paper can be found here http://www.ercouncil.org/B&O%2037.1.pdf (Pages 9-27) and powerpoint of the paper here http://www.ercouncil.org/Professor%20David%20B.%20Smith.ppt
Lefties aren't necessarily behind any wave on this one. This is about a living wage and whether South Wales, Ashington or Easterhouse this will be more than the current debacle of a minimum wage which is yet to wreck the economy. There's a link to a Number 10 petition at my post.
(How can I get my countdown widget to work? I'm sticking the code in a text box in blogger at the moment ... but it's not displaying the countdown ...)
If this happened where would the rich get their servants?
If the rich paid there servants more to keep them in London - where would the postman etc live?
The rich surely get their servants from overseas and they don't get the minimum wage under various exemptions and arrangements. And the Post Office are trying to move to housewives and students doing your mail for pin money.
I think the idea may have merit.
It costs a lot to move a business and it is usually a tipping point that causes such a move. But the businesses that move in to an area are just noise. Most job growth in an economy comes from organic growth. A new call centre in Wales employing 200 bods is nothing compared to all existing call centres adding 8 to 28 bods to their operations. Likewise, if pressures build up in a locale, the tipping point for moving away from the area will be different for each business. So one business leaving starts to take pressure off the remaining. But so would the influx of migrants…
The idea of a tipping point applies to labour as well. For instance it can take a lot for some families to move town in search of work. They may leave behind support networks, extended family, cause disruption to children’s schooling, the spouse’s employment, etc.
I think the Lib Dems brought this up in committee in 1997, but obviously it didn't garner much favour at the time...
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