Living Wage - be careful what you wish for!

[Lankester Merrin]

I think you're missing the point, if the living wage was set at say £20ph (for arguments sake) to take a couple with kids (one working parent) out of benefits, what would that do to inflation?

Yes, there is a point at which increases in the minimum wage become inflationary. No, we are nowhere near that point. It would take many years of generous increases to reach that point. There is so much slack in the UK economy right now that we don't have to worry about inflation.

Whats more - the poorer you are the more likely you are to shop locally, and to use any increase in income on additional consumption in your local area. The richer you are the more likely you are to use any increase in income to spend abroad (on imported goods or foreign holidays) or to squirrel it away. Giving money to poor people grows the economy faster.

Thats why the last 30 years have seen slower economic growth in economies like Britain and the USA which have favoured a redistribution of wealth from poor to rich.

 

[AndrewP]

It's not their fault but they're in a business to make money, that's threatened by what the competition does, if they don't work out how to evolve in the light of that they'll die. That's how it works.

But just for example-one of the values of going to the cinema over the home experience is the getting out bit, the human interaction, the exchange yeah? It's more personable and bespoke than just sitting at home in front of the TV. What have they done in the example above? Made the whole experience staffed by a skeleton crew and removed the management who would have been responsible for making sure services run efficiently, which removes much of that unique experience at a stroke.

I much prefer the whole cinema experience to watching a blu ray in the house.

 

[monkeytassle]

I do get your point.

But some industries aren't a race to the bottom - they are a race to the top. The City pays enormous wages because in order to remain competitive they have to pay top dollar to get the best staff. Law firms the same. Top Drs too. The best in design, business, advertising also.

Defence/weapons research and sales, pharmaceutical research, top universities, management consulting, specialist engineering, specialists in engineering and petrochemicals. All of these industries rely upon paying higher and higher salaries to get the best people. None of them are in a race to the bottom.

The reason why I pick on the industries above, is because they represent the areas where Britain is most competitive globally - our biggest export earners, They are all industries where competitiveness is driven by higher salaries and better people (I have missed out specialists food and drink producers because they don't fit my argument). For most people in globally competitive industries, or in globally networked industries or cities globalisation has driven higher salaries, not lower.

The areas of the UK economy which have seen sharp declines in wages - the race to the bottom - are the ones which don't export and which aren't in a global race. Globalisation may have moved a small number of jobs to offshore call centres, but even if we shut the doors to the world tomorrow wages at the lower end of the market wouldn't pick up. All that would happen is those at the top doing well and paying tax would do worse.

I disagree on that. if you had the choice of paying someone £200k or £250k to do the same job the choice is easy. the key component is would another person be willing to do it for less. the answer is always, always yes.

 

[Harry Angstrom]

OK, so you're prime minister, you abolish all in work benefits. How would you ensure the lowest paid working families aren't much worse off? It's not really possible, that's why it's never been done by any government since in work benefits were introduced.

I would massively restrict the importing of consumer durables.

 

[sonson]

I much prefer the whole cinema experience to watching a blu ray in the house.

Lots of people do.

Lots more people don't though, it would seem. I can't see any other way of joining the dots between the massive fall of cinema audiences and massive increase of Netflix subscriptions and DVD/Blur Ray sales.

 

[AndrewP]

Yes, there is a point at which increases in the minimum wage become inflationary. No, we are nowhere near that point. It would take many years of generous increases to reach that point. There is so much slack in the UK economy right now that we don't have to worry about inflation.

Whats more - the poorer you are the more likely you are to shop locally, and to use any increase in income on additional consumption in your local area. The richer you are the more likely you are to use any increase in income to spend abroad (on imported goods or foreign holidays) or to squirrel it away. Giving money to poor people grows the economy faster.

Thats why the last 30 years have seen slower economic growth in economies like Britain and the USA which have favoured a redistribution of wealth from poor to rich.

Exactly, yet to abolish all in work benefits, the minimum/living wage would have to be set at around that level or higher, thus it's not possible to set a living wage and abolish in work benefits. A living wage is an impossible dream in reality as everyone needs a different minimum amount to live on depending on circumstances and even with a seemingly decent living wage, some working people will rely on benefits (or be much worse off than they are now).

I would massively restrict the importing of consumer durables.

Are you deliberately avoiding the question because you know you're wrong?

Lots of people do.

Lots more people don't though, it would seem. I can't see any other way of joining the dots between the massive fall of cinema audiences and massive increase of Netflix subscriptions and DVD/Blur Ray sales.

There hasn't been a massive fall in cinema audiences though has there? You'll see year on year blips, but overall it's steady, isn't it?

 

[Lankester Merrin]

Why not? Would someone on massive wages not pay a decent wage for a cleaner instead of having to do it for themselves?

Because wages at the lower end of the labour market aren't set by supply and demand they are set by legislation - minimum wage and benefit rates define the bottom of the market

If we removed the minimum wage and let pure supply and demand take hold wages at the bottom end of the market would plummet (lets call that the notional equilibrium market rate). There is a massive oversupply of manual labour which would drag down wages. How low is anyone's guess, but I would suspect they would end up somwhere are Edwardian wage rates - ie roughly at the rate where any further decrease would cause the workforce to starve to death.

The extent to which you would need to reduce labour supply in order to move the notional equilibrium market rate above the minimum wage would be huge, and unless you could then wages still wouldn't rise. The reduction you would need to shift the market higher than the minimum wage is much greater than simply turning away some immigrants or building a fence at Calais 100ft high.

You would need another Somme.

 

[zinedine]

Hmmm... not sure that Cinema staff are a good example of globalisation?

The Classic cinema in Mumbai might pay it's staff less, and have better popcorn. They might pass this onto the customer in lower admission prices, and a better range of catering options.

But the movie will all be shit, and they will all star Shah Rukh Khan. And it's miles away. And all they show are muscials. With Shah Rukh Khan in.

Was going to say something similar.
If wages /overheads are too high companies can offshore their business as we see with Indian call centres. Moving a cinema to India would be a bit too far for me to travel for a night out though.

 

[monkeytassle]

Because wages at the lower end of the labour market aren't set by supply and demand they are set by legislation - minimum wage and benefit rates define the bottom of the market

If we removed the minimum wage and let pure supply and demand take hold wages at the bottom end of the market would plummet (lets call that the notional equilibrium market rate). There is a massive oversupply of manual labour which would drag down wages. How low is anyone's guess, but I would suspect they would end up somwhere are Edwardian wage rates - ie roughly at the rate where any further decrease would cause the workforce to starve to death.

The extent to which you would need to reduce labour supply in order to move the notional equilibrium market rate above the minimum wage would be huge, and unless you could then wages still wouldn't rise. The reduction you would need to shift the market higher than the minimum wage is much greater than simply turning away some immigrants or building a fence at Calais 100ft high.

You would need another Somme.

good post.

 

[Lankester Merrin]

Exactly, yet to abolish all in work benefits, the minimum/living wage would have to be set at around that level or higher, thus it's not possible to set a living wage and abolish in work benefits. A living wage is an impossible dream in reality as everyone needs a different minimum amount to live on depending on circumstances and even with a seemingly decent living wage, some working people will rely on benefits (or be much worse off than they are now).

The problem is that the minimum wage is falling in value, while benefits (relative to wages) have risen in value. This has eroded the incentive to work. There is a limit to how much further you reduce benefits without causing social conflict, or cause such hunger you damage your workforce. The only way out is higher wages at the bottom of the market. But this can only happen through legislation, not through market forces due to a permanent over supply of unskilled manual workers

The other solution is mandatory work creation programmes for everyone unemployed longer than 6mths paying the national minimum wage.

 

[JAZZMANB]

It's not their fault but they're in a business to make money, that's threatened by what the competition does, if they don't work out how to evolve in the light of that they'll die. That's how it works.

But just for example-one of the values of going to the cinema over the home experience is the getting out bit, the human interaction, the exchange yeah? It's more personable and bespoke than just sitting at home in front of the TV. What have they done in the example above? Made the whole experience staffed by a skeleton crew and removed the management who would have been responsible for making sure services run efficiently, which removes much of that unique experience at a stroke. Now you'll get overworked, distressed staff having to do more work and be more focused on their own job survival and just staying above water, to the expense of having the mental space and actual resources to provide a good customer experience.

Apart from buying a ticket and buying popcorn what can go wrong on a cinema visit?even if you had a bit of bother on either its 5% of your time there,the rest is you sitting down and watching a movie.I'm all for more staff at a reasonable wage but the numbers have to add up and you've already stated why.

 

[monkeytassle]

The problem is that the minimum wage is falling in value, while benefits (relative to wages) have risen in value. This has eroded the incentive to work. There is a limit to how much further you reduce benefits without causing social conflict, or cause such hunger you damage your workforce. The only way out is higher wages at the bottom of the market. But this can only happen through legislation, not through market forces due to a permanent over supply of unskilled manual workers

The other solution is mandatory work creation programmes for everyone unemployed longer than 6mths paying the national minimum wage.

like I said, someone somewhere in the world will always do your job for less. there is a permanent pressure on unskilled wages. and even skilled wages to an extent.

 

[JAZZMANB]

Disgusting. People are not philanthropists. If they're working and can't actually afford to live on the gains of their labour, what's the point of people going to work at all? Do these companies think people actually enjoy working to make other people rich while they and their families suffer? Do they actually believe all the stuff people say in job interviews, and that first and foremost, their main, if not only, priority for the worker and their families isn't to y'know, live?

Stuff like this sickens me. It's no different to what people slag Unions off for, but from the other side of the fence. Infact its far, far worse. It's all posturing and asserting themselves, at the expense of peoples livelihoods. The people behind this are utter scum.

Lost of people on minimum wage are managing and are not "suffering" you make out the country is run on slave labour it isn't,that cinema is now paying the staff it has more, in line with rulings,unfortunately there's less of them now.Without looking at everybody's lifestyle and what their money goes on you can't make sweeping statements like you first comments

 

[AndrewP]

The problem is that the minimum wage is falling in value, while benefits (relative to wages) have risen in value. This has eroded the incentive to work. There is a limit to how much further you reduce benefits without causing social conflict, or cause such hunger you damage your workforce. The only way out is higher wages at the bottom of the market. But this can only happen through legislation, not through market forces due to a permanent over supply of unskilled manual workers

The other solution is mandatory work creation programmes for everyone unemployed longer than 6mths paying the national minimum wage.

Neither of these would be a solution. Lets use person A as an example, he/she works in the North East, he is married with three young children (all under 4) and earns circa £30,000 per year, a wage of approximately £16 per hour.

His wife stays at home to look after his three young children. Person A currently receives £580 per month in benefits.

Living wage is increased to £16 per hour and at the same time in work benefits are withdrawn, person A is £580 per month worse off. You can see how many people this could effect if the living wage was introduced in lieu of working age benefits at a more realistic level.

 

[sonson]

There hasn't been a massive fall in cinema audiences though has there? You'll see year on year blips, but overall it's steady, isn't it?

My friend is a lecturer at Edinburgh College of Art in Film Studies, it's one of the most prestigious places to do film in the UK, he's always saying they are. Admittedly I've never pressed him on it, just assumed he would know what he was talking about.

 

[JAZZMANB]

Lots of people do.

Lots more people don't though, it would seem. I can't see any other way of joining the dots between the massive fall of cinema audiences and massive increase of Netflix subscriptions and DVD/Blur Ray sales.

Yes they are linked,what can you do about?not a lot except be the best at what you do in that shrinking market.Bloke streams a movie to his tv,orders a pizza in and opens a few tins,thats 3 business's in his area not getting a punter

 

[AndrewP]

My friend is a lecturer at Edinburgh College of Art in Film Studies, it's one of the most prestigious places to do film in the UK, he's always saying they are. Admittedly I've never pressed him on it, just assumed he would know what he was talking about.

They fell last year after a particularly impressive 2012. 2013 was seen as lacklustre as far as blockbusters go.

 

[Thurston]

Lost of people on minimum wage are managing and are not "suffering" you make out the country is run on slave labour it isn't,that cinema is now paying the staff it has more, in line with rulings,unfortunately there's less of them now.Without looking at everybody's lifestyle and what their money goes on you can't make sweeping statements like you first comments

One of the reasons they're 'managing,' if they are, is because thankfully for these companies, the poor wages they pay are often subsidised through the taxpayer, dishing out money in tax-credits. Then people moan about benefits...

 

[sonson]

Apart from buying a ticket and buying popcorn what can go wrong on a cinema visit?even if you had a bit of bother on either its 5% of your time there,the rest is you sitting down and watching a movie.I'm all for more staff at a reasonable wage but the numbers have to add up and you've already stated why.

Presumably there was a reason the cinema employed a lot more people. I don't run a cinema, so I don't know. What I do know in my line of work is that a lot of money and effort is spent in making things like look simple and straightforward to the people seeing what we put out. That's the art of it really. So I don't assume that if something seems simple it necessarily is.

 

[AndrewP]

One of the reasons they're 'managing,' if they are, is because thankfully for these companies, the poor wages they pay are often subsidised through the taxpayer, dishing out money in tax-credits. Then people moan about benefits...

Exactly, then people say introducing a minimum wage in line with the living wage would mean employees wouldn't rely on benefits, except they still often still would, unless the minimum wage was stupidly high.