Ha-Joon Chang has a great article in the Guardian this morning in which he completely nails the anti-living wage lobby.
As he puts it:
More problematic than this misrepresentation of big business is [the] view — shared by many in business, government and media — that British companies cannot "afford" to pay higher wages. The subtext is that British companies have to compete with companies from low-wage countries like China, so British workers should feel lucky they are not paid even less, to match Chinese wages. In this view, whatever causes wages to rise needs to be abolished or at least seriously weakened: trade unions, health and safety regulations (the new whipping boy of the Tory right) or employers' national insurance contributions.
As he then notes:
The low-wage strategy so beloved of the British business elite — or what Miliband called the "race to the bottom" — has no future. If Britain is aiming to compete with China in terms of wages, it will have to lower them by 85%. It is doubtful whether this can be achieved even if it engineers a 30-year recession and installs the harshest military dictatorship. Worse, once it had reduced its wages to the Chinese level, it would have to contend with Vietnam, where wages are one-quarter those of China's. After dealing with Vietnam, Britain would have to face down the Ethiopias and Burundis of this world, with wages one-third that of Vietnam's, or less. Countries like Britain can never win that game.
His conclusion?:
Does Britain want to go back to Victorian times or, looking forward, become like some Middle East oil states, where a small wealthy minority is served by poorly paid workers with zero-hour contracts and minimal rights? Or does it want to reform its economic system so that its companies and government invest in raising productivity — and thus enable its workers to have decent wages, job security, and well-protected rights?
The choice seems like a no-brainer. Unfortunately, large sections of the British business and political establishment do not see it that way.
He is spot on.
And that's why we need, as some would put it, a revolution that puts people and not profit at the heart of our society. I know Ha-Joon thinks that's possible. And so do I.
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“The choice seems like a no-brainer. Unfortunately, large sections of the British business and political establishment do not see it that way.”
That’s because the short sighted get rich and shaft everyone else philosphy pervades big business, which appears to be devoid of medium to long term strategic thinking despite all the “welfare hand outs”.
It is time to show big business some tough love to break its dependency culture!
Once again the argument seems to be dominated by big business. I see another problem in implementing the living wage – most small businesses will see their profits reduced considerably.
Big businesses can afford it on their profit margins despite their protestations. Help must be provided to the smaller employers to bear the extra cost.
Stuart I take your point but how would you help smaller businesses? The usual answer is tax cuts but most of the benefit would go to the big boys.
As Richard points out if the big businesses paid what was due, this could reduce the burden on those businesses who do pay.
Secondly, poor people (those going from NMW to a Living Wage -so not well off) tend to spend and the increase in demand could generate more work and thus profits.
Thirdly, would more locally focused banks willing to give longer term investment be a partial solution?
The CBI reaction exposes the limits of pleading for a voluntary, unenforceable living wage.
In the USA people are campaigning for higher minimum wage rates, and so should we.
In addition we should demand an enforceable living wage for outsourced functions still ultimately paid from the public purse, large employers and labour providers .
“In this view, whatever causes wages to rise needs to be abolished or at least seriously weakened: trade unions, health and safety regulations (the new whipping boy of the Tory right) or employers’ national insurance contributions.”
I would take exception to the inclusion of health and safety regulations in that list. In my experience all regulation inherently disadvantages small business compared to large business. Large businesses have the economies of scale to introduce health and safety training, compliance officers, business continuity officers etc at much smaller proportionate cost than small business.
As a result, the proliferation of regulation is a competitive advantage to big business, which stops the sort of competition (for staff) that could help drive up wages.
That is not to say that such regulation is wrong: only a fool would deny that some regulation is needed. But I suspect although regulation is a cost to big business, secretly they like it, because they know that it is also entrenches their advantage and that they can use what is often a near monopoly position to pass the cost on to the punter.
I disagree
An injury is an injury whoever imposes it
“I would take exception to the inclusion of health and safety regulations in that list. In my experience all regulation inherently disadvantages small business compared to large business.”
Oh come on! You probably know full well the rules provide for that. Small businesses are not expected to put in place what the big boys have to. They only have to do what is “reasonably practicable”.
In other words, they are allowed to put measures in place within, in most cases at any rate, their budget.
The article is nonsense. No-one is seriously arguing that wages have to be reduced to Chinese levels. Having set out a strawman argument, Ha-Joon Chang then embarks on a reductio ad absurdum threatening us with dictatorships, 30 year recessions and a return to the Victorian era.
The after-tax take home of the campaigned for ‘living wage’ would be achieved by raising the personal tax allowance to £12,300 on the current minimum wage. Are we really teetering on such a knife edge of disaster?
You keep waiting for your revolution; but don’t hold your breath.
It is nonsense
Except that the CBI and others believe that is what we should
Which totally shatters your case
Didn’t John Cridland (director-general of the CBI) help to set up the Low Pay Commission? He did serve on it for 10 years. Do you have any evidence that the CBI believes that?
Let’s start with what they say on this issue? Isn’t that a good place to start?
Can you find one member of the CBI who is seriously advocating that in the UK we pay Chinese levels of wages? Please point us towards a link.
The implication is clear
I know that you neoliberals don’t do inference
In the real world we do
“The after-tax take home of the campaigned for ‘living wage’ would be achieved by raising the personal tax allowance to £12,300 on the current minimum wage.”
So are you saying that people should be allowed to earn £12,300 tax free? If HMT did that, what do you think they would do to the tax rates of those earning between £12,300 and say £40,000? Wonder who would have to pick up the drop in revenue to HMT from such a policy.
He may not be saying that but I do. Income Tax should only be levied on the guy’s income in excess of what he needs to live on. It is insane to levy income tax and hand out tax credits on the same incomes.
People like me and Richard would have to pick up more of the bill. [Admittedly he’s getting well over £40k and if I retired my income would rise above £40k, but if basic rate went up then we should expect to pay over 40%]
I do get over £40k, yes
If I was required to pay more tax as the price of living in a better society I would willingly pay
Is it the case that the middle class in China earn UK wages? Or that the the highest paid get the same in money terms as UK equivalents? Or that profit is, in money terms, the same as that in the UK?
Or is it the case that the proportion of the money income for each of those three groups is like that in the UK?
Are prices proportional?
What is the contribution of investment in machinery compared to investment in manpower? How does productivity compare?
Why do we only talk about wages?
“I would take exception to the inclusion of health and safety regulations in that list. In my experience all regulation inherently disadvantages small business compared to large business.”
Really?
In my experience, working for small biz, SMEs’ pay little attention to the H&S@W (etc) act.
It only really troubles them when coming into contact with biz that complies with that act, and requires its contractors to comply as well.
Left to their (SME) devices small biz usually relies upon “where are you working tomorrow” if the workforce questions conditions.
The enforcing authority has been trimmed to the bone, banned from certain workplaces as routine, and generally is unfit for its requirements.
Where have we heard that before?