In which I fully agree with @richardjmurphy!

And it’s also about time that Labour asked why it is so important that the state subsidise the lifestyle of so many people working for large companies who do not pay high enough wages, and have no intention of paying enough to ensue their employees have a hope of making ends meet. Because let’s be clear what these benefits are – many of which go to those in work. What they actually represent are straightforward subsidies to the profit of companies who can underpay their staff as a result, and as such they’re another shift from the poorest to the richest in society.

Quite right too.

And we most certainly shouldn\’t be subsidising the profits of large companies nor aiding the shift of incomes and resources from the poorest to the richest.

And it is indeed these in work benefits which cause this. Therefore of course we should abolish all in work benefits, to stop the subsidisation of such large corporate profits.

3 comments on “In which I fully agree with @richardjmurphy!

  1. Normally I agree with T.Worstall. But not on this occasion.

    GDP is maximised where the price of everything is free market price (including the price of different types of labour, different skills, etc). The only exception comes where market failure can be demonstrated, as can occur with monopolies, pollution, etc.

    I.e. the price an employer pays for a totally unskilled individual with a drink problem needs to be min wage or even below.

    If we as a society decide that unskilled people with a drink problem and five kids ought to get a lot more than that (and quite clearly the latter sort of individual DOES need more than the min wage), then it is up to society as a whole to come up with the money.

    Also, subsidies given to (or taxes imposed on) employers do not in the long run influence profits. The INITIAL effect is doubtless to raise/cut profits respectively. But ultimately competitive forces bring profits back to what economists call “normal profits”. We grant big subsidies to farmers and impose big taxes on distilleries. Far as I know, both categories earn a fairly standard return on capital.

    Tim adds: Well, yes Ralph. I know that, you know all of that, but R. Murphy doesn’t. Which is why it can be amusing simply to take his statements and logic at face value and see where that leads us. As I have done above.

    As proof that I know these things, I’ve even written in this vein for The Guardian of all places.

  2. “the price an employer pays for a totally unskilled individual with a drink problem needs to be min wage or even below. “

    I’m not knowledgeable about the theory behind all of this.. but I think I dispute this.

    Say I have an office which I would like to have cleaned. That clean office has a value to me.. intangible as that may be.. so I should be willing to pay someone up to that value to clean my office. Their skill level is irrelevant.. I would, after all, pay the same cleaning rate to a college dropout as I would to someone with a PHD in particle physics.

    Now.. I can’t put a number on the value of a clean office. Nobody can.. because the government has now set the price through the minimum wage and the benefits system. This means I, and let’s say my office is in central London, can have it cleaned for, assuming I need the equivalent of 1 FTE, £13k a year. Great… but what if that were simply impossible? What if there was no way I could find anyone willing to do it for that.. because nobody could afford to live anywhere near central London and work for £13k? Would I pay £20k? £25k? £30k? Would the free market decide how much we all *really* value our clean offices by giving us a stark choice between paying someone enough to exist on, or, y’know, not having a clean office.

    I suspect we’d find that the market values cleaning at more than it currently pays for it… not less. Of course, it might decide that it doesn’t and that there’s an ample supply of people willing to share a bedsit with six other people because doing so and cleaning the bogs at HSBC for £4p/h is still better than being unemployed in Rotherham/Rhyl/Rwanda. We might see that many people do, indeed, do away with the cleaners and just make staff clean up after themselves (an option I favour). It looks like Richie wants to see how this all pans out.. and I’m right with him!

  3. Surely the cleaner needs skills. They need for starters the skill to get themselves to your office at the required time, continue working until the office is adequately clean, complete that task in the available time,dust things without breaking them, not spill buckets of water everywhere- doubtless I could think of more but that’ll do.
    You might take these skills for granted- but you shouldn’t. And I suspect anyone with a drink problem is likely to lack at least some of them.
    There may be another organisation that feels they can afford a lower standard of cleaning than you, or more breakages (or has nothing breakable) don’t mind being missed out frequently, and are happy for the cleaner to over-run and still be cleaning whilst they want other work to be done. Someone to clean the streets perhaps.
    That second organisation would in a free market pay less than you, since it needed lower skills. If it has to pay the same as you- then it will probably choose the same level of skills that you do might as well, makes the organisation simpler and doesn’t cost anything. Or they may decide to do without a cleaner altogether.
    And the free market wage in London would be higher than anywhere else simply because otherwise it wouldn’t be worth the cleaners while given the expense of living in central London- So either the wage goes up, or firms do without cleaners, or they move out of London.
    Oh, and I’m not so sure of the wisdom of having skilled workers on median wage doing the cleaning- sounds expensive to me.

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