What is the connection between these two stories?

Bankers were accused of \”sticking two fingers up to austerity Britain\” after it was revealed that Goldman Sachs had handed its staff a £10bn payday as new figures showed unemployment among Britain\’s young people had hit its highest level since modern records began.

Data from the Office for National Statistics showed that one in five people under 25 were out of work by the end of November last year – a total of 951,000.

Meanwhile, the Wall Street bank Goldman Sachs\’s announcement that its employees – 6,000 of whom work in the City – earned an average of $430,000 (£268,000) in pay and bonuses in 2010, prompted calls from Labour for a repeat of Alistair Darling\’s City bonus tax.

I don\’t get it.

Youth unemployment: yes, we\’re in bad economic times and it will be the young and untrained, those with the lowest productivity, who get shafted.

It\’s also an entirely normal part of the economics of the minimum wage that it will be the young and the untrained, those with the lowest productivity, who will get shafted. So what we\’re seeing happening to youth unemployment is exactly what we would expect to be happening from the introduction of a minimum wage: don\’t forget, this is the first major recession since its introduction.

I wouldn\’t go so far as to say this proves the minimum wage is therefore a bad idea (although I obviously think it is) but the evidence before uas is indeed consitent with that position, that it is a bad idea.

But what\’s the connection between this and bankers\’ bonuses? Are we supposed to think that if bankers weren\’t getting the dosh then lots of young people would then find jobs? How would that work?

Isn\’t it actually the other way around? Firstly there\’s the 50% take the taxman gets of that dosh. But also, as good little Keynesians, we want money to move from where there is a low propensity to spend to where there is a higher one. You know, a little bit of boosting of aggregate demand?

And given that the corporate sector is stuffed with cash at present, moving money from a corporate to the employees of it will certainly increase the likelihood that that money is spent.

So as I say, I don\’t really get it: unless it\’s all just political. Look at the poor youth, look at the gilded excesses of the usurers. And policy should be based on more than that, surely?

4 thoughts on “What is the connection between these two stories?”

  1. Yes, I know some will go to the Champagne houses in France (but on the way will go through a City Pub and partly into a waitresses pocket so she keeps her job) but also the pub will need another cork popper soon (1 less unemployed) if another bank pays bonuses.

    Then the pub owner or tenant buys a car on his higher profits and the whole chain of businesses involved; parts manufacturers, assemblers, local bank (cos he also took out a loan) and their employees benefit and another employee is needed in each to meet the demand!!!

    Meanwhile the bank employee, buys a ring for his wife, a diamond necklace for his lover, and takes his kids to McDonalds, finally contracts a gardener for the mansion (1 more employed), takes his car for a service, buys winter tyres (which he didn’t used to do), books a holiday at a huntin’, shootin’ and fishin’ lodge in Scotland for his family and the in-laws (books the lover into the hotel next door), orders 5 suits in Saville Row and 10 pairs of hand-made shoes from Church’s saving them singlehandedly form bankruptcy.

    The money left over after tax, has to go somewhere and what matters is a lot will go on investment (he’ll buy some shares, adding liquidity to the system), savings (he’ll want more than the state pension, creating investment opportunities for pension funds) but a lot will pour directly back into the economy and start to push things round and round.

    I agree that the bank employee doesn’t need such money. But neither does Wayne Rooney or almost anybody else on the sort of money I was born to enjoy but for some reason don’t.

    However taking 100% of it off them (by regulating against or taxing) won’t solve the other people’s problems and will create a whole lot more of intractable ones.

    Yeah, I know it’s simplistic but that is the start of the recovery. Profitable companies, paying dividends and giving more to their employees. Somebody, somewhere has got to start buying and for that they need money.

    We get some now in tax directly and a lot more furhter down the line.

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