David Miliband has joined forces with his party leader brother Ed behind Labour plans to deliver a \”living wage\” of well over £7.20 an hour – rising to more than £8.30 in London – for millions of workers in both the public and the private sectors.
The Miliband brothers, whose relationship has been tense since Ed narrowly defeated David in the 2010 leadership contest, are working closely together on how to make the living wage – as opposed to the lower minimum wage – the new norm and a core economic policy for Labour at the next election.
I\’m not averse to the working poor getting more money. Far from it, I think it\’s an excellent idea. However, two thoughts do occur:
Labour believes that, rather than imposing the living wage in both the private and public sector, employers should be encouraged to adopt the policy voluntarily after seeing the economic and employment benefits.
There\’s a certain logical problem here. Why do you have to bribe, cajole, force, persuade, people to undertake a course of action that is to their benefit? If it is to their benefit then they would already be doing it, no? Or if they\’re too stupid to know that it is then just explaining it will prompt them to do so.
All this construction of a grand plan for rolling the living wage out rather shows that the benefits are not obvious. If indeed there are any. Precisely because you need a grand plan rather than everyone doing it because it benefits them.
The second point is that:
a \”living wage\” of well over £7.20 an hour – rising to more than £8.30 in London – for millions of workers in both the public and the private sectors.
current minimum wage is £6.19 for people aged 21 and over and £4.98 for those aged to 18 to 20.
The difference between that £6.10 and the £7.20 is almost entirely the amount of tax and NI that is taken off the working poor. The £7.20 is a pre tax and NI number. If we wanted people to have the same amount of money in their pocket as that wage rate then we could do it by having that minimum wage of £6.19 which is not taxed and which does not pay NI. The numbers really are the same, to within a few pennies per hour.
That is, it\’s entirely within the government\’s power to create an effective living wage. Simply raise the tax and NI limits to some £12,000 a year. Indeed, make it part of the law. The personal allowance will be the full time full year minimum wage. Move one you\’ve got to move the other. Raise the minimum wage, you\’ve got to raise the personal allowance. Some idiot Chancellor wants to tax the poor more heavily? Lower the minimum wage. Make this a stark choice that has to be faced.
Now, are the Milipedes proposing anything like this? Nope, they\’re not. Thus they\’re not actually being serious either.
If you want to improve the incomes of the working poor the obvious answer is to stop taxing them so damn much.