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B341 - National Minimum Wage Rates Bill 2010 Watch

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    As this point was ignored, i'll raise it again. The current take home pay given the 37% tax rate on all earnings introduced by the poverty abolition bill means that before any change in the minimum wage rate, those on the lowest wages are receiving less money per hour than their real life equivalent. So it is not true that this is merely reducing the minimum wage to what it would have been if only increased by inflation since its introduction.

    A more progressive tax banding would rectify this; reducing tax on the lowest earnings, whilst lowering the minimum wage rate in tandem would have no impact on individuals at the bottom of the earnings scale, reduce business costs, and be covered by a slightly higher rate of taxation for higher earners. This would raise employment, and in the long term be beneficial for everyone.

    And the idea of matching minimum wage to inflation is actually a reasonable enough one.
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    (Original post by CyclopsRock)
    Hmm, that's odd. So you'd be against it if it were going up - because it'd cause greater unemployment - and against it were it going down - presumably because some workers would be getting less. So you really think the NWM is at a perfect level of equilibrium right now? You think it's maximising earnings for people who's labour isn't worth it, whilst simultaneously minimising unemployment due to higher cost of employment?

    Hmmm, I love partisanship.
    On the contrary - I think that at this crucial time of transition towards a fairer system of welfare, it's better to make sure that NMW stays at this level for the short-run.
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    (Original post by Don John)
    On the contrary - I think that at this crucial time of transition towards a fairer system of welfare, it's better to make sure that NMW stays at this level for the short-run.
    But we do have a fairer system of welfare, that's the point...
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    (Original post by Anony mouse)
    I don't blame you Sandys. I used to think the NMW was just obvious common sense but after being persuaded to the contrary by other Libertarians a couple of years ago, I became quite interested in this area.

    The reality is that millions of people are still paid below the NMW for the same reason that the illegality of selling cannabis hasn't resulted in a shortage of the drug: that is, it still goes on only that now it goes on illegally which means such workers are are not protected by other employment rights entitlements whilst working in dangerous conditions with no proper training.

    The importance of lowering the NMW is to prevent it hitting employment. As the Work Foundation had already warned prior to the global financial crisis, the rate of growth in the NMW should be no faster than that of average earnings. Otherwise where the NMW is too high for the market, especially for particular regions across the country, it can lead to job losses.
    Then surely we should be tackling contravention of employment/immigration laws? Obviously that's far easier said than done, but I don't believe that we should refrain from putting legislation in place because a certain number of people will choose to act illegally. I also think it's a bit simplistic to say that the minimum wage reduces employment levels. As simon pointed out, this didn't happen when it was introduced, and studies have also suggested that there's not necessarily a link.
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    (Original post by sandys1000)
    Then surely we should be tackling contravention of employment/immigration laws? Obviously that's far easier said than done, but I don't believe that we should refrain from putting legislation in place because a certain number of people will choose to act illegally. I also think it's a bit simplistic to say that the minimum wage reduces employment levels. As simon pointed out, this didn't happen when it was introduced, and studies have also suggested that there's not necessarily a link.

    Of course, I have already said that the minimum wage per se does not cause unemployment. My point was that when it is too high for the job market, that is when it can lead to unemployment hence why Gordon Brown had drawn up plans to vary the minimum wage region by region across Britain.

    We are already tackling contraventions of employment laws. The point I was making was that it creates an illegal black market whereby workers are not only paid below the minimum wage but, due to the illegality of this, they are left vulnerable without their full employment rights.
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    (Original post by Eru Iluvatar)
    As this point was ignored, i'll raise it again. The current take home pay given the 37% tax rate on all earnings introduced by the poverty abolition bill means that before any change in the minimum wage rate, those on the lowest wages are receiving less money per hour than their real life equivalent. So it is not true that this is merely reducing the minimum wage to what it would have been if only increased by inflation since its introduction.

    A more progressive tax banding would rectify this; reducing tax on the lowest earnings, whilst lowering the minimum wage rate in tandem would have no impact on individuals at the bottom of the earnings scale, reduce business costs, and be covered by a slightly higher rate of taxation for higher earners. This would raise employment, and in the long term be beneficial for everyone.

    And the idea of matching minimum wage to inflation is actually a reasonable enough one.
    Actually I see what you're saying but your conclusion is wrong, Eru. We are concerned about the gross pay when comparing to levels of inflation since the NMW was introduced. Of course, this would be rather unsatisfactory if the immediate taxation rate is 37%. However, unless I'm mistaken, the personal income tax allowance still remains regardless of the PAA.
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    (Original post by Anony mouse)
    Of course, I have already said that the minimum wage per se does not cause unemployment. My point was that when it is too high for the job market, that is when it can lead to unemployment hence why Gordon Brown had drawn up plans to vary the minimum wage region by region across Britain.

    We are already tackling contraventions of employment laws. The point I was making was that it creates an illegal black market whereby workers are not only paid below the minimum wage but, due to the illegality of this, they are left vulnerable without their full employment rights.
    Do you actually support the level set out in this bill then?

    I understand what you're saying, but I still think that more could be done to tackle the 'black market' in employment.
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    (Original post by sandys1000)
    Do you actually support the level set out in this bill then?

    I understand what you're saying, but I still think that more could be done to tackle the 'black market' in employment.
    I do support the level set out in this Bill although we have discussed regional variations in our Government sub forum. However, as I'm sure you'll appreciate that would make for a far more complicated system than we currently have in real life and feel that priority is firstly to make modest adjustments to the NMW for now.
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    (Original post by Anony mouse)
    I do support the level set out in this Bill although we have discussed regional variations in our Government sub forum. However, as I'm sure you'll appreciate that would make for a far more complicated system than we currently have in real life and feel that priority is firstly to make modest adjustments to the NMW for now.
    Oh, as a Libertarian, I expected you to be opposed to the idea of a minimum wage.

    Yes, despite differences in living expenses etc, overall I don't think I would support such a system.
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    (Original post by sandys1000)
    Oh, as a Libertarian, I expected you to be opposed to the idea of a minimum wage.

    Yes, despite differences in living expenses etc, overall I don't think I would support such a system.


    Well it's not that I am particularly for a NMW so much as I am in favour of lowering it.
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    (Original post by Anony mouse)
    Actually I see what you're saying but your conclusion is wrong, Eru. We are concerned about the gross pay when comparing to levels of inflation since the NMW was introduced. Of course, this would be rather unsatisfactory if the immediate taxation rate is 37%. However, unless I'm mistaken, the personal income tax allowance still remains regardless of the PAA.
    3 Tax and National Insurance
    (1) All income above the calculated minimum shall be taxed at thirty-seven pence in the pound.
    ... is the text from the PAA. This means all income above the PAA (which is the calculated minimum referred to) is taxed at 37%. No personal income tax allowance at all mentioned, so even someone working minimum wage for a couple of hours a week has to pay 37% in tax on that money earned.
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    (Original post by Eru Iluvatar)
    Due to the tax changes also brought in by the PAA, this brings minimum take home pay to 3.08 an hour... this is both a disincentive to work, and an exploitative rate of pay. The overall hourly rate of pay on TSR is less therefore than the real life equivalent, which is something i think needs to be considered by anyone thinking about this bill.
    Let us deal with the two claims.

    (1) It is a disincentive to work.
    Well, if that is the case, companies will need to offer above the minimum in order to attract workers. As far as I'm aware the Bill is not stipulating people must be paid that amount, merely that it is a floor. If people don't wish to work at that level, they won't, and companies will raise wages to attract workers.

    (2) It is an exploitative rate of pay.
    Really? That is entirely subjective, what one might feel exploited on is perfectly reasonable to another. The question usually would be over balancing these two things, is it right that one person should not be allowed to work at a lower wage rate to try to get a job so that another does not feel exploited? Perhaps you wouldn't work for £4.88/hour, feeling exploited. Many others would.

    However, the key point is that in the context of the PAA (providing a decent standard of living - you may not like the vagueness but that is because it's not the place for Acts of Parliament to set out a precise list of goods & services, that is for statutory order and departmental ministers - the Act merely guarantees transparency so that it is in the hands of the voters), people can choose not to work and can survive with a decent life, and thus if they choose to work, it is not down to them being forced to, and thus they cannot be exploited at a level they are choosing to work at.

    Furthermore, this Bill is only reducing it to the level it was introduced at by New Labour (in today's prices). If it wasn't exploitative then...
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    However, the key point is that in the context of the PAA (providing a decent standard of living - you may not like the vagueness but that is because it's not the place for Acts of Parliament to set out a precise list of goods & services, that is for statutory order and departmental ministers - the Act merely guarantees transparency so that it is in the hands of the voters), people can choose not to work and can survive with a decent life, and thus if they choose to work, it is not down to them being forced to, and thus they cannot be exploited at a level they are choosing to work at.
    And this is the reason i'm not dismissing the bill out of hand, because even though i disagree with you on the effect of the PAA, it does provide a level of income (whether or not its sufficient is another debate). But if you want the bill to bring in a minimum wage equal to that when it was originally introduced by labour, in today's prices, you'll have to amend income tax, otherwise people are earning much less per hour than they were under the original introduction of the minimum wage. I reply to this point first, because the rest of your points i don't think we will find agreement on, simply because of our differing views on the PAA, with no real world figures to see its effects either way, means my arguments are coming from the point of view that the PAA isn't sufficient, where yours are on the basis that it is.

    (Original post by simontinsley)
    Let us deal with the two claims.

    (1) It is a disincentive to work.
    Well, if that is the case, companies will need to offer above the minimum in order to attract workers. As far as I'm aware the Bill is not stipulating people must be paid that amount, merely that it is a floor. If people don't wish to work at that level, they won't, and companies will raise wages to attract workers.
    If this is the case, then there is no harm in the minimum wage at its current level. If you didn't think wages at the bottom would drop, then you wouldn't be proposing this bill, because it would do nothing. The drop in minimum wage means that those who need to work (and with unemployment as high as it is, the power is very much with the employer), will have to work for what they can get.

    (2) It is an exploitative rate of pay.
    Really? That is entirely subjective, what one might feel exploited on is perfectly reasonable to another. The question usually would be over balancing these two things, is it right that one person should not be allowed to work at a lower wage rate to try to get a job so that another does not feel exploited? Perhaps you wouldn't work for £4.88/hour, feeling exploited. Many others would.
    Furthermore, this Bill is only reducing it to the level it was introduced at by New Labour (in today's prices). If it wasn't exploitative then...
    Again, the power imbalance between employers and employees means that many people don't have that option. If its be exploited, or not work at all, people who need work will have to work, even at an exploitative rate. And its £3.08 after tax, as i already explained. The only way to make your claims accurate is to amend the tax system accordingly. If you're willing to do this, then i could possibly support it.
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    (Original post by Eru Iluvatar)
    And this is the reason i'm not dismissing the bill out of hand, because even though i disagree with you on the effect of the PAA, it does provide a level of income (whether or not its sufficient is another debate). But if you want the bill to bring in a minimum wage equal to that when it was originally introduced by labour, in today's prices, you'll have to amend income tax, otherwise people are earning much less per hour than they were under the original introduction of the minimum wage. I reply to this point first, because the rest of your points i don't think we will find agreement on, simply because of our differing views on the PAA, with no real world figures to see its effects either way, means my arguments are coming from the point of view that the PAA isn't sufficient, where yours are on the basis that it is.
    Well indeed, but we can use the figures from the original costing (+ inflation, obviously) as an approximate for the costs of the PAA (since that is how it was designed).


    If this is the case, then there is no harm in the minimum wage at its current level. If you didn't think wages at the bottom would drop, then you wouldn't be proposing this bill, because it would do nothing. The drop in minimum wage means that those who need to work (and with unemployment as high as it is, the power is very much with the employer), will have to work for what they can get.
    If indeed. As it is, yes I do think that given the large real increases in the NMW over the past 11 years (pushing the floor higher) and the economic downturn (pushing the equilibrium lower) have pushed the NMW to a point where it is a major factor in causing the lowest skilled to be unable to find a job. I make no bones about it and wouldn't otherwise propose or defend the Bill. That doesn't change the fact that if people aren't willing to work at the minimum, companies will pay above the minimum to attract them, thus any arguments about disincentives to work are quite baffling.

    Again, the power imbalance between employers and employees means that many people don't have that option. If its be exploited, or not work at all, people who need work will have to work, even at an exploitative rate. And its £3.08 after tax, as i already explained. The only way to make your claims accurate is to amend the tax system accordingly. If you're willing to do this, then i could possibly support it.
    Well this is of course, coming from the premise that you have to work. Which is exactly what the PAA *does* stop. That in itself shifts the power imbalance towards the worker, since they do not need a job while companies still need workers.

    So, who are these people who need work - since everyone is guaranteed a decent living anyway?

    As for changing the tax system, that would be rather odd, considering the PAA is designed as a negative income tax system, just one based on needs (goods & their prices) rather than arbitrary figures. The administration of it is slightly different in that money is given regardless and then taxes are taken separately, but it operates as one.

    The key figure is that paid by employers, if we're talking about employment effects, and so no, it's not necessary to bring the tax changes in to get rid of the unemployment effects happening because of the NMW at a high rate.
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    (Original post by simontinsley)
    Well indeed, but we can use the figures from the original costing (+ inflation, obviously) as an approximate for the costs of the PAA (since that is how it was designed).
    This is a problem, because if i remember correctly, there was lots of disagreement about the initial figures before they were removed (initial quoted figures didn't include rent etc.).

    Well this is of course, coming from the premise that you have to work. Which is exactly what the PAA *does* stop. That in itself shifts the power imbalance towards the worker, since they do not need a job while companies still need workers.

    So, who are these people who need work - since everyone is guaranteed a decent living anyway?
    :rolleyes: As i stated already, this is where we disagree on the effects of the PAA. You think it guarantees a decent living, i don't think it does. The bill is too vague to know, and there is no real life evidence one way or the other, so that argument holds no weight with me.

    As for changing the tax system, that would be rather odd, considering the PAA is designed as a negative income tax system, just one based on needs (goods & their prices) rather than arbitrary figures. The administration of it is slightly different in that money is given regardless and then taxes are taken separately, but it operates as one.
    Not really, its just a matter of adjusting tax bands, so to speak. If the PAA is a negative income tax, then a second band following that which is tax neutral, where money is earned, and not taxed, followed by the third band where money is taxed (currently at 37%) .

    The key figure is that paid by employers, if we're talking about employment effects, and so no, it's not necessary to bring the tax changes in to get rid of the unemployment effects happening because of the NMW at a high rate.
    But, and this is where our priorities are different, changing the tax rate is necessary to stop those on the lowest incomes losing out. You might not care about that, but i do. I'm not arguing that there wont be benefits to business of a lower NMW, but at the cost of the individual on low income. I am arguing that if we reduce minimum wage, as well as reduce taxation on low wages, so that for an individual on low income, the result is neutral, this means that businesses benefit from a lower NMW, those on low income are not pushed back further in terms of income, and by altering tax bands so that higher earners pay a slightly higher rate of tax on higher income, it means that the government also comes out tax neutral.
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