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# £10 minimum wage? watch

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1. (Original post by The_Internet)
Nah, Im just more in to politics, and I've seen the minimum wage go up every year in line with inflation or beyond sometimes
6.5% rises would be somewhat ahead of inflation...
6.5% rises would be somewhat ahead of inflation...
Usually, inflation hits around 2% or so. 2% of 2% + 2% etc... adds up. Maybe not that high, and perhaps it's a small change, but it's not really a drastic change is it? And as before, the supermarkets will have to either raise prices, or fire people. One makes us no worse or better off, one paves the way for automation of staff.

By 2020, the minimum wage is predicted to be £9 any way

3. (Original post by The_Internet)
Usually, inflation hits around 2% or so. 2% of 2% + 2% etc... adds up. Maybe not that high, and perhaps it's a small change, but it's not really a drastic change is it? And as before, the supermarkets will have to either raise prices, or fire people. One makes us no worse or better off, one paves the way for automation of staff.
But 6.5% of 6.5% + 6.5% adds up more...

If you take 2% as the inflation rate the difference is over 4.5% a year... for five years...

That graph is leveling off, doesn't even look like it'd get to £7 by 2020... (if you take their correlation line)
Not really...

NMW today = £6.50
NLW 2020 = £9

Increase = 38.5%

GDP growth 2.3% x 5 years = 12%

How is a 38.5% increase in NMW proportional to a 12% increase in GDP?
It's not. I concede that. Clearly I've been reading unreliable sources and haven't done the necessary maths.

I still think, despite that, my concerns that the positive effects of the NLW will be negated by the tax credit cuts, and other above-GDP growth price increases, are valid ones.
5. (Original post by L'Allegro)
I still think, despite that, my concerns that the positive effects of the NLW will be negated by the tax credit cuts, and other above-GDP growth price increases, are valid ones.
Thats fine, as long as you are clear what impact the tax credit cuts will be on which groups of people. I'm not - I just understand that it'll effect some people more than others.

You also need to take into account rises in income tax and national insurance thresholds which will improve living standards.

Inflation is difficult to predict, but today its 0.0% by CPI or 1.1% by RPI, well below GDP let alone the rate of rise to be seen in NMW.
How do you compete today at above NMW?
With difficulty. We're a small company (it's just me and my old man) and we barely take home £600 a week between us. We have the advantage of living and working in a small town, so the reputation and professionalism of our firm precedes us more easily than it would if we were working in a large town or city. We let our work do the talking

However, this does have some drawbacks. First and foremost is a waiting list: if someone calls up and wants work doing then they could be waiting months until the work actually gets started because we always book work in in advance. You probably know as well as I do that people are impatient and want everything sooner rather than later, so often they end up getting someone else in to do the work.
Word to the wise: if a tradesman says that he can start a job next week, then you're either lucky that someone else has cancelled a job on him (thus freeing him up) or he has no work on at that moment in time and simply sits about waiting for calls to come in (at which point you have to ask yourself why it is that he's able to come to do the job so quickly). Those who are good at what they do are always busy.

Another drawback is price. What we don't ask for in labour costs will likely get spent on materials because it's important to have a proper sub-base put down. If someone suggests laying slabs on sharpsand, you don't want that person to be doing your garden (sharpsand moves a hell of a lot more easily than 4 inches of concrete. It's an issue of practicality, and most of the cost of building a garden gets lost underneath what the final product looks like on the surface).

Some people simply aren't willing to pay the financial price though. So it's somewhat ironic that they end up paying the metaphorical price anyway when they get someone in to do their garden who uses cheaper materials that don't last more than a few years, if that.

We're always competing with cowboys who can easily undercut us on price. What most people don't realise is that you pay for what you get, and that there's a practical reason why other firms are cheaper than us.
7. (Original post by Drunk Punx)
http://www.huffingtonpost.co.uk/2015...ushpmg00000067

Workers are going to be rejoicing across the country at this prospect... but are the business owners?

As someone who's self-employed, I'd love to be paid £10 an hour... but it'd be difficult.
How can I compete with other landscapers that are offering their services for cheaper, or even worse (on an ethical level), pocketing the £10/hour for themselves and then doing the job with sub-standard materials or lack of professionalism (these are the kind of people that wear 10-gallon hats and have spurs on their boots. You know the kind. They come from the school of thought of "What do I need a spirit level for? If it looks level, it's good enough."

And that's not even taking into account the many other small business that are struggling as it already is, without having to pay their employees a sum that would amount to being almost an additional £500 a month. No doubt that in order to cut costs, most employers would sooner sack their employees to save the business than have everyone go down with the ship. Can't have a tenner an hour if you don't have a job.
Then again, how can they run a business without employees? Food for thought.

These are merely a couple of the potentially numerous problems with this idea, though no doubt if we all got our thinking hats on we could come up with solutions to any problem that presents itself.

Where do you guys stand on this?
Why don't we just change minimum wage to £1000 pound so everyone can be rich?
Thats fine, as long as you are clear what impact the tax credit cuts will be on which groups of people. I'm not - I just understand that it'll effect some people more than others.

You also need to take into account rises in income tax and national insurance thresholds which will improve living standards.

Inflation is difficult to predict, but today its 0.0% by CPI or 1.1% by RPI, well below GDP let alone the rate of rise to be seen in NMW.
My current understanding based on some independent sources is that tax credits will leave a large group - apologies for vagueness - of people, approximately £1000 worse off this year, and progressive worse after that. I understand I need to do further research to work out whether families on the NMW will achieve a net loss or gain, but again my instinct is that Osborne's policy is going to have limited benefits for lower-income families, especially because of uncontrolled rents. But I also concede it's possible that my fears in that last clause are unfounded.
9. (Original post by Drunk Punx)
With difficulty. We're a small company (it's just me and my old man) and we barely take home £600 a week between us. We have the advantage of living and working in a small town, so the reputation and professionalism of our firm precedes us more easily than it would if we were working in a large town or city. We let our work do the talking

However, this does have some drawbacks. First and foremost is a waiting list: if someone calls up and wants work doing then they could be waiting months until the work actually gets started because we always book work in in advance. You probably know as well as I do that people are impatient and want everything sooner rather than later, so often they end up getting someone else in to do the work.
Word to the wise: if a tradesman says that he can start a job next week, then you're either lucky that someone else has cancelled a job on him (thus freeing him up) or he has no work on at that moment in time and simply sits about waiting for calls to come in (at which point you have to ask yourself why it is that he's able to come to do the job so quickly). Those who are good at what they do are always busy.

Another drawback is price. What we don't ask for in labour costs will likely get spent on materials because it's important to have a proper sub-base put down. If someone suggests laying slabs on sharpsand, you don't want that person to be doing your garden (sharpsand moves a hell of a lot more easily than 4 inches of concrete. It's an issue of practicality, and most of the cost of building a garden gets lost underneath what the final product looks like on the surface).

Some people simply aren't willing to pay the financial price though. So it's somewhat ironic that they end up paying the metaphorical price anyway when they get someone in to do their garden who uses cheaper materials that don't last more than a few years, if that.

We're always competing with cowboys who can easily undercut us on price. What most people don't realise is that you pay for what you get, and that there's a practical reason why other firms are cheaper than us.
Sounds like a sub optimal business model.

But that wasn't the point of the question.

What has the numerical figure of the NMW got to do with how you compete in the market?

If NMW was £2/hr would your life be easier?
What has the numerical figure of the NMW got to do with how you compete in the market?
Everything. If (and this hinges on this if) both members of the firm were being paid £10/hour, our services would be much more expensive. Other people might not really care being on a tenner an hour if they're making enough money to keep their lifestyle, but we couldn't let the quality of our work drop.

Suppose I'm using our own company as a bad example. Suppose we use another company: a company that actually formally employs people instead of having self-employed contractors working for them.
The owner of the company would have to start laying people off otherwise the company wouldn't be making enough money to stay afloat, and that's even assuming that they can still stay in competition with people who are self-employed and would be willing to work for a wage less than that while maintaining the same use of materials that the company does.
£10 an hour sounds great for the worker, not so great for the guy who has to pay the workers.

If NMW was £2/hr would your life be easier?
If we were working for £2/hour (and assuming that our competition was charging more than that) then we'd be able to undercut near enough everybody on labour charge with relative easy, but our quality of life would suffer such a shock to the system that it wouldn't be financially feasible to work for that wage.
We'd be earning £100 a week each, you can't really house and feed a family of 4 on that money. Well, that's a lie, given the correct circumstances you probably could, but as it is we don't live in a one-bed bungalow in a run-down area of town whilst surviving on Super Noodles.

As a slight digression: sub-optimum business model how?
11. (Original post by Drunk Punx)
Everything. If (and this hinges on this if) both members of the firm were being paid £10/hour, our services would be much more expensive.

If we were working for £2/hour (and assuming that our competition was charging more than that)

As a slight digression: sub-optimum business model how?
Yes, but so would everyone elses... and the %age difference between your higher quality service and others lower quality service would be reduced.

Why are you assuming others would charge more?

Well if you're losing business to lower quality lower cost competition, then wouldn't that be a better business model?
Yes, but so would everyone elses... and the %age difference between your higher quality service and others lower quality service would be reduced.
Because if you're happy living comfortably for £8/hour then why would you risk losing business due to financial reasons solely to line your own pockets?

Why are you assuming others would charge more?
Would you do a physically laborious job for 10 hours a day for £2/hour? It's not worth it in many ways, and in actuality it wouldn't change the reality of the situation as it is currently.

Well if you're losing business to lower quality lower cost competition, then wouldn't that be a better business model?
Not really. As I've already said, our reputation precedes us. We get work solely on our reputation and via word of mouth, we don't have adverts anywhere.

We start doing lower quality lower cost work then we start losing business due to the quality of our work. Which to me seems like a much poorer choice of business model than the one we currently operate under (during which we've normally got a steady stream of work throughout the year, weather permitting).
13. (Original post by Drunk Punx)
Because if you're happy living comfortably for £8/hour then why would you risk losing business due to financial reasons solely to line your own pockets?

Would you do a physically laborious job for 10 hours a day for £2/hour? It's not worth it in many ways, and in actuality it wouldn't change the reality of the situation as it is currently.

Not really. As I've already said, our reputation precedes us. We get work solely on our reputation and via word of mouth, we don't have adverts anywhere.

We start doing lower quality lower cost work then we start losing business due to the quality of our work. Which to me seems like a much poorer choice of business model than the one we currently operate under (during which we've normally got a steady stream of work throughout the year, weather permitting).
If you're on £8/hr how can you say you're struggling to compete with people on £6.50/hr...?

So you're not struggling to compete with them?
14. I don't really agree with the minimum wage. It distorts the true value of workers' contributions. If someone's worth £8 an hour to the company, the company won't pay them £10 just because the government upped the minimum wage - they'll make them redundant.

Additionally, smaller businesses can struggle because they can't afford the inflated labour prices, inhibiting entrepreneurship and leaving people without jobs they'd otherwise have.

Minimum wage is something that appeals intuitively but doesn't really help anyone. If we want to help people we should provide a basic income that can be supplemented with whatever labour value a person is able to contribute.
15. (Original post by miser)
I don't really agree with the minimum wage. It distorts the true value of workers' contributions. If someone's worth £8 an hour to the company, the company won't pay them £10 just because the government upped the minimum wage - they'll make them redundant.

Additionally, smaller businesses can struggle because they can't afford the inflated labour prices, inhibiting entrepreneurship and leaving people without jobs they'd otherwise have.

Minimum wage is something that appeals intuitively but doesn't really help anyone. If we want to help people we should provide a basic income that can be supplemented with whatever labour value a person is able to contribute.
Which is why unemployment rose with the introduction of the NMW and rises as the NMW rises faster than inflation?
If you're on £8/hr how can you say you're struggling to compete with people on £6.50/hr...?

So you're not struggling to compete with them?
I never said we were struggling due to wages... did you actually read my long and boring post?

- We do a better quality job with better quality materials.
- Our competition uses lesser quality materials, thus making the work they do cheaper.
- People like cheap and know **** all about the practical issues of why it's cheap, so we lose to them.

Money spent on wages and money spent on materials are two completely separate issues. The customer pays for everything, we "merely" provide the expertise in planning and installation. The customer couldn't give two ****s what happens to their money, as long as they get the job done the way they want it, and more often than not the way they want it is cheap.

Look at it this way:
Suppose we're laying a patio that requires several bags of aggregates.
We'd use 4 bags of ballast (plus the cost of the cement that goes with it) for the concrete at a depth of 4 inches.
We'd then need a bag of building sand (plus more cement) needed to make the mortar and the pointing..
We'd also be using better quality slabs.

A cowboy might use 2 bags of sharpsand at a depth of 2 inches and lay the slabs directly on top of that.

Assuming that each bag of whatever it is we're using, regardless of actual price difference in reality, costs £30, we'd need £150 to do the job and that's without the cost of the cement or labour.
The cowboy would need £60.

A price difference of £2.50 an hour in wage is irrelevant in this 'not exactly realistic but serves as a decent enough example' scenario because, aside from obvious price differences on material usage, a job of that size would take us 2 days. It'd take John Wayne maybe into the mid-afternoon of the same day.

You simply cannot compare the two as far as wages are concerned (which admittedly was a error I initially made in the OP) because the money that ends up in my pocket at the end of a job is such a minimal amount compared to the amount of money that gets spent on materials.

In all of my previous posts I've only mentioned "wages" or "labour charge".

NB: I blame Ground Force for this ****, for making people think that you can landscape an entire garden to a professional standard for a couple of grand. People have no idea of how much it actually costs to do a job properly, and our wages barely make a dent in how much it costs compared to materials when landscaping a garden.
Which is why unemployment rose with the introduction of the NMW and rises as the NMW rises faster than inflation?
Do you mean why unemployment didn't rise? There would have been more than one factor at play - it's often difficult to identify exact cause-and-effect in macroeconimics.

Here is an excerpt from an analysis of that question however:

So how come millions of workers with low productivity did not swell the ranks of the unemployed as a result of introducing the minimum wage? There are three possible reasons that come to mind.

The first is the stickiness of labour markets that results from other government intervention. In the short-term, it may be cheaper to increase a person's wages to a level that is higher than their productivity than to make them redundant. This is particularly true if they have been in the same job for a long time: redundancy payments would be high, while they may be expected to retire or move on soon. So in the short term the impact may be softened.

Secondly, if the minimum price floor is set below the market price, it will not affect supply or demand (or, for that matter, wages!). If, when it was introduced, very few workers in the UK had a marginal productivity of below £3.52/hour, it would not have had a discernable impact: it would, in fact, have been nothing more than a hollow gesture intended to burnish the socialist credentials of the New Labour government (imagine!).

Thirdly, as welfare economics teaches us, what matters to a person considering changing their employment is the next best alternative. In the case of the UK, the real minimum wage is not necessarily the legal minimum, but the amount that one would receive in benefits if one were not working. Housing Benefit alone can be worth around £5 or £6 an hour. Thus, for the poorest and least-skilled in our society, working only ceases to be the next best alternative once the wage they can command rises above the level of out-of-work benefits.
18. (Original post by Drunk Punx)
You simply cannot compare the two as far as wages are concerned (which admittedly was a error I initially made in the OP) because the money that ends up in my pocket at the end of a job is such a minimal amount compared to the amount of money that gets spent on materials.

In all of my previous posts I've only mentioned "wages" or "labour charge".
So I don't see what the problem is for you.

Increasing NMW decreases the percentage cost difference between you and the 'cowboys' thereby making you more competitive...
19. (Original post by miser)
Do you mean why unemployment didn't rise? There would have been more than one factor at play - it's often difficult to identify exact cause-and-effect in macroeconimics.
So unless you know the marginal productivity its not a useful argument.

Is your reposte to 'but your argument doesn't work' that 'oh its far more complicated than I originally said'? You can't predict what'd happen.
20. (Original post by miser)
I don't really agree with the minimum wage. It distorts the true value of workers' contributions. If someone's worth £8 an hour to the company, the company won't pay them £10 just because the government upped the minimum wage - they'll make them redundant.

Additionally, smaller businesses can struggle because they can't afford the inflated labour prices, inhibiting entrepreneurship and leaving people without jobs they'd otherwise have.

Minimum wage is something that appeals intuitively but doesn't really help anyone. If we want to help people we should provide a basic income that can be supplemented with whatever labour value a person is able to contribute.
They will surely only make them redundant if the marginal income they generate for the firm is less than £10. To act otherwise would be irrational if a firm's aim is maximum profit.

What would occur is that technology inputs (machinery) that was previously uneconomic on cost/running cost grounds might become favoured over labour, now being economic to use. So unemployment might rise as employers invest in equipment and reduce labour use.

Robots will continue to develop and may become the labour force of choice.

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