Presumed Value

First a quote (emphasis mine):

The real message of the conservative pro-life position is that we're in favor of living. We consider people--with a few obvious exceptions--to be assets. Liberals consider people to be nuisances. People are always needing more government resources to feed, house, and clothe them and to pick up the trash around their FEMA trailers and to make sure their self-esteem is high enough to join community organizers lobbying for more government resources.

- P J O'Rourke

The above quote not only illustrates part of my own beliefs in the pro-life debate but also links in to the next bit below.

I had a tweet exchange with Mr. Murphy on the subject of the minimum wage that went something a little like this (*cues piano*):

Today's announced increase in the minimum wage of 2.5% to 608p is considerably less than current rate of inflation. bit.ly/f1a0H7 (Retweeted by Mssr Murphy)

ME: @RichardJMurphy @Peston yes - where are employer[s] supposed to find the extra money to pay their employees?

@tjerubbaal @Peston if u r paying min wage your staff costs r already state subsidised massively - how much state sub do u need?

This comment came as odd, alien even; on top of enforcing higher rates of pay from employers was the government also subsidising this? How?

To this day I still await an answer from Mr. Murphy, accountant extraordinaire; but, using the magic of twitter, stream of consciousness that it is, I delved into the vast knowledge and "wisdom" of my "zealous" following to invite an answer from further afield.

It appears that being on minimum wage attracts additional "subsidies" in the form of housing benefit and tax credits to make up the shortfall; like Gordon Brown's splurge of tax credits for the middle classes down this seems to me like robbing Peter to pay Peter and Paul a moderate sum back the difference going to paying Humphrey's wage and giving him paper to shuffle, the effect here being to raise the amount of income to an "acceptable" level for those on minimum wage; below is the breakdown of what is available to the average singleton on the new £6.08 minimum wage:

So on a 37.5 hour week at minimum wage of £11856, £483.30 is added as the bare minimum, making their wage up to £12339.30.

Course you then have to take of the tax for that first:

So on an after tax income of £10,424.44 they add £483.30, making the amount those hard-pressed minimum wage earners working under the jack-boot of a top-hat wearing capitalist is £10907.74.

This gets to you by first taking off £876.20 from your wage annually only for you to get a fraction back from the state.

A few things.

Lets accept that we can (not should) guarantee a minimum wage - lets ignore the fact that the labour theory of value has almost certainly been proved a nonsense since it was first mooted (a one word answer as to why it is a nonsense: eBay) - are we really going about it the right way when we tax the pay of those we consider to require subsidy?

Further if we are admitting that the minimum wage doesn't cover the basics, something I'm naive to think if we are going to have should be a pre-requisite, then why bother with it in the first place? Why would you tax any of it? I means that like admitting it should be lower isn't it?

In fact if we are going to buy in full time to the charade that is the state subsidy of workers wages then why not abolish all benefits and fold them into one benefit system?

In a negative income tax system, people earning a certain income level would owe no taxes; those earning more than that would pay a proportion of their income above that level; and those below that level would receive a payment of a proportion of their shortfall, which is the amount their income falls below that level.

Now it could be said that eliminating minimum wage legislation and initiating a Negative Income Tax benefit system doesn't eliminate the possibility that employers will attempt to milk the subsidy for all its worth in order to reduce pay below what they would offer for that role, and you would be right; if employers can reduce wages at another's expense then they will (look at how health and safety legislation and regulations favours the incumbent, larger established businesses, dissuading new entrants to the market); likewise what is to stop someone from doing no work at all and just collecting their pay whilst staying at home? This is of course a dilemma that we face today but with the myriad benefits system, albeit currently the system dissuades people from entering work altogether

One model was proposed by Milton Friedman, as part of his flat tax proposals. In this version, a specified proportion of unused deductions or allowances would be refunded to the taxpayer. If, for a family of four the amount of allowances came out to $10,000, and the subsidy rate was 50% (the rate recommended by Friedman), and the family earned $6,000, the family would receive $2,000, because it left $4,000 of allowances unused, and therefore qualifies for $2,000, half that amount. Friedman feared that subsidy rates as high as those would lessen the incentive to obtain employment. He also warned that the negative income tax, as an addition to the "ragbag" of welfare and assistance programs, would only worsen the problem of bureaucracy and waste. Instead, he argued, the negative income tax should immediately replace all other welfare and assistance programs on the way to a completely laissez-faire society where all welfare is privately administered. The negative income tax has come up in one form or another in Congress, but Friedman opposed it because it came packaged with other undesirable elements antithetical to the efficacy of the negative income tax. Friedman preferred to have no income tax at all, but said he did not think it was politically feasible at that time to eliminate it, so he suggested this as a less harmful income tax scheme.

I would perhaps make it less restrictive on how you retain the advantage offered by your tax-free income, as I laid out here.

And can anyone really claim this would be more expensive to implement? Switching from 50+ benefit systems to one would save money in the long run.

That is of course unless you are a civil servant intent on a little empire building, less interested in what actually works rather than what gets you more unbridled power over the people you deign to serve.

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