Tuesday, September 15, 2009

Pay freeze? Not for the wealthy!

In real terms, both minimum wage and dole money are taking a cut. Executive pay, in the meantime, is up by 10 per cent. By Stan.

Supporters of pay freeze have been getting cockier for a while. A few months ago, while attacking the UK's "onerous employment legislation" (with not an ounce of irony), Luke Johnson in the Telegraph argued that:

"An employer-organisation can go to hell in a hand basket, but God forbid a single employee has to take even a small reduction in salary! Yet in a deflationary environment, the value of constant money is rising – and with unemployment soaring and firms struggling to survive – why shouldn't workers share the pain?"

The Torygraph's target? Well, like the Daily Mail, nurses, teachers and ordinary workers, guilty of asking for a 2 per cent rise during a recession.

And yet, little is said about the fresh news that executive pay has risen by a whopping 10% in the last year. Just to keep into perspective, remember that in the meantime, the National Minimum Wage is going up by 1.1% -below the inflation rate for the second year running.

Also, the new Inflation Report for 2009 indicates that people on lower wages are feeling the inflation disproportionately: essential goods, in fact, have suffered the highest rates of inflation in the last year. As the Left Economics Advisory Panel remarked: "With the Government and private sector employers calling for pay freezes for low paid workers, this should be a wake-up call to trade unions and workers who once again are being forced to pay for a recession not of their making".

But this is not all yet. If you were amongst the 750,000 people who lost their job in the last twelve months, you may have discovered that unemployment benefits in the UK are impossible to live on: they amount to 10 per cent of average earnings, according to a new TUC study.

Not only that: in real terms, benefits have been getting thinner. In 1979, dole handouts were 18% of real earnings. In 1994, the proportion was 14%. Now, 10%.

The Institute of Directors confirmed last month that "almost a million people were working part-time because they could not find a full-time job, meaning the impact of the recession on employment was "even greater" than unemployment figures suggest.

In the words of TUC General Secretary Brendan Barber: "The view that we need low benefits to encourage people into work makes no sense in a recession. The vast majority of the unemployed are desperate for jobs, and need no encouragement."


PhilH said...

Excellent post.

There was an interesting but circular debate on You and Yours today, about the lack of trust we have for politicians, banks, media, etc.

Nice to see today that Labour seem to have admitted that their idea to not let frugal renters to keep their £15 of extra housing benefits, wasn't thought through very well (Labour? Not thinking new policies through first?).

It would have saved them a whopping £140m, I think they said on the news. Which sounds a big number, but tiny in the context of the National Budget.

But then, they probably thought it's a good idea to cut the parts of the Budget that they think people won't notice.

Only people will notice, because it's those little things that make a big difference to individual people.

Anonymous said...

Today IDS's Centre for Social Justice is advocating making work worth the hassle. Claimants taking a job with a salary of less than £15,000 find themselves worse off than if they remained out of work once state support is taken away.
That is true.
The problem with the Centre for Social Justice is that it argues in favour of removing benefits. Its basic tenet is that people are on benefits because they want to which, in a recession, is a borderline criminal idea to advocate.

PhilH said...

Iain Duncan Smith was on Radio 4's Today programme just now talking about that.

His proposals sound sensible and logical, but you're right, I didn't like the way he phrased things when he was talking about people getting back into work.

There was a constant underlying implication that people on benefits don't want to work and need convincing that work is worthwhile.

In some cases, true no doubt. But not most. Some people can't afford to work, some people will be a little bit scared of work because they've been out so long.

They're proposing interim tax breaks or benefits for people that continue for a period after they find work.

Of course, once those benefits stop completely, they're back to square one of being worse off in work than they would be if unemployed.

Surely raising the tax threshold would be a tidier solution?

But then, I think IDS's theory is that once people are into the habit of going into work, they'll be convinced that it's wonderful and they won't mind being shafted by the state.

the patriot said...

You leftists criticse what Iain Duncan Smith said only out of tribalism.

Instead you don't get why Labour's so unpopular. The battle to exempt the low paid from tax should be your own.
Taxing low paid jobs is plain stupid. Many people turn down jobs or fail to apply for them because they calculate – often rightly – they would be worse off as a result.

Duncan Smith said :"The complexity of the system, which operates 51 different benefits, is a linked deterrent because if claimants take a job and then lose it, they may have to wait months before they can restore their income from benefits."

How can you argue against that?

PhilH said...

ThePatriot, are you just looking for an argument? Read my comment.

When did I say I think Labour are good? They're an awful Government, and the Tories will also be awful, for similar reasons.

I completely agree with you that taxing low-paid jobs is wrong. In fact I said so in my comment:

"Surely raising the tax threshold would be a tidier solution?"

The part where IDS suggests amalgamating benefits into simpler categories sounds really good in principle.

The bit I'm questioning is the continuing-to-pay-benefits-or-give-tax-breaks for a while after someone finds work. Because when those benefits *do* stop, they'll be back to being shafted by the tax system again.

The angle he's coming from seems to be that people can't be bothered to get back into work, and they need to be offered incentives. Wrong. They need a better system that will continue to reward them whether they've been back in work one week or ten years. A system that will *allow* them to continue working.

Like I say (and *you* said) this is much better achieved by offering a better tax deal to *all* low paid workers.

Stan Moss said...

ignore that patriot guy. His only mission in life is to come on here and start stupid rows.

The thing is we prolly all agree on this: scrapping tax on the low-paid should be Labour and the LibDem's clearest aim, sculpted in capital letters each time they go on telly etc.

But, unless I have a tendency to blink that's not the case.

That said, I wholly agree with Phil's analysis.

PhilH said...

But I do so enjoy agreeing with trolls.

Thomas Byrne said...

The Adam Smith institute have some proposals that would couple well with IDS's plans.

Good post on it here, with links to the plans.