Well well well…
December 12, 2016 Leave a comment
What’s that Skippy? The National Living Wage is having exactly the negative consequences I foresaw 18 month ago? Oh no!
Oh? And what would that have to do with the living wage?
Conservative councillor Izzi Seccombe, of the Local Government Association, said that increasing the precept "would not plug" any funding gap.
She said the £383m raised from a previous 2% precept was eclipsed by larger costs, such as the £600m cost of the national living wage increase.
The chief executive of Care England, which represents care home providers, has warned that rising demand, cuts to public spending and costs associated with the national living wage have turned the system into a “house of cards”. Martin Green said: “The whole thing could topple over at any moment and those who are poor and vulnerable will suffer most.”
Taxes will rise or services will be cut.
It ought to be self-evident (though sometimes I don’t think it is to some people) that if a person is employed in the public sector, or works for a company whose services are bought by the public sector, that all of the cost of employing those people is paid for out of taxation. There is, after all, no other source of income for public sector organisations.
If wages are pushed up – by the living wage or otherwise – then the cost of those wages is ultimately born by the tax-payer in council taxes, income tax etc. Thus again, those costs are borne by the person on the inflated living wage, again with the associated inefficiency of transfer costs.
What if the living wage were set at £15/hour? What about £20/hour? £30/hour? Well, by now that ought to be obvious: With each increase relative to inflation, more people will be rendered unemployable and stuck in the poverty trap, more goods & services will be more expensive, more people will resort to a cash economy, and more tax rises & public sector cuts will be necessary,