Is The Living Wage A Socialist Plot?

Poverty is a real issue, even in 21st Century Europe and the United States which have traditionally enjoyed high standards of living. There is plenty of wealth in Europe, America and the world, the problem has always been how to distribute it fairly. And here is the first stumbling block, who decides what is “fair” and according to what criteria is it to be redistributed?

Video: The living wage is a noble but flawed concept.

In the UK, Archbishop John Sentamu and his Living Wage Commission think they have the answer. The problem is, they don’t. The goal of this organisation is admirable, to lift especially the working poor out of poverty. They want not simply a minimum wage but a higher “living” wage. In the UK this would be £7.65 per hour, £8.80 per hour for London. This will lift people out of poverty, it is claimed. The problem is that it will not, and indeed it will create more problems than it will solve. A bit of thought shows this to be the case, but the well-intentioned dogmatists never listen.

In Seattle, a minimum wage of $15 per hour was signed in earlier this month. Small businesses are opposing it arguing that it discriminates against them unfairly. Clearly it does, let’s stay with the UK. The Iceland supermarket chain has around 23,000 employees and a turnover of some £2.4 billion. Founded by the charismatic Malcolm Walker – who started with a single store – it has a reputation not only for delivering quality food at bargain prices but as a happy place to work. How are Iceland and other big companies able to deliver the goods? The simple answer is economies of scale; the local family owned corner shop cannot compete with this, and such shopkeepers eke out a living by opening long hours and serving the local community, something supermarkets and especially hypermarkets cannot always do. Other small businesses are in a similar position; if their overheads are squeezed by an increased minimum wage, they have to make staff redundant, or in some cases close down altogether.

Clearly this tips the scales in favour of big companies, who are also able to cope with the increased regulation better than those that employ perhaps only a handful of staff. In the UK, anti-discrimination legislation and similar nonsense increases overheads even more, and has other detrimental effects. Take maternity leave, this sounds a good idea, especially if you are a working mother. Now take a gander at the legislation. This is no problem for government or local government employers, but if you are running a commercial enterprise, especially a small business, does it make sense to employ any woman of child-bearing age? Does it make sense to employ a member of an ethnic minority who might sue you for racial discrimination if you sack him for whatever reason? There are some companies that don’t need to worry about such problems. A firm that provides technical services in the IT industry or a law firm in the City of London will be paying most of its staff well above the minimum wage. Likewise, local authorities, universities and similar state or quasi-state employers can always find extra money to pay their staff. But this “extra” money comes at a cost – higher rates or higher taxes.

There are also those who seek to impose a higher minimum wage less to benefit low paid workers than to further their own political agendas, which in one word can be described as socialism. Under socialism, the state controls everything, including you. If that doesn’t put you off, the economy that goes with it should. Prices serve a purpose, in particular they signal what is wanted, and in what quantity. Rising prices stimulate production; falling prices just the opposite. Paradoxically, rising prices can result in lower prices because they increase economies of scale and boost investment. If you don’t understand that concept, think of that device you are carrying around in your pocket. In 1927, a trans-Atlantic phone call would have set you back £150 for half an hour, the price of a decent second-hand car.

The noble intentions of Archbishop Sentamu and his crowd may succeed in lifting a few people out of poverty, but overall simply raising “poverty pay” will do far more harm than good. There are though things that could be done in the UK and elsewhere that would definitely improve the lot of those at the bottom of society.

First and foremost is taking the power to create credit away from the banks and putting it in the hands of responsible, accountable governments; in the UK that means the Crown. Although more and more people are waking up to the reality of the banking scam, that is something we cannot expect to see in the short term. The same can be said of Basic Income, which should be our number two priority behind putting the banksters in their place. One of the biggest expenses ordinary people face is travel in all forms. Apart from a few things that are grown and produced locally, all goods come to us by road, even those that are transported by train, plane and water part or most of the way. Reduce the cost of travel, and you reduce the cost of both goods and services.

The cost of public transport in the UK is extortionate, which is hardly surprising when the taxpayer is subsidising ostensibly private companies to run the trains and buses. This leaves us with the worst of both worlds. These companies should be nationalised without compensation and run for the benefit of the community; this does not equate to socialism, at one time the British Railways Board did a reasonable job of running the trains.

With regard to transport within cities and towns, there is a strong case for operating fare-free buses; this has been done elsewhere without the sky falling. Among its other benefits are a cleaner environment, because the more people who travel by bus, the fewer travel by car. The Government could also simply reduce the duty on fuel, yes, this would reduce revenue, but the motorist is already being used as a cash cow, and earlier this month the unfairness of this was acknowledged with a curb on “Big Brother local councils”.

Doubtless there are other things that could be done to improve the lot of the poor, but increasing the burden on businesses and hamstringing them with yet more legislation is wrong in both principle and practice.

[The above article was published originally on June 24, 2014].

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