Minimum wage rises - 1 comment

Chris Dillow attacks the futility of today's announced increases statutory minimum wage within the current benefit framework (my bold):

[...] Of this £6.80 rise, they'll [those affected] pay £2.24 in income tax and national insurance. And they'll lose £2.52 in working tax credit and £1.73 in housing benefit and council tax benefit. That's a deduction rate of 95.5%. Details come from table 1.6d of this massive pdf.
For sure, I'm taking an extreme case - though isn't it scandalous that such ones exist at all? But a single childless person faces a deduction rate of 70%, and some lone parents one of 89.5%.
So, the benefits to many low-paid are tiny - smaller than the gains to the Treasury in many cases. And for this, the low-paid face an increased risk of losing their jobs or getting their hours cut.

If a government is going to enact laws that affect the employability of approximately 1.3 million workers, the least it can offer in exchange for making them less employable (all other things remaining equal) is a significant rise for those who don't have their jobs or hours cut. It seems to me that, while the poverty trap remains, minimum wage rises like this give us the worst of both worlds. I had intended a longer post on this topic, but suffice to say that this obsession with wages rather than incomes is costing the poor more than the low-paid.

Sorry for "giving succour to the enemy", but that's the price we have to pay for continuing with - and not scrutinising - ropey policies, when we have ambitions to make substantial improvements to people's lives. Perhaps also for dismissing welfare reform proposals out-of-hand, in order to promote our preferred alternative leadership candidate and preserve the tax and benefit model to which we're attached.