For the first time ever I am replying to another blog on this site. The blogger is someone whose output I tend to admire.
She has recently posted a comment in which she argues that the government is wrong to increase the minimum wage. The government announced in March this year (2015) that the minimum wage is to rise by 20p to £6.70, and Enza Ferreri links to a report on the BBC website which includes the following comment:
It ... would allow the recipient of that wage to
rent a one-bedroom place in a dowdier part of London, so long as he or
she didn't eat, use power, pay council tax, or wear clothes.
Before I continue, anyone who is new to my blog might like to know that I have written extensively on the subject of salaries, covering both low pay and the fat cat salaries often enjoyed by managers. I link to some of those previous posts below.
Ferreri claims that: If a worker A's skills don't have enough value for an employer B to pay A
the minimum wage ... B will not hire A. What I would like to know is how employer B - or anyone else - is expected to place a monetary value on someone else's work. There is no simple formula that I know of which can determine the value of work.
Furthermore, many companies in Britain are led by company directors earning salaries way in excess of what most people can hope to earn. Nevertheless many companies still manage to go out of business, and I have never come across a single case of a company director agreeing to repay his salary in the event of his company failing. Surely the first duty of any company director should be to ensure that your company stays solvent. If you cannot do that, then maybe you do not deserve to earn much more than the minimum wage.
Ferreri also claims that a higher minimum wage would make it harder for the unemployed to find work, but that might not be the case. It is easy to envisage a higher minimum wage leading to workers having more money to spend, and this in turn leading to companies recruiting more staff because workers are spending more.
Another claim is that a higher minimum wage will drive up prices, but I have already tackled that misconception in a previous post which is linked to below.
Ferreri concludes that workers should seek to earn more by making themselves more valuable, but fails to explain the logic of this. Suppose I spend my evenings studying things which are relevant to the job I do, and as a result make myself more useful to my employer. It does not follow that my employer will pay me more as a result.
Consider pilots. Pilots in the UK tend to be very well paid, but anyone who has seen the 2009 film Capitalism: a love story will know that it was common at that time for pilots in the USA to be poorly paid. A search on the internet suggests that this might still be the case. Does anyone know for certain?
If workers are paid according to their value, then surely a pilot in the USA would earn about as much as a pilot in the UK - or am I missing something?
I could write a lot more on the subject of wages, but instead I will invite the reader to look at some of my other essays on this subject.
Related previous posts include:
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