The best way of raising workers' wages isn't to force employers to pay more. It's to get the state to tax less.
By Paul Goodman
Follow Paul on Twitter
- Do you know what Ed Miliband's idea of "predistribution" means in plain English? It means employers paying workers higher wages rather than the taxpayer paying them more subsidies - usually in the form of the cats-cradle of tax credits that his former boss, Gordon Brown created. The Living Wage sits nicely with this approach.
- Boris has announced that the Living Wage in the capital will be increased by 25p an hour to £8.55. The rate outside London was increased by a similar amount yesterday to £7.45 an hour. He has called for all local authorities in London as well as Whitehall to pay the Living Wage.
- But Boris's position isn't Mr Miliband's. The Mayor thinks that local authorities and employers should pay the Living Wage. Mr Miliband believes that they should be forced to by law. So Boris had sound policy reasons, as well as political ones, for shunning a joint platform appearance with the Labour leader yesterday.
- David Cameron's position before the last election was that the Living Wage is a "good and attractive idea", and he said that that as the biggest employer in the country a Conservative Government would take the lead to ensure "fairness will begin to be hardwired into pay scales up and down the country". Not all Whitehall departments pay the living wage.
- The Mail's Alex Brummer says "it is no hardship for the London Mayor to be the standard bearer for such a generous cause — he will simply pass on the cost to London taxpayers (who are, incidentally, still paying in their council tax bills for Boris’s starring role in the Olympic extravaganza)".
- Polly Toynbee (for it is she) claims that the IFS says "that the Treasury gains £1,000 in tax and saved credits for each living wage worker. Why should the taxpayer subsidise Scrooge employers? But a living wage is only part of the cure for Britain's dangerous epidemic of inequality." (She wants more taxpayer-funded childcare.)
- But Tim Worstall in The Times(£) argues that the real problem is taxing lower-paid workers - what he calls "the vile stupidity of the way we tax the working poor...The Living Wage Campaign’s vision is to shout at every employer in the country until they give in. The Worstall Way is to increase the incomes of the working poor by stopping taxing them."
> On ConHome yesterday, Sam Bowman suggested a much higher income tax allowance was preferable to a living wage and The Deep End suggested a grand bargain where a living wage was introduced in returned for localised pay and bargaining.