£8 minimum wage pointless without lowering the 89% marginal tax rate.

I’m always amazed by the idiocy of the left. Recently the greens argued for a £10 per hour minimum wage what I can’t work out is why stop there? Why not go for £20 or even £100. After all then we can all be rich.

The thing I really dislike about the minimum wage is that I don’t understand the logic. If people are earning very low wages either because they don’t have the skills or they aren’t productive enough to demand more then that is a travesty. However, if you don’t like it then the correct thing to do is to transfer money to them via taxation not via forcing their employers to pay more. All that will happen is that jobs for the low skilled will disappear.

Setting aside the job cutting problems with this policy lets look at how much money will actually go into the pockets of a minimum wage worker.

I’ve chosen a single earning household with 3 children in Tower Hamlets (my borough) for this example.

Currently working full time on minimum wage the house hold would receive £11,870 in wages and £11,314.40 in Tax Credits and pays £841.12 in tax and NICs, finally assuming the 3 bedrooms they would be entitled to and a band D home there would be housing benefit of £15,795.74 and Council Tax benefit of £442.36 and child benefit of £2,475.20 for a total after tax income of £41,048.94 the equivalent to a pre tax income of just less that £58,000. Being precise here became too hard due to the child benefit component.

Now lets run this again on £8 per hour. The house hold would receive £14,610 in wages and £11,306.76 in Tax Credits though now paying £1,717.59 per year in Tax and NICs. The housing benefit falls to £14,588.34 and the council tax benefit to £69.83 obviously at this level child benefit is unaffected. This gives a total new income (including benefits) of £41332.54. Effectively giving a marginal tax rate of 89.79%.

Now I don’t know about you, but if I was one of a team of 80 earning minimum wage I wouldn’t be too keen to see as many as 15 of my colleagues (which may include myself) lose our jobs (and thus in work benefits) in order to increase my take home pay by 0.69%.

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