Economics Essay 101: National Minimum Wage

 Discuss the view that a national minimum wage is beneficial for an economy.

The view that a national minimum wage is beneficial for an economy is widely debated and depends on various factors and perspectives. Let's discuss some of the arguments supporting the benefits of a national minimum wage:

1. Improved Standard of Living: One of the primary arguments for a national minimum wage is that it helps improve the standard of living for low-wage workers. By setting a floor on wages, it ensures that workers receive a certain level of income deemed necessary for a decent living. This can help reduce poverty and inequality, lifting individuals and their families out of hardship.

2. Reduced Income Inequality: A national minimum wage can contribute to reducing income inequality within a society. By narrowing the gap between low-wage and higher-wage workers, it promotes a more equitable distribution of income. This can have positive social and economic implications, fostering social cohesion and reducing social disparities.

3. Increased Consumer Spending: When low-wage workers receive higher wages through a national minimum wage, they tend to have more disposable income. This increased purchasing power can lead to higher consumer spending, stimulating demand in the economy and potentially boosting economic growth.

4. Reduced Reliance on Welfare Programs: A national minimum wage can help reduce the dependence of low-wage workers on government welfare programs. By providing higher wages, it allows workers to rely less on social assistance, thereby reducing the burden on public finances.

However, it is important to consider the potential challenges and criticisms associated with a national minimum wage:

1. Potential Job Losses: Critics argue that a higher minimum wage can lead to job losses, particularly in sectors with lower profit margins or where businesses rely heavily on low-wage labor. Employers may respond to increased labor costs by reducing staff, cutting work hours, or slowing down hiring. This can particularly impact small businesses and industries with limited pricing flexibility.

2. Negative Impact on Small Businesses: Small businesses may face difficulties in adjusting to higher labor costs associated with a national minimum wage. They may struggle to compete with larger firms or face challenges in passing on the increased costs to consumers. This can potentially lead to business closures, reduced job opportunities, or increased prices for goods and services.

3. Potential for Inflationary Pressure: A significant increase in the minimum wage can potentially lead to higher costs for businesses, which may be passed on to consumers through higher prices. This can contribute to inflationary pressures in the economy, eroding the purchasing power of consumers and potentially offsetting some of the intended benefits of the minimum wage increase.

4. Regional and Sectoral Variations: National minimum wage policies may not consider regional or sectoral differences in living costs and economic conditions. Setting a uniform minimum wage across the country may not adequately reflect the varying economic realities, potentially leading to unintended consequences in certain regions or industries.

In conclusion, the debate on the benefits of a national minimum wage is complex and multifaceted. While proponents argue that it can improve living standards, reduce income inequality, and stimulate consumer spending, critics highlight concerns over job losses, negative impacts on small businesses, inflationary pressures, and the need for regional and sectoral considerations. The effectiveness and desirability of a national minimum wage depend on careful policy design, taking into account the specific context and economic conditions of the country in question.

Also, when discussing the impact of a national minimum wage, it is important to consider the role of globalization. Here are some additional points to consider:

1. Global Competitive Pressures: In an increasingly globalized world, countries with higher minimum wages may face challenges in maintaining their competitiveness. Higher labor costs resulting from a national minimum wage can make domestic businesses less competitive compared to firms in countries with lower labor costs. This can potentially lead to job losses, reduced investment, and shifts in production to countries with lower labor costs, impacting domestic industries.

2. Supply Chain Effects: Globalization has facilitated complex supply chains, with production processes spanning multiple countries. Implementing a national minimum wage may affect the cost structure of these supply chains. If a country's minimum wage is significantly higher than that of its trading partners, it can lead to cost increases in the production of goods and services, potentially impacting the competitiveness of industries reliant on global supply chains.

3. Migration and Labor Mobility: Globalization has increased labor mobility, allowing workers to seek employment opportunities in different countries. A higher national minimum wage can attract migrant workers seeking better wages, potentially impacting the domestic labor market and employment dynamics. Additionally, businesses may choose to outsource or offshore jobs to countries with lower labor costs to offset the impact of higher wages.

4. Multinational Corporations: Globalization has facilitated the growth of multinational corporations (MNCs) that operate across borders. MNCs may have operations in countries with different minimum wage levels, allowing them to adjust their labor costs based on local conditions. This can affect the impact of a national minimum wage on these corporations and their employment practices.

5. Economic Integration and Trade Agreements: Countries engaged in regional economic integration or trade agreements may face considerations regarding the harmonization of labor policies, including minimum wages. Disparities in minimum wage levels between countries within such agreements can lead to concerns about fair competition and potential distortions in trade.

It is important to note that the impact of globalization on the effectiveness and desirability of a national minimum wage can vary depending on the specific circumstances and characteristics of the country. Policymakers need to carefully consider the interplay between national minimum wage policies, global market dynamics, and the potential consequences for domestic industries, employment, and overall economic competitiveness.

Economics Essay 90: Price Discrimination

 Assess the view that price discrimination is always damaging.

Price discrimination refers to the practice of charging different prices for the same good or service to different customers or groups of customers. The aim of price discrimination is to maximize revenue or profit by capturing the maximum amount of consumer surplus.

Assessing the view that price discrimination is always damaging requires a nuanced analysis. While price discrimination can have both positive and negative effects, it is not inherently damaging. Here are some key points to consider:

1. Increased Market Efficiency: Price discrimination can lead to increased market efficiency by allowing firms to capture more consumer surplus and generate additional revenue. This can incentivize firms to invest in research and development, improve product quality, and introduce innovative products and services. In this sense, price discrimination can be seen as a mechanism that promotes economic growth and competitiveness.

2. Enhanced Consumer Welfare: Price discrimination can benefit certain groups of consumers. For example, in the airline industry, different fare classes are offered to cater to the diverse preferences and willingness to pay of passengers. This enables consumers with different budgets to access air travel and enjoy the benefits of increased options and flexibility. Price discrimination can also enable firms to offer discounted prices to price-sensitive consumers or those with lower incomes, thus increasing affordability and accessibility.

3. Allocation of Resources: Price discrimination can help allocate resources more efficiently. By charging higher prices to customers with a higher willingness to pay, firms can ensure that goods and services are directed to those who value them the most. This can lead to a more optimal allocation of scarce resources, promoting overall economic efficiency.

4. Potential for Exploitation: Price discrimination can be seen as unfair or exploitative when it disproportionately affects vulnerable or disadvantaged groups. For example, if certain essential goods or services are priced higher for specific demographics based on factors such as race or gender, it can perpetuate inequality and create social and economic barriers. This can be particularly concerning when price discrimination leads to exclusion or discrimination against certain individuals or groups.

5. Market Distortion: In some cases, price discrimination can distort market dynamics and hinder competition. Firms with significant market power may engage in price discrimination to drive out smaller competitors or discourage new entrants. This can result in reduced market competition, limited consumer choice, and potential monopolistic behavior.

Overall, the effects of price discrimination depend on the specific context and market conditions. While it can lead to more efficient resource allocation and enhanced consumer welfare in certain cases, there is a risk of exploitation and market distortions. It is crucial for policymakers and regulatory bodies to monitor and assess the impact of price discrimination to ensure that it does not result in harmful or unfair outcomes.

A Level Economics Essay 23: Comparative Advantage and Trade

Using the concept of comparative advantage, explain how international trade should allow a country to consume outside its production possibility frontier. 

The theory of comparative advantage explains how trade enables an economy to consume more goods than it would in an autarky, where it produces everything domestically without engaging in international trade.

Comparative advantage refers to the ability of a country to produce a particular good or service at a lower opportunity cost compared to other countries. The opportunity cost is the value of the next best alternative that must be given up to produce or consume a specific good or service.

Let's consider Country A and Country B, which both produce two goods: cars and computers. In an autarky scenario, Country A can produce either 100 cars or 200 computers, while Country B can produce either 50 cars or 100 computers.

To determine comparative advantage, we compare the opportunity costs between the two countries. The opportunity cost of producing one car for Country A is 2 computers (200 computers / 100 cars), while for Country B, it is 0.5 computers (100 computers / 50 cars). On the other hand, the opportunity cost of producing one computer for Country A is 0.5 cars (100 cars / 200 computers), and for Country B, it is 1 car (50 cars / 100 computers).

Based on these opportunity costs, we can see that Country A has a comparative advantage in producing computers, as it has a lower opportunity cost (0.5 cars) compared to Country B's opportunity cost of producing computers (1 car). Conversely, Country B has a comparative advantage in producing cars, as it has a lower opportunity cost (0.5 computers) compared to Country A's opportunity cost of producing cars (2 computers).

Now, let's explore the advantages of trade based on these comparative advantages. Suppose Country A specializes in producing computers and allocates all its resources to computer production. Meanwhile, Country B focuses on producing cars and utilizes all its resources for car production.

In this scenario, Country A can produce 400 computers (double its initial production capacity), and Country B can produce 100 cars (double its initial production capacity). If they engage in trade and exchange their surplus goods, both countries can benefit.

Let's assume that through trade, Country A exports 200 computers to Country B and imports 50 cars in exchange. Country B exports 50 cars to Country A and imports 200 computers.

As a result, Country A now has 200 computers for domestic consumption (initial production) plus 200 imported cars, which it did not produce domestically. Similarly, Country B has 50 cars for domestic consumption (initial production) plus 200 imported computers.

Through trade, both countries can consume beyond their initial production possibilities. Country A gains access to cars that it would have struggled to produce domestically, while Country B gains access to computers that would have been costlier to produce locally.

This example demonstrates how trade based on comparative advantage allows countries to allocate resources more efficiently and expand their consumption possibilities. By specializing in the production of goods with lower opportunity costs and engaging in mutually beneficial trade, countries can access a wider variety of goods and achieve a higher level of overall welfare.

It's important to note that the numerical examples used here are for illustrative purposes and simplified for clarity. In real-world scenarios, trade patterns and quantities will vary based on a range of factors, including market conditions, production capacities, and trade policies. Nonetheless, the underlying principle of comparative advantage remains valid in explaining the advantages of trade in expanding consumption possibilities and improving economic welfare.

Richard Wolff: The Crash IS Coming! What To Watch For

The middle class are about to discover the cruelty of Britain's benefits system

A decade of cuts has ripped apart the safety net. People on decent salaries hit by the Covid-19 fallout are in for a shock writes Polly Toynbee 

 

‘People confronting universal credit’s obstacles may join the half who find themselves propelled to local food banks.’ Photograph: Oli Scarff/AFP/Getty Images


Millions of people are about to discover something they didn’t know about British life. There is no longer a safety net. People who have paid tax and national insurance for years and never been near the social security system will be turning to it in their hour of need; yet far too late, like trapeze artists falling through the air, they will find that the net beneath them has been lowered dangerously close to the ground and is badly torn.

If these people once believed relentlessly misleading tabloid tales of benefit scroungers, they will have a rude awakening. They will find that when Iain Duncan Smith turned the screw on social security in 2012, he was right to warn claimants: “This is not an easy life any more, chum.” As if it ever was. 

The chancellor, Rishi Sunak, has done well to honour 80% of wages for those “furloughed” from shut-down businesses – up to £2,500 a month. No one knows how many that covers and at what cost, but it was a macroeconomic necessity. One worry is the incapacity of the HMRC workforce, with 15,600 staff cut and 157 local offices with local knowledge closed: can they pay the wage subsidy to companies in time to save them? Many firms could still close, sending millions into unemployment.

The 15% self-employed are urgently seeking a matching plan, with the Treasury under intense pressure for a rapid response. Most of the self-employed are low-paid: their median income is just £10,000, according to Paul Johnson of the Institute for Fiscal Studies. Some won’t qualify, if they have earning partners. But many will have been forced into sham “self-employment” by tax-cheating companies. They will be desperate – and angry. The Resolution Foundation wants them paid 80% of average earnings over the past three years – or they will work through illness, rather than starve on £94 a week sickness benefit, says the RSA Populus poll.

Let’s hope that injustice is fixed. But even then, watch the shock as millions fall on the untender mercies of the Department for Work and Pensions, to discover what happened to benefits in the past decade. While never over-generous, by 2010 Labour had greatly lifted living standards for low earners, especially for children: Gordon Brown’s tax credits raised a million children and a million pensioners out of poverty. Since 2010, according to new research by Kerris Cooper and John Hills, a professor at the London School of Economics, children have lost a quarter of the support they had; chancellor George Osborne and his successors took out a staggering nearly £40bn from benefits. Never “all in this together”, Osborne justified it by raining down abuse on low-paid families. The hypocrisy: as the current editor of the London Evening Standard, he ran Christmas collections for poor families! The Resolution Foundation predicts a third of children falling into poverty by 2023.

Some cuts were secretive, uprating benefits by a meaner CPI not RPI inflation rate, a four-year freeze, and axing council tax support. Some made a noise – such as the bedroom tax, costing some families £14 week for a spare room. An early case was a Hartlepool family whose empty room belonged to their recently deceased 10-year-old. Housing benefit for renters was cut brutally. Introducing the two-child limit was exceptionally unjust.

New claimants confronting universal credit’s obstacles may join the half who find themselves propelled to food banks. Many new arrivals will join the 60% of claimants falling into debt and rent arrears while waiting at least five weeks for first payments. As with HMRC, a stripped-down DWP workforce is at risk of being overwhelmed. Some talking to the Treasury are shocked to find its staff clueless about the meanness of a benefits system they have cut and cut again. That explains Sunak’s sudden extra £20 a week and slight easing of housing benefit: they had no idea.

Torsten Bell, head of the Resolution Foundation, says people on £50,000 salaries have been anxiously asking him about benefits rates. They’re in for a shock, he says. Unlike the previous tax credit system, universal credit only allows savings of £6,000 (it takes steep deductions from savings up to £16,000). People hoping this is only temporary will be distraught at having to use up their rainy-day funds, often saved for years for a deposit on a home. The foundation is lobbying urgently to have this savings means-test dropped.

Hills says a couple with two children will get £266 a week. And take from that £115 – the average amount that housing benefit falls short of rental payments. Many new claimants will run up rent arrears. Expect them to plunge immediately into poverty, miles below the £384 minimum income standard for a family of four, says Hills.

Some singles will get a shock too. Under-35s will be living on £73, and only funded for a room in a shared flat, in the cheapest third of rentals in the area.

Many who see themselves as middle class will confront the reality of Britain’s nonexistent safety net. It is, says the IFS’s Paul Johnson, “extraordinarily low”. One piece of advice from all these experts I’ve talked to: apply immediately, to limit these delays and debts. “Too many will wait, borrow from family, deny it’s happening to them, feeling the stigma. Apply at once,” says Torsten Bell.
These millions discovering DWP brutality at first hand will no longer be deceived by the old poison shaming those on benefits as loafers, frauds and “not people like us”. Benefits offer penury, not a life of Riley. Rishi Sunak has been lavishly praised, not least for his empathic language: “We will be judged by our capacity for compassion”. But his compassion will be judged by how far he keeps benefit rates below the most basic poverty line.

Brexit deal must meet six tests, says Labour

• Fair migration system for UK business and communities
• Retaining strong, collaborative relationship with EU
• Protecting national security and tackling cross-border crime
• Delivering for all nations and regions of the UK
• Protecting workers' rights and employment protections
• Ensuring same benefits currently enjoyed within single market

David Cameron's ever-shifting view of Britain's place in EU

Long before current renegotiations, PM made series of half promises and pledges that never materialised. Here is a selection

 

David Cameron speaks to factory staff at the Siemens manufacturing plant in Chippenham on Tuesday. Photograph: Ben Pruchnie/AFP/Getty Images


Alberto Nardelli in The Guardian

David Cameron has come a long way in how he views Britain’s place in the European Union. Over the years, long before the current renegotiations even started, the prime minister has made a series of bold comments, half promises and pledges.

Tuesday’s draft agreement demonstrates that only a handful of his commitments have been delivered. Here is a selection of some of them:

• In 2009, he promised that a Tory government would stop the European court of justice overruling UK criminal law by limiting its jurisdiction. The government has since opted back in to 35 justice and home affairs measures, including the European arrest warrant.

• In 2012, Cameron said that the government was “committed to revising the working time directive”, a set of EU-wide working standards. However, last December, George Osborne, told the Treasury select committee that this formed no part of the negotiation. Back in 2007, before becoming prime minister, Cameron had even pledged to pull Britain out of Europe’s social chapter on workers’ rights.

• The prime minister also promised in the Conservative manifesto last May to push for further reform of the EU’s common agricultural policy. This promise was not part of the renegotiation as it was likely to face fierce opposition from some member states.

• Cameron said in early 2014 that he would put in place treaty change before the referendum. Tuesday’s documents make it clear that there will be no changes to the EU’s governing treaties – including its headline principle of “ever closer union” – ahead of the vote because this would not be feasible in the referendum’s timeframe.

In any event, Tusk said in Tuesday’s letter that the principle of ever closer union is already not equivalent to an objective of political integration, and the substance of this will be incorporated into the treaties when they are next revised.

• Last year Cameron said that he wanted EU jobseekers to have a job before they come to Britain. Such a measure is contrary to the principle of free movement and as such was also not part of the negotiations.

• When the renegotiations formally began Cameron started by asking for a cap in the number of EU migrants allowed into the UK. That idea lasted the length of a phonecall to the German chancellor, Angela Merkel, in 2014. She was not very impressed.

• The prime minister had to think of a new idea and proposed – in writing this time – that people coming to Britain from the EU must live in the UK and contribute for four years before they qualify for in-work benefits or social housing. It has proven to be the most controversial – albeit the most precise – of Cameron’s demands.

What he is set to get is the dilution of an already diluted idea: an “emergency brake” on in-work benefits for up to four years. The one-off restriction would not amount to an outright ban on benefits either but would be graduated. That means that EU migrants would receive no benefits upon arrival but would get an increasing proportion each year – another piece of complexity for an already over-complex benefit system.

When it came to the formal negotiations, Cameron’s other requests included:

• Ending the practice of sending child benefit overseas. This was also watered down. The UK will be allowed to index the payments to the country where the child is based.

• On measures to crack down on the abuse of free movement, members states will be able to take action against fraudulent claims and sham marriages, as well as against individuals who pose a threat to national security. None of these measures would appear to be new, but are simply based on the interpretation of current rules.

• On “economic governance”, Cameron had asked for a series of principles to be recognised ranging from a simple recognition of the idea that the EU has more than one currency, and that taxpayers in non-euro countries should never be financially liable for operations to support the eurozone as a currency.

Here Cameron did better, although only because Tusk clarified, in effect, that all these things are already covered by existing rules and principles.

• As part of the competitiveness basket, Cameron had said he wanted the EU to be more competitive. In response, Tusk has committed the EU to increasing efforts to enhance competitiveness. It is probably not surprising that the contents of this basket proved the easiest to agree on.

Nevertheless, however much has been negotiated away, Cameron has still won some important concessions. Take the emergency brake: just a month ago the measure seemed to be off the table but now it is a centre piece of his pitch to the British people. The European commission has accepted that the UK is facing exceptional circumstances due to high levels of immigration and must be allowed to do something about it – assuming the British people vote to stay in the EU.

However, the vast majority of the words in the draft agreement are dedicated to clarifying how existing rules and principles can be applied to ease British fears. The achievement is somewhat distant from the grander aspirations set out by Cameron over the past five years, but in the end it may be enough.

The real benefit cheats are the employers who are milking the system

In the last year, Tesco has cost the Treasury £364m in pay-rate supplements. Photograph: Carl Court/AFP/Getty


Deborah Orr in The Guardian


I really don’t know why the government is making such heavy weather of cutting £12bn off the benefits bill. That sum, and much more, could be cut at the stroke of a pen – though it would mean that the government would have to put its money where its mouth is and make it a legal requirement for employers to pay the living wage. If a company really can’t afford to, then it’s the company that should be applying for supplements, not the people who work for it.

Cameron wants to curb in-work benefits. No wonder: just £8bn on benefits goes to the unemployed, while an estimated £76bn, according to James Ferguson of Money Week, goes to people who are working. The government says this shouldn’t be happening. Cameron insists employers should be paying wages people can live on – which, funnily enough, is the sort of thing unions say, although they no longer have any power to make it happen.

It’s what Labour says, too, now the party is out of power. When it was in power, it avoided confrontation with employers offering poverty wages, and with the unions, by kindly offering to make up the difference between the minimum wage and a living wage via the benefits system.

It would be funny if it wasn’t so sad. The Tories excoriate Labour because Labour accepted the Conservative idea that employers should be freed from the burden of social responsibility. Labour spent a lot of money on protecting employers from such irksome duties. The Conservatives still don’t want to impose such irksome duties, but don’t want to stump up for the hefty bill that ensues from failing to do so either.

Just one of the woeful consequences of Labour’s drive to support employers by supplementing employees is that it makes the figures look like the Department of Work and Pensions is showering taxpayers’ money on the feckless, when it is actually showering taxpayers’ money on businesses. Employing someone has come to be seen as such a noble pursuit that businesses are paid to do it. Businesses don’t, of course, complain that this interferes with the free market. Money spent supplementing wages should be coming from the Business and Enterprise budget, with companies vetted to assess whether they are justified in offering pay below the living wage. Those who are can be offered loans to cover the difference, repayable in much the same manner as student tuition fees. They are hiring staff to grow their own businesses, after all. Such entrepreneurial risk-taking is seen as admirable. But when the taxpayer is taking on so much of the cost, and the benefit-receiving employee is getting so much of the blame, there’s really only sheer nerve and hypocrisy left to be admired.

Businesses, of course, would hate having to admit that they expect the state to prop up their poverty wages. They despise “red tape”, after all. Although that doesn’t stop them employing individuals who must submit themselves and their families to miles of red tape and minute government scrutiny because their wages aren’t enough to live on.

Work in the retail sector is notoriously badly paid, so it should be no surprise that around £11bn in in-work benefit is paid each year to people working in retail. Employees at Next receive more money in pay-rate supplements than the company pays in tax (about £2,087 per low-paid worker). In the last year, Tesco has cost the Treasury £364m in pay-rate supplements. Cameron talks about dysfunctional merry-go-rounds of tax and spend. But the culprits aren’t ordinary people scraping by. The culprits are employers milking the system.

The in-work benefits system also encourages businesses to employ lots of people part-time, rather than fewer people full-time. A couple has to work 24 hours a week to qualify for in-work benefits, and a single person 16 hours. The more part-time people you employ, the more the government is supplementing your payroll, and the easier it is to get competent staff on the cheap.

Much of the reduction in unemployment seen over the last couple of years is because people are taking part-time work when they would prefer full-time work. The government may trumpet the decline in unemployment. But its complaints about the cost of in-work benefits are an acknowledgement that the Department of Work and Pensions is paying out a lot of cash to make that happen.

A system that minimises costs while maximising profits is bound to result in a mismatch between what people earn and what it costs them to live. This tendency can be seen most clearly in the housing market. In 2009-10,according to House of Commons figures, 478,000 people with jobs claimed housing benefit, at a cost of £2.2bn. By 2014-15, it was 962,000 and £4.6bn, and it’s set to continue rising if things don’t change. What things?

It’s endlessly said by everybody that the social housing supply has to increase. But no one seems willing to take their valuable piece of land and render it much less valuable by building social housing on it, when they could keep it as an asset or sell it to private developers instead. Private landlords are the obvious beneficiaries.

But again it’s the person claiming the housing benefit that is seen as the problem, not the person who wants the “market rate” when the market isn’t paying it. Again, the person making the profit gets the benefit, rather than the person who doesn’t have enough income to put a roof over his head. Just as it’s time to restrict state benefits paid to employers via employees, it’s time to restrict benefits paid to landlords via tenants.

The Conservatives, I’m afraid, seem to do nothing at all in government except complain that Labour spent too much money on mitigating the effects of the previous Conservative government’s policies. Employers are allowed to set wages and landlords allowed to set rents without regard to the amount of money people have to live on. The least the state can do is be honest about the amount of state money that is spent on defending the right to make profits, instead of blaming the hapless citizens from whom the profit is wrung.

Dutch city of Utrecht to experiment with a universal, unconditional income

Louis Dore in The Independent

The Dutch city of Utrecht will start an experiment which hopes to determine whether society works effectively with universal, unconditional income introduced.

The city has paired up with the local university to establish whether the concept of 'basic income' can work in real life, and plans to begin the experiment at the end of the summer holidays.

Basic income is a universal, unconditional form of payment to individuals, which covers their living costs. The concept is to allow people to choose to work more flexible hours in a less regimented society, allowing more time for care, volunteering and study.

The Netherlands as a country is no stranger to less traditional work environments - it has the highest proportion of part time workers in the EU, 46.1 per cent. However, Utrecht's experiment with welfare is expected to be the first of its kind in the country.

Alderman for Work and Income Victor Everhardt told DeStad Utrecht: "One group will have compensation and consideration for an allowance, another group with a basic income without rules and of course a control group which adhere to the current rules."

"Our data shows that less than 1.5 percent abuse the welfare, but, before we get into all kinds of principled debate about whether we should or should not enter, we need to first examine if basic income even really works.

"What happens if someone gets a monthly amount without rules and controls? Will someone sitting passively at home or do people develop themselves and provide a meaningful contribution to our society?"

The city is also planning to talk to other municipalities about setting up similar experiments, including Nijmegen, Wageningen, Tilburg and Groningen, awaiting permission from The Hague in order to do so. 

Abracadabra! Britain’s political elite has fooled us all again

Aditya Chakrabortty in The Guardian

Magicians call it misdirection: directing the attention of a crowd elsewhere so as to distract from the trick happening right in front of it. A bump on the shoulder, a blur of handwaving and – wham! – your wallet’s taken leave of your hip pocket.

Since the crash, British politics has been one epic act of misdirection. Lay off those bankers who shoved the country into penury! Just focus on stripping disabled people of their benefits. Never mind the millionaire bosses squeezing your pay! Spit instead at the minimum-wage migrant cleaners apparently making us poorer. So ingrained is the ritual that when a minister strides into view urging the need for “a grown-up debate”, we brace ourselves for another round of Blame the Victim. The only question is who gets sacrificed next: some ethnic minority, this family on low pay, that middle-aged dad who can’t get a job.

Here is how political misdirection works in real time. Yesterday, Unite’s Len McCluskey came under a barrage of criticism for suggesting that Labour live up to its name and support “ordinary working people”. Evil paymaster! Meanwhile, on the front page of this paper, digger firm JCB called on David Cameron to prepare to take Britain out of the EU – and this was just a company having its say.

JCB boss says EU exit could lift burden of bureaucracy on UK businesses

 

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I hold no brief for McCluskey – but he is the democratically elected head of a trade union simply seeking to influence the party part-funded by his members. Perhaps this comes as news to some on Fleet Street, but the debate over Labour’s future is not the chew-toy solely of newspaper columnists. Moreover, Unite’s donations to Her Majesty’s Opposition are a matter of easily checkable record. Not so the money poured into Tory coffers by JCB, either as a business or from its owners, the Bamford family. To learn that, we must rely upon forensic researchers such as Stuart Wilks-Heeg at Liverpool University. He calculated this morning that, between 2001-14, the Bamfords and JCB had together given the Conservatives at least £6.7m. One arm of JCB also donated £600,000 last year to Tory campaigns in key marginals, including the all-important battleground of Nuneaton.

So a company that funded David Cameron all the way into Downing Street, and whose chairman was recently made a lord, seeks to influence the government on one of the most fundamental issues in British politics, something that affects all of us – and this is business as usual. Yet a workers’ elected representative adding his voice to the din of an internal party argument somehow represents the biggest political landgrab since a bloke with a goatee popped in to the Winter Palace.

Expect more of this misdirection over the next few weeks. Labour has scheduled the entire summer for its leadership campaign, which could equal months of an entire party sounding like an indecisive satnav: Veer right! Keep left! Meanwhile, in just over a month, George Osborne will lay out an emergency budget to deal with the enormous £90bn deficit that he inherited from himself. Using the traditional lexicon of political hocus-pocus – “hard choices” – he will begin making some of the extra £12bn of welfare cuts the Tories pledged at the last election.

Every feat of misdirection is always intended to distract the audience from a sleight of hand. The same goes in politics – only here it’s aimed at taking our minds off the fact that all this jiggery-pokery is actually making us worse off. Let me show you what I mean, using figures calculated for the Guardian by academics at the Centre for Research on Socio-Cultural Change (Cresc), using official data. When Thatcher moved into No 10, 28% of all working age households took more from the state in cash benefits, in health and education and all the rest of it than they paid back in taxes. In other words, more than one in four employers in Britain were failing to pay their staff’s way.

The next round of cuts will hit the working poor all over again, like a hammer to the face

More than three decades later, through Major and Blair and Brown and Cameron, that proportion has kept on rising. Now 38% of working-age households rely on taxpayers to pay their way. Think about all those tax credits for low-paid work, those exemptions for people earning too little even to be taxed. We have more people in work than ever before – and more households than ever before relying on the state to keep them afloat.

There’s nothing wrong with these people. These are the hard-working families politicians like talking about – the strivers, the squeezed middle, the alarm-clock Britain. But there’s a lot wrong with their employers – because they now rely on taxpayers to top up poverty pay, even while insisting on cuts in corporation tax and grants for investment. Come 8 July, it won’t be those businesses that the chancellor tells to change their ways – it’ll be the people they employ who will see more money taken out of their weekly budget by the cuts. Because the one thing we know about the next round of cuts is that they will hit the working poor all over again, like a hammer to the face.

This is what politics looks like in Britain nowadays, once the newspapers have their japes and the politicians leave the TV studios: it is about justifying an extractive business class that wants to lean on taxpayers to pay their way, even while lecturing the rest of us about welfare dependency. And it doesn’t change all that much whether the Tories or Labour are in Downing Street. The Cresc team looked at who reaped the rewards from growth over the past three decades. Under Thatcher and Major, the top 10% of all working-age households took 29p in every £1 of income growth. Under Blair and Brown, their share actually went up, to 30p in each £1. Cresc found that New Labour bumped up the share of the poorest economically active households from 0.5% to 1.5%. Taxes and benefits evened that up a bit – the same taxes and benefits that are now deemed unaffordable. So much for trickle down.

This is what all the misdirection has been about: taking our minds off the fact that Britain is a soft touch for businesses that want taxpayers to pay their way, and politicians who count on the middle classes to feel richer, not through their wage packets, but by their house prices, their no-frills flights, their luxury buys from Lidl. What a trick has been pulled on Britain by its political and business elite: never have so many people had their pockets picked at the same time.