Matt Nolan on the living wage

February 13th, 2013 at 3:00 pm by David Farrar

blogs at TVHE:

Let me start this by underlying everything with a certain point – living wages are idiotic if our concern is to make sure that the worst off in society have a sufficient income.  By imposing a “price floor”, you are ensuring that there are a group of people who can’t get jobs and will get hurt – unions don’t care because they don’t represent the unemployed, but I find it morally abhorrent.  You want a minimum standard of living for societies worst off – have a minimum income, it’s as easy as that.

A minimum income scheme, which has merits, would need a radical reshaping of the tax and welfare systems.

Let’s take someone working full time at $19hr.  What does this person earn pre-tax $39,420pa (this excludes benefits which they are targeting to increase it further). What is nominal GDP per capita.  $47,157pa.

So either we have a society where different types of labour, and different peoples requirements for income (eg a 18 year old and a 57 year old), aren’t terribly different and so people shouldn’t get paid very differently – and as a result the potential worker who “offers the least” may well still get hired – or this will lead to higher unemployment and cut backs in hours for these people.  Who won’t get hired in this sort of situation – people that are risky to hire or haven’t developed skills yet.  So the young, the vulnerable, those that have been out of work.

I just think it is daft to claim an 18 year old with no experience living at home needs to be paid the same as a 45 year old with 20 years experience who is supporting a family and mortgage.

I mean I swear to god unions, and their determination to get what they want without thinking about the consequences for other people, makes me sick.  There are people who struggle, and as a society I think we should try to help them – part of this is ignoring faux research by unions, and making sure that we actually push government to sufficiently redistribute to the poorest

Instead so many on the left and unions support paying welfare to millionaire parents. That is because they are really just about growing the size of the state that they tend to live off.

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52 Responses to “Matt Nolan on the living wage”

  1. hamnidaV2 (247 comments) says:

    Hidden due to low comment rating. Click here to see.

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  2. David Farrar (1,901 comments) says:

    What nonsense. You just spout any rubbish Hamnida. The $19 an hour is calculated for someone supporting a spouse and two kids. $13.50 an hour is absolutely enough to live on for many people. I’ve lived on it. You probably have also.

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  3. Than (487 comments) says:

    That $19/hr presumably also assumes a 40 hour week. So if the two adults between them worked ~56 hours a week (not hugely difficult between two people, even with children), that would be enough to live on.

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  4. Alan Wilkinson (1,886 comments) says:

    @hamnidaV2, actually you don’t need a lot to live on until you have to pay for everyone else who wants to live off you.

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  5. mikemikemikemike (331 comments) says:

    Can you seriously name even 5 millionaire parents who are receiving this welfare without bullshitting the system DPF? Surely that is a disingenuous comment.

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  6. MT_Tinman (3,250 comments) says:

    What does what people are paid have to do with what they need?

    Workers should be paid what they are worth, no more, no less.

    Non-workers should not be paid, at which point history shows the vast majority miraculously become employed.

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  7. Pete George (23,680 comments) says:

    hamnidaV2 – where in New Zealand are you talking about? In what personal and family circumstances? With what household income? Private rental, subsidised state housing, mortgage, mortgage free? What financial commitments?

    Promoting a one size fits all living wage is simplistic nonsense that shows a lack of understanding of real life variances and is counterproductive to addressing the real issues.

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  8. Peter (1,723 comments) says:

    @hamnidaV2 It is actually quite simple.

    $13.50 if you’re a youth living at home and not being charged board is quite well off. Not so if you’re paying off a mortgage and supporting two kids.

    If you raise the minimum wage to $19, you’re destroying every job that isn’t viable up to that figure. So you’re putting more people out of work, as many jobs aren’t worth that figure. The business will either become more productive using technology or downscale.

    Finally, all you’re really doing is changing the numbers, as other wages must be adjusted upwards, too. The person who was on $19 now goes to $22, and so on up the chain. All your prices go up, and you’re back where you started, due to inflation. Your buying power hasn’t changed.

    If you want to earn more, then get needed qualifications and enter an industry where there is a short supply of labour. Tip: not an actor.

    It really is that simple.

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  9. leftyliberal (651 comments) says:

    DPF: Just a slight clarification: it is computed based on the parents working a combined total of 60 hrs/week (i.e. one full time, one half time). For a single worker at 40hrs/week, one presumes it increases to something in the neighbourhood of $28+/hr (tax will be slightly higher in that case).

    Certainly others can and do get by on much less than that.

    Personally I support moving the minimum wage distortion to a universal benefit as Nolan suggests – it simplifies a great deal of the benefit system when everyone gets the same thing and anything and everything earned above that is taxed as the same flat rate. A large overhaul indeed, so unlikely to happen all in one go, but perhaps it could be introduced piece-meal. We already have it for over 65’s and most are happy enough with how that works, right?

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  10. Agent BS (10 comments) says:

    “It is actually quite simple – The minimum wage at $13.50 per hour is not enough to live on in New Zealand. The amount required is $19 an hour.”

    It’s simple if you make generic observations with no intention of ever proving them. What you describe is Communism – every one gets paid the same regardless of overall worth.

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  11. Pete George (23,680 comments) says:

    A large overhaul indeed, so unlikely to happen all in one go, but perhaps it could be introduced piece-meal.

    The problem is that while it’s easy to overhaul when giving people more money in the hand it’s a lot trickier to overhaul and cut effective incomes/benefits. People easily adjust to having more money, but many would really struggle if their money suddenly dropped.

    That’s one of the problems with WFF, once given it’s very hard to take back. Even people on higher incomes commit themselves to loans and mortgages and families etc based on available income so if it drops for a lot of people it can cause a lot of hardship – and clobber purchasing and business activity at the same time.

    It’s far easier to restructure during good financial times than bad.

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  12. alloytoo (571 comments) says:

    We already have this mechanism which factors in such things as location, experience and skill set.

    It’s called the market.

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  13. leftyliberal (651 comments) says:

    Easy to get rid of WFF: Replace it with a child universal benefit. Done.

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  14. speters (108 comments) says:

    I’m a student in Wellington living off a student loan + part-time employment. The amount I live on per week is equal to a 40-hour week at roughly $12/hour (EDIT: gross, so less after tax). I wouldn’t say I live lavishly but I have enough to live off – I flat with a few friends which helps, but we have Sky TV and enough spare cash to go out drinking fairly regularly, etc. I also live fairly centrally. There’s no way $13.50/hr isn’t enough to live off, at least for an individual.

    Of course not everyone is in my situation, but that’s what WFF and other top-up mechanisms are for. As others have said, a one size fits all solution is no solution at all.

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  15. seanmaitland (501 comments) says:

    When I left varsity and started working in 2000, I was on $35,000 per annum – $16.80 per annum.

    My rent was $200 per week, plus I had a car and a mobile phone, SKY and internet – all which cost me similar to what I pay today, except because I was so young, my cars insurance was 4 times what it is today.

    Despite this, I was managing to save $1,000+ per month and go out partying a couple of times a week.

    The only thing that has changed in price since then for the worse out of my expenses is petrol, food and power, and due to our low inflation rate, the price has not increased that much. The tax rate is better these days, even when GST is accounted for.

    Single people (such as Hamnida talks about) who cannot survive on $13.50 per hour are talking out their backsides and have some massive areas of expenditure that they are not owning up to, or simply don’t work fulltime (which is their choice).

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  16. seanmaitland (501 comments) says:

    That should read “$16.80 per hour”

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  17. Manolo (14,030 comments) says:

    Easy to get rid of WFF: Replace it with a child universal benefit. Done.

    More blanket benefits from an aptly-named person. The last thing NZ needs.

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  18. Alan Wilkinson (1,886 comments) says:

    @leftyliberal, anything is easy if you don’t need to think. Your proposal will pay thousands who don’t need it as well as promoting even more children for people who can’t afford them (and can’t teach them how to succeed in life).

    The consequence of waste like that will inevitably be that most who are struggling already will become worse off.

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  19. alloytoo (571 comments) says:

    @leftyliberal

    Lets rather tax people who have more kids, on the basis that those kids consume more state resources.

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  20. speters (108 comments) says:

    alloytoo – those kids also contribute more to state resources?

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  21. Cunningham (845 comments) says:

    @leftyliberal typical left solution to a problem. Throw as much money (with no concern as to how it is used and by whom) as possible and hope like fuck it will go away!

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  22. Weihana (4,583 comments) says:

    “A minimum income scheme, which has merits, would need a radical reshaping of the tax and welfare systems.”

    An inevitability. Unskilled labour will become a thing of the past and along with it the purchasing power of a large portion of the populace.

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  23. KiwiGreg (3,259 comments) says:

    It’s really quite simple. No amount of histrionics about the poor or the disadvantaged changes the fact that the government (or anyone else) can’t create the wealth needed to legislate an increase in mandated minimum pay.

    Some combination of things happen: prices rise to compensate, there is a forced transfer from one party to another, national wealth is decreased as jobs which previously existed are destroyed Or new jobs are not created, there is an increase in the black economy as those wishing to employ and work for lower rates are forced underground.

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  24. leftyliberal (651 comments) says:

    @Alan Wilkinson

    “Your proposal will pay thousands who don’t need it”. WFF already pays thousands who don’t need it. The point is that WFF is quite obviously a flawed concept. We recognise that some need help financially due to raising kids, and that society as a whole should contribute to that process. Then we go ahead and give it to some but not others. Need doesn’t come into it with WFF, so my suggestion is instead of trying to account for who needs it most, make it the same for everyone. Those that don’t need it get a few extra bucks they won’t complain about (consider it a tax cut) and those that do need it get it. It doesn’t have to cost any more than WFF costs already.

    This is the whole idea of universality – get rid of the silly special-casing which leads to such perverse consequences.

    “as well as promoting even more children for people who can’t afford them (and can’t teach them how to succeed in life)”

    Surely we do that already with the DPB and WFF, though I suspect you consider the former in this case rather than the latter (at least the latter are working, right?)

    It’s universal, so does not promote the idea of children to those that can’t afford them any more than it does to those that can afford them. It clearly highlights that it costs to raise a kid, and we as a society are going to help parents to succeed in this endeavour by helping out financially.

    The universality allows you to get rid of WFF as well as a large chunk of the DPB.

    @Cunningham: Or, maybe it replaces two existing, clearly flawed benefits with one that is fairer for all?

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  25. Zapper (1,027 comments) says:

    Most appropriate moniker EVER.

    “Those that don’t need it get a few extra bucks they won’t complain about (consider it a tax cut)”

    Tax churn tax churn tax churn.

    But you don’t care, you just want more people dependent on the State.

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  26. dime (10,095 comments) says:

    i love how leftys think they can just legislate growth.

    a $19 an hour minimum wage would not effect anyone at my business.

    bet it would reduce my sales though. that may lead to someone being laid off.

    most NZ businesses are small businesses. imho the majority can cut overheads as turnover drops. back to a point where they dont employ people but earn a half decent wage.

    why do the left want to do so much harm to people who are already struggling?

    did they all sleep through 3rd form economics? or are they just out to punish those who are more successful, no matter the cost.

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  27. Viking2 (11,553 comments) says:

    Instead so many on the left and unions and center left support paying welfare to millionaire parents. That is because they are really just about growing the size of the state that they tend to live off.

    There fixed that.

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  28. Tom Jackson (2,553 comments) says:

    It’s lucky that economics isn’t a science then.

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  29. Rich Prick (1,720 comments) says:

    Lets watch the leftist language here. A “living wage” implies anything less means not living.

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  30. Tom Jackson (2,553 comments) says:

    If you raise the minimum wage to $19, you’re destroying every job that isn’t viable up to that figure.

    Nonsense. Just as people don’t necessarily stop buying petrol when the price goes up, they don’t necessarily stop buying labour when the price goes up. They may well cut back on other goods. It depends. Other countries have high minimum wages. It’s not the disaster people claim it is.

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  31. Rich Prick (1,720 comments) says:

    Well Tom, in the real world, when I’m required by law to pay more, I pick the worst performers, get rid of them and make the remainder work harder to take up the slack and earn the extra money I must pay them.

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  32. Peter (1,723 comments) says:

    Nonsense. Just as people don’t necessarily stop buying petrol when the price goes up, they don’t necessarily stop buying labour when the price goes up.

    Those employers who can pass the cost on will likely pay $19. Those who can pay it, but can’t pass it on, will pay less in tax on lower profits.

    The problem starts when the job returns $18.99 or less. If the employee is paid $15 p/h, and the employer makes $16 p/h (simplified example), then all is well. If you force the employer to pay $19, that jobs vanishes. No one can pay $19 to return $16 for long.

    Many businesses – especially many small businesses, which make up most businesses in New Zealand – cannot pass the cost on nor can they absorb that cost.

    As RichPrick points out, in the real world the worst employees lose their jobs and the rest work harder.

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  33. Rich Prick (1,720 comments) says:

    For every action, there is an equal and opposite reaction. I’ve never understood union/leftist subscription to minimum pay rates et el. It gives me the perfect excuse to say the labour I currently employ is not worth that rate and “let them go” and raises my performance expectations for those who remain and get the raise. Not great for the working environment, but that’s the result when unions/leftists prescribe how I must value the labour I have decided to hire.

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  34. Rich Prick (1,720 comments) says:

    It is also interesting to note that those so far who have expressed some enthusiasm for a so-called living wage are City Councils and government departments. They have never had to work to gain custom, rather they are dead hands in our pockets with the threat of property confiscation or jail if we don’t pay them what they demand. So of course they have the luxury of over valuing the labour they employ and feel good about themselves.

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  35. pq (728 comments) says:

    David Farrar (1,655) Says:above
    February 13th, 2013 at 3:12 pm

    What nonsense. You just spout any rubbish Hamnida. The $19 an hour is calculated for someone supporting a spouse and two kids. $13.50 an hour is absolutely enough to live on for many people. I’ve lived on it. You probably have also.””

    PQ says Farrar is in dream land, print your income here Farrar go on have the guts. You probably lived on $19 an hour when your Daddy was sending you to school. Propose to me how you can supoport your children on $19 an hour, also tell me how wife survives.

    .

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  36. Rich Prick (1,720 comments) says:

    Oh dear pq. What a Stalinist you are, your demand assumes DPF’s capital invested and labour value is no different to that of a burger flipper. There is no point to your comment.

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  37. pq (728 comments) says:

    Farrar in this column is an absolute disgrace, 87 demerit points for sheer stupidity, no idea about expenditure in household, pull self together Farrar or I send in Tim Selwyn to take the show over

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  38. Rich Prick (1,720 comments) says:

    Fuck, you really are an idiot pq. As an employer, an employee’s expenses are of no interest to me. Should I pay the cleaner with a pokie and booze habit $200k? No, didn’t think so, why should I give a fuck about an employee’s other expenses? God, only in North Korea would I have expected a “pq”.

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  39. Adrian Slobovich (4 comments) says:

    @Alan Wilkinson vs leftieliberal:

    “Your proposal will pay thousands who don’t need it”. WFF already pays thousands who don’t need it.

    Let’s stop paying it to them, then – and pay it to someone who really needs it.

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  40. Adrian Slobovich (4 comments) says:

    Look, you can’t just pass a law that makes people pay their staff more. When the minimum wage goes up by 50c, everyone at my place loses a couple of hours a week and they all end up working harder for the same dough. Not even the taxman gets a pay increase because the wages bill stays the same. A radical change such as making the so-called living wage mandatory will see me selling off the takeaway to foreign investors, and 7 Kiwis will be out of a job.

    Hamnida seems to be mathmatically challenged, so especially for him, Economics 1:01: what’s going to happen to the price of your fruit & veg, bread, car servicing or lawn mowing if everyone’s wages suddenly increase by 30%? Exactly! So stay where you are and if you need more beer money, get a sponge and a bucket and go cleaning windows for 6 hours on Saturday, just like the rest of us did.

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  41. Harriet (5,118 comments) says:

    “……I just think it is daft to claim an 18 year old with no experience living at home needs to be paid the same as a 45 year old with 20 years experience who is supporting a family and mortgage….”

    There is all sorts of problems with that arguement David.

    Firstly it depends if the experiance is actually being used – what employer would pay for something that isn’t being delivered?

    Secondly, why should a young female who is ‘planning’ for a family by ‘saving’ some of her current income, be denied income ‘now’ because someone else has decided to have children at ‘this same particular time’?

    That then brings us into the territory of women making there fertility difficult by putting of childhood till there late 30’s and expecting the taxpayer to fund IVF.

    Ect.Ect.Ect.

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  42. KiwiGreg (3,259 comments) says:

    “Nonsense. Just as people don’t necessarily stop buying petrol when the price goes up, they don’t necessarily stop buying labour when the price goes up.”

    @ Tom you are either being disingenuous or trolling. No one is arguing that ALL jobs are lost when the government mandates higher prices. But anyone understands that the more expensive something is, the less you buy of it and labour is no different. It is the loss of the marginal jobs which is the issue.

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  43. Left Right and Centre (2,994 comments) says:

    Peter is right on the money. Right on brother….

    And I can provide myself as an example.

    Having been a moron truck driver I can attest to this theory….

    Minimum wage goes up $1? Driver wage goes up $1. Simple. I’ve got every last payslip going back yonks to back it up.

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  44. Peter (1,723 comments) says:

    Two things bother me about the socialists when it comes to a minimum wage. One, none of them appeared to be listening in third-form Economics, and two, their total lack on ambition.

    If we can mandate wages by state decree, then why stop at $19? Why not $29? Why not $129? Why not $1119 p/h?

    And if they think that’s stupid, they might begin to understand why $19 is stupid, too.

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  45. hannity (152 comments) says:

    Exellent way to flush out ,deadbeat employers, who bludge on taxpayers, to keep their sorry little “business” limping along.
    Employees have fixed costs too.
    Some employers, really do need to get a real job in a business that ‘is’ profitable.

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  46. hannity (152 comments) says:

    Peter, or $7 or $3 or $0 ph ?
    Just as disingenuous.
    You may have been listening in third form Economics, but you obviously didn’t make it to fifth.

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  47. itstricky (1,880 comments) says:

    Although pq is clearly, off the rail, there is a point. Is DPF saying he has lived on 13.50 recently? Probably not. So spewing a statement like ‘I used to live on minimum wage’ means absolutetly nothing. Doesn’t mean minimum wage has kept up with inflation, rent, food etc. Just meaningless. Needs more clarification.

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  48. Peter (1,723 comments) says:

    If you set it at $19, you will destroy jobs.

    Why assume the employer can afford the increase? The presumption is the employer is hoarding profits. Really? New Zealand businesses are all highly profitable?

    Is it not better to have a job @$15 than no job @$19? What if the employee is treating the job as a stepping stone – an apprenticeship – to gain experience, so they can step up to the $29 job? What if the employee lives in small town New Zealand where her costs are low?

    I don’t think anyone advocates working poverty, but minimum wage is the wrong tool.

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  49. hannity (152 comments) says:

    Why should employees and taxpayers subsidise unprofitable businesses, via WFF, Accommodation sups etc,
    If a business is unprofitable ,let it die.
    There may well be too many businesses inefficiently chasing the same dollar.

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  50. Alan Wilkinson (1,886 comments) says:

    @hannity, of course you don’t stop there. You want to make businesses that are currently profitable unprofitable and kill them. Your will also reduce competition and increase prices and costs for consumers hurting those on low fixed incomes the most. You are, in fact, a moron.

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  51. Peter (1,723 comments) says:

    Why should employees and taxpayers subsidise unprofitable businesses, via WFF, Accommodation sups etc,

    You advocate removing WFF and accommodation supplements?

    What you’re doing is taking profitable businesses and making them unprofitable. As an earlier poster pointed out, the reaction of many small businesses to increases in overhead is to cut overhead. In my own business, I can cut it right back to one permanent person – me.

    Sure, I don’t make quite as much in total, as total output is lower as the business has been downsized, but it would still pay me a good wage. Who loses? Employees and the IRD.

    BTW – I don’t pay minimum wage, but the principle is the same.

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  52. b1gdaddynz (279 comments) says:

    I love the people who say that if a business isn’t making enough profit to pay it’s workers an arbitrary amount then we should let them die off…sounds great exect that it’s probably most small to medium businesses in the current economy and if businesses die guess what happens to the demand for labour…that’s right it falls meanwhile the supply of overpriced labour goes up. Those people struggling on minimum wage now (unskilled, inexperienced etc) will have no show of getting a job now! Well done! If the issue is really about eleviating the effects of poverty on the children of these unskilled low paid workers then surely it would be more efficient if the money followed the kids instead of being paid to parents who clearly (in some cases) are not making the smartest decisions (unskilled people with out sufficient education aren’t usually very good at accounting) about their finances. This would mean meals provided at school, clothing and medical care directly to the child taking it from the pool of funds that would have been paid to their parents to spend on their vices and hire purchases that they should never have gotten in the first place.

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