Minimum Wage, Subsidised Childcare and Middle-Class Lobbying

Two editorials in The Economist this weekend that roused my ire. One on the folly of raising minimum wages, and another on the need for subsidised child care to maintain a country’s population. The two are linked. Not by any economic theory, but by the class interest of the journalists and interns who write for The Economist. The people who write for The Economist want cheap tradesmen to work on their St John’s Wood flats, cheap nannies to look after the children so that Charlotte can go back to her career as a consultant at Accenture, and, of course, more immigrants. Lots of immigrants. But that’s another subject.

Anglo governments are talking about minimum wages because the overwhelming majority of low-paid workers are women and immigrants, two constituencies which are seen as block votes with a tendency to turn left. It’s also because Governments are getting tired giving tax subsidies to low-paid workers which end up in the profit line of large companies who then: cut jobs; create social uncertainty; sell, make or provide goods and services of ever-decreasing quality; and generally make Governments look as though they are presiding over a decline the quality of life. It also happens to be the right thing to do: how on earth does anyone run a society when only about 20% the workforce can afford to live in an independent, adult manner? The rest have to get married or live in subsidised housing to even pretend to be living an independent life.

If you’re doing something that isn’t profitable unless you pay low wages, you probably shouldn’t be in business. Either you don’t know how to price properly, or you’re being screwed by your customers (any farmer supplying any supermarket in any country in the developed world), or you aren’t supplying something that people really want. Like Morecombe Bay cockles. Low wages are the result of bad management. It’s an entrepreneur’s job to find something people want at a price that makes it profitable when the workers are paid enough to live like adults. The reason cleaners aren’t paid a lot of money is that their clients are quite prepared to live in dusty and slightly messy conditions. A cleaner-cleaned house is a nice-to-have, not a must-have. Now, if parents risked having their kids removed by social services should a random inspection find fecal matter in the toilet bowl or a trace of grime or spilled milk in the children’s room - guess how important it would be to employ a cleaner? Guess what would happen to cleaning rates? Especially if cleaners (not the agencies) had to be local-council certified first?

According to Charlotte’s editorial-writing husband Jasper, the reason Charlotte should have free child-care so she can go back to her job at Accenture is that developed countries aren’t producing enough children to keep their parents in fat pensions and luxurious healthcare when they get old. (Oddly, one way out of that is, Jasper’s editorial says is, yes, more immigrants! But I digress.) However, a declining young population is not a problem. The problem is declining GDP. Anyone who sees a declining population as irrevocably linked to declining GDP, again, probably shouldn’t be running an economy. And who says that healthy old people should be exempt from work, especially when there won’t be enough (younger and middle-aged) people to do all the work that needs doing? Keep the oldies working. When they start dying, close down what they needed to live behind them. And instead of importing more people to do low value-add jobs with a low tax take, work on figuring out how to increase GDP per capita so that the economy doesn’t shrink even while the population does. More exports and fewer imports of high-value goods would help. (It wouldn’t hurt if Vodafone, Google, Apple and others paid their due taxes either. Who cares if they go somewhere else, since they aren’t actually making a net contribution to the country? But again, I digress.)

Seriously? A magazine with the self-advertised stature of The Economist should not be lobbying for the benefit of a bunch of wanna-be BCBG’s. Perhaps if paid its staff more, they wouldn’t use its pages in such a blatant manner.