Wealth doesn't trickle down – it just floods offshore, new research reveals

Ttosca - yes, they really and truly are entirely unrelated. The links that the report tries to make are specious and spurious.

Fight the fight that matters, not the one the report is trying to make us have.

Problem with no income taxation is that it would be a gift to all the bitter people who hate the poor - they'd argue that people on minimum wage don't contribute to society (which would be bollocks, but they'd say it. There are enough hard of thinking people who forget that everyone pays tax even if you don't earn enough to pay income tax).

I agree that there should be no taxation up to the minimum/living wage.

Furthermore, the min wage should be linked to inflation, and increase annually.

But what is a 'living wage'? And how do you go about introducing one. Because from where I'm standing it means different things to different people.

You love making the possible impossible, don't you? Always making excuses for why no change is possible, and it's the best of all possible worlds - except when it comes to making it even easier for business to exploit people in the UK.

Why don't you look on the living wage website?:

www.livingwage.org.uk/about-living-wage

What is the Living Wage?

A number

An hourly rate set independently and updated annually.

The Living Wage is a calculated according to the basic cost of living in the UK.

In London the rate is calculated by the Greater London Authority, the National rate for outside London is calculated by the Centre for Research in Social Policy.

Employers choose to pay the Living Wage on a voluntary basis.

The Living Wage enjoys cross party support, with public backing from the Prime Minister and the Leader of the Opposition.

Paying the Living Wage is good for business, good for the individual and good for society.
Good for Business

An independent study of the business benefits of implementing a Living Wage policy in London found that more than 80% of employers believe that the Living Wage had enhanced the quality of the work of their staff, while absenteeism had fallen by approximately 25%.

Two thirds of employers reported a significant impact on recruitment and retention within their organisation. 70% of employers felt that the Living Wage had increased consumer awareness of their organisation?s commitment to be an ethical employer.

Following the adoption of the Living Wage PwC found turnover of contractors fell from 4% to 1%.
Good for the Individual

The Living Wage affords people the opportunity to provide for themselves and their families.

75% of employees reported increases in work quality as a result of receiving the Living Wage.

50% of employees felt that the Living Wage had made them more willing to implement changes in their working practices; enabled them to require fewer concessions to effect change; and made them more likely to adopt changes more quickly.
Good for Society

The Living Wage campaign was launched in 2001 by parents in East London, who were frustrated that working two minimum wage jobs left no time for family life. Over 10,000 London families have been lifted out of working poverty as a direct result of the Living Wage.

The Rate

The London Living Wage is currently £8.30 per hour.

The figure is set annually by the Greater London Authority and covers all boroughs in Greater London.

You can view the 2011 GLA report which explains how the London figure is calculated here.

The National Living Wage for outside of London is currently £7.20 per hour.

The figure is set annually by the Centre for Research in Social Policy at Loughborough University.

You can view the report which explains how the National figure is calculated here.

From November 2012 both Living Wage figures will be announced annually in November of each year.

Living Wage Employers should implement the new rate as soon as possible following the annual announcement and within 6 months.

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So, in summary, the living wage is calculated based on the cost of living of the area or region. Unfortunately, it is voluntary, which is shouldn't be, just as the minimum wage is not voluntary.

It doesn't matter whether it will fit one particular persons needs 'exactly'.

If someone is in need of a 'living wage', then they will no doubt be better off than on the minimum wage, dependants or not. So even if it isn't quite enough, it will be drastically better than the minimum wage, which is a sick joke.

You see, this is why I get irrate with this kind of report. It detracts from where the real debate and indeed outrage should be focused - we should be improving the lot of the poorer sections of society, not getting our knickers twisted about whether or not the wealth that is at the top of society remains onshore or offshore.

Yes, because these two things are totally unrelated.

Sorry, I made a mistake there. I said that £12646.40 is the take home pay on NWM. This is clearly wrong. What I meant to say (and the whole point I was trying to make) was that £12646.40 is the PRE-tax figure.

It's the paying tax on NMW which pushes people below the living wage rate.

CouthyMow I agree that tuition costs make university a much less attractive proposition amongst the poor, however, university is far from being the only route towards a high paid profession. I know plenty of people who are in what I would describe as high paid employment (above £50k) who worked their way up to that position without going through university. Similarly, the best paid person I know learned his technical trade as an NCO in the Royal Navy despite entering as a 16 year old school leaver without a single qualification to his name.

As someone who has interviewed and employed people in the past, I would never discriminate against someone who didn't have a suit. As long as they turned up looking reasonably smart, and didn't look like they were taking the piss, they'd be OK. At the end of the day, it has always been much cheaper to get a motivated person to smarten up a bit than it is to get a smartly dressed person motivated.

My point about the living wage is this. The Rowntree Foundation states that for an individual to achieve an acceptable standard of living and participate fully in society, they need to earn at least £14,400 per year. After income tax and national insurance are deducted, the actual amount of money someone earning that salary takes home is £12324.04. Now, if someone was earning minimum wage and working a 40 hour week, they would take home £12646.40 per year which is £322.36 MORE than the Rowntree Foundation's minimum salary to live in this country.

However, because we are led by incompetent socialists who cannot manage a budget but expect us all to be able to, those on National Minimum Wage, who are legally prevented from selling their labour for a penny less than £6.08 per hour, are still taxed somewhere in the region of £1500 per year. It is that taxation which pushes them under the Rowntree Foundation's level of acceptable living and it is that taxation which is the reason why they will need in work benefits.

The employers are not exploiting the workers; it is the state which is.

CM.

But what is a 'living wage'? And how do you go about introducing one. Because from where I'm standing it means different things to different people.

I know the NMW has a slight variation based on age but at least that's simple to understand.

But a 'living wage' will differ wildly based upon the worker's:

1. Age
2. Living Status (eg. parents, on their own, in a relationship)
3. Any dependants
4. Housing situation (Renting/mortgage)
5. Geographic location (eg. Scotland or London)

Just how do you go about calculating what a 'fair' wage should be without some complex algorithm like they use for tax credits?

So let's say we introduce a law that says the living wage for hiring a 30yr old parent with 2 kids is £25k per year. And an 18yr old with no kids is £15k per year. What will happen? Well employers will be more incentivised to hire young kids instead of the parent. Is that 'fair'? Is that what you wanted to see with the living wage?

The notion of a living wage is great in theory, sounds great too. In practice I don't think it's practical at all.

I do agree though that tax credits shouldn't be necessary for working people and I think we have quickly forgotten that the world still turned and the country still managed perfectly well before their introduction.

You see, this is why I get irrate with this kind of report. It detracts from where the real debate and indeed outrage should be focused - we should be improving the lot of the poorer sections of society, not getting our knickers twisted about whether or not the wealth that is at the top of society remains onshore or offshore.

Of COURSE entrepreneurs exploit their workers. And taxation breaks for those on £10k or less don't take even NMW workers working FT fully out of taxation. And an income of £15k is STILL too low to support a family on.

When employers pay a LIVING WAGE to every employee, from the cleaner up, then and only then will I cease to see it as exploitation, and leaving the State to pick up the tab.

Tax Credits for those in employment should NOT be necessary.

CM - I do agree with you entirely that poorer people are denied opportunities that are readily available to the middle classes.

Yes, you've misunderstood. Undoubtedly my fault for explaining badly.

Definitely take steps to reduce the differential in pay between the average worker and the highest paid director in every company. I'll shout for that until I'm blue in the face. It's the only practical way to make our society more egalitarian, in my view.

All I'm saying is that the wealth that undoubtedly is accruing at alarming rates at the top of the pile isn't actually going offshore - which is what the report claims. (Or at least not in anything like the numbers reported, for the reasons I've explained above.) UK earned wealth is largely staying in the UK. Now, much as I'd prefer that it hadn't ended up so overwhelmingly in the hands of the very wealthy, we should at least acknowledge that when that cash gets spent in the UK it's (i) helping to stimulate the UK economy; and (ii) raising tax through VAT.

Actually, I suspect that the UK is a net 'importer' of some kinds of wealth due to the presence of people in the London like the Russian oil oligarchs. They undoubtedly don't bring their capital here (and, TBH, I would expect Russia to get first dibs on taxing their wealth in any case because it's where the wealth originated - seems only fair) but they do spend cash like it's going out of fashion.

MrJudgyPants - Poor people are denied access to higher paid jobs because 1) They see the costs involved in higher education as a barrier. 2) Because there IS prejudice amongst employers - if someone turned up to an interview for a job paying a salary of £50k wearing tatty clothes with holes in that were obviously poor quality, are you honestly telling me that most interviewers would hire that person? 3) because if they have had to go straight from A-levels to work in order to continue to have a roof over their head, or to pay their way in a low-paid household where their parents can't afford to keep an adult financially, not because they don't WANT to, but because they CAN'T, they are locked out of higher paid jobs.

I can't believe that you can't see the myriad ways in which a poorer person will be locked out of higher paid work.

MrJP, CouthyMow's point was that we undervalue the most vital jobs in society and overpay lazy slobs who lie and steal and exploit everyone else.

Or maybe she didn't say that, but I am.

Cinnabar - words actually fail me.

Let them eat cake, eh? Or have I misunderstood your last paragraph?

CouthyMow I don't follow your logic. "people are refused access to higher paid jobs because they are poor." Are you saying that the poor are barred from higher paying work because of the prejudices of the employer or a structural failure within society?

If you raise a TA's salary to £30k per year, the teachers, who will have spent four years at university and may have been teaching for ten years or so before collecting a £30k salary, will want a pay rise too. This is only going to lead to inflation as it did the last time this sort of thing was tried back in the 1970's.

You seem to suggest that entrepreneurs exploit the worker but without entrepreneurs you don't have workers.

As for workers getting paid poor wages and having to top them up with various tax credits, if the government wasn't taxing the workers so much in the first place, there would be no need for tax credits (aka rebates). As near as makes no difference, the delta between the Rowntree Foundations living wage and the take home pay of someone on minimum wage is the tax that the government levy on the poor.

CM, I agree that the professions you've very eloquently written about are underpaid and underappreciated, woefully so. Nor that very senior management are overpaid relative to the average worker.

Where I disagree is that I simply don't believe that the fruits of bosses' overpayments end up in tax havens. The sums just don't add up. And because the sums stay onshore, they do contribute to the wider economy. They get spent on luxury goods, and private schooling, and racehorses, sure, but in so spending the rich are pushing some economic activity.

Of course people are refused access to higher paid jobs because they are poor. Redundancy requiring retraining? Where does the money come from to PAY for that retraining?

Also, why SHOULDN'T a care worker, who looks after the most vulnerable people in Society, be worth being paid £30,000? Or the person who collects your bin bags? Or the person who cooks your good for you in hospital? Or the person who pushes your trolley to theatre. Or the ambulance driver? Or the TA who helps those DC's with LD's. Or even that wonderful NQT who taught your DC's any more. Or the nurse who looks after you after your operation when you are in the ward?

Why are none of these jobs VALUED? They would be missed if they were not being done...

Why on earth SHOULDN'T people doing these jobs be paid £30k? Why should someone who sits on their arse EXPLOITING these people get paid 5x, 10x or even more than that for doing so, I just don't understand this mentality.

Oh, I've paid my tax, so it doesn't matter if I am sitting here counting £5 million, that I earned by exploiting the people that actually STACKED the shelves of the supermarket chain I am the CEO of, by paying them so little that the State has to top up their wages with Tax Credits to a level that they can actually LIVE OFF. Because, you see, I don't actually PAY my employees enough to pay for a roof over their head, for heat and light AND let them be able to buy food in the supermarket chain that I am CEO of. And if I was taxed any more on my £5 million when I have already paid 45% tax on some of my earnings, 40% on some of it, and 20% on the rest, then woe is me sitting here with my £5 million and I'll just take my business to another country and ignore the fact that I have a massive captive audience of customers on this island and that it will cost me far more than that £5 million if I no longer trade in this country...

Yeah, RIGHT. They will cut off their nose to spite their face.

And they're not permitted to move their profits offshore. There are slews of legislation, including criminal sanctions against tax evasion and money laundering, to stop them.

I would just like to point out that I did not call rich people evil! Also to answer my point that those not in control of the wealth have little opportunity to alter this situation with "they could go to tech college" is a little naive. Getting a job which allows you to earn £40,000 more than you did before does not suddenly put you in control of wealth. When I say the majority of us are undervalued and underpaid, I am not just talking about lavatory cleaners but the vast majority of us who do not control prices/ wages by running a major corporation (eg the supermarkets who dictate how farming works in this country/ banks who contol borrowing and lending etc etc), who do not contriol property prices/ availability by investing in property in various ways and so on. The corporations and individuals who do have this kind of control should not be allowed to move the profits away so that they are protected from tax.

Very interesting, CinnabarRed, thanks.

Well, there's the explicit assumption that money is salted away into tax havens to avoid tax - but when you test is that doesn't make sense at all.

Remember, banks make profits by investing money placed on deposit with them. They pass most of the investment return back to the deposit holder, and keep a margin for themselves.

So banks have to have something to invest in, in order for them to make money, and to be able to pay interest to the deposit holders.

Deposits of the size that the report is talking about would get 'stuck' in tax havens, and not earn a return for anyone at all. There's simply not enough infrastructure within tax havens for the banks to invest in, in order to generate a return for deposit holders and a profit for the bank. Deposits of that size would have to come back onshore to make profits for the banks, and then they become traceable (and hence taxable) again.

The mega-wealthy aren't stupid. They would rather earn interest on their deposits and then lose some of the interest in tax, than earn no interest at all.

(In practice, the mega-wealthy can avoid paying tax in a far more straightforward manner - they simply avoid staying in any one place for long enough to become tax resident there. Years ago Madonna successfully sued her tax adviser for not noticing that she's spent too much time in California and had become tax resident there, meaning she became liable for California state taxes. If she's spent one more night in Arizona she'd have been fine.)

I also have my doubts about the quantum of lost wealth that the authors claim is in tax havens. I just don't believe that a sum equivalent to the entire annual output of the US and Japan can possibly sit there, doing nothing. The GDP for the entire world was only $65 trillion - is it really credible that an amount equivalent to a third of the globe's wealth has been stolen and hidden? Really?

I suspect that the people who really do use tax havens - or secrecy jurisdictions, to use a more accurate name - are nasty third world dictators who need a fund readily available for when the shit hits the fan and they need to do a runner. They don't care if they're not earning any interest, they just need to know the money's there when they need it.

(Switzerland, as an aside, earned international praise during the Arab Spring because its banks were so quick to shut down bank accounts held by Mubarak and family.)

"What sort of pain would you like me to inflict on the non-contributors?"

Tell them that we're all in this together.

What are they, CinnabarRed?

Yes, I am, Niceguy!

MrJP, if you have been bled dry then you can't pay anything more. What sort of pain would you like me to inflict on the non-contributors?