Mr Duncan Smith, Why Is Britain’s Minimum Wage Double That Of America?

The USA invented the minimum wage.   A Federal Minumum Wage was introduced in 1938 at the equivalent in 2009 Dollars at $3.77 an hour.  Today the Federal minimum wage is $7.00, although as recently as 2007, it was still $5.15.

States can add to the rate, and the highest is in Los Angeles where the rate is near to $10 an hour.  Some jobs are exempted from the minimum wage.  And some territories.

Wikipedia –

As of July 24, 2009, the federal minimum wage in the United States is $7.25 per hour. Some states and municipalities have set minimum wages higher than the federal level (see List of U.S. minimum wages), while some U.S. territories (such as American Samoa) are exempt. Some types of labor are also exempt, and Tipped labor must be paid a minimum of $2.13 per hour, as long as the hourly wage plus tipped income result in a minimum of $7.25 per hour.

In the USA, productivity per hour worked is around 50% higher than that of the UK.  So why, you might ask, is the minimum wage in Britain set at just under GBP 6 an hour, which is currently $9.50.  To be competitive Britain’s minimum wage should be one third less than that in the USA at about GBP 3 an hour.   At the very least, why should the minimum wage in Britain be any higher than it is in the USA?  

No wonder Britain has 6 million people stuck at home without work and unable to find jobs.  If employers could pay a rate of GBP 3.50 an hour, or kids could work in restaurants for GBP 1.50 an hour and get tips, many of these millions would get back to work.  Most would prefer to do something, and get a start.  

If these rates of pay were lifted out of tax, both Income Tax and Nat Insurance, as proposed by the Lib Dems, then there would be an incentive to earn GBP 140 a week tax free for a forty hour week, a handy contribution to most households.

This would also make the IDS task of blending the tax and benefits systems much simpler.  

Why is halving the minimum wage not on the agenda.  It will have to come.  Or the recession will kill off millions of jobs where GBP 6 an hour can no longer be afforded.  The minimum wage should be $5 an hour as it was three years ago in the USA.   The government cannot afford the coming tsunami of unemployment.  It should act now to save jobs, businesses and its own finances.

Guardian on IDS Conference Speech –

Work and pensions secretary Iain Duncan Smith will tomorrow unveil the biggest shake-up of the benefits system in decades, with plans to introduce a Universal Credit in place of the current multitude of benefits. The aim is to save billions in the medium term by increasing the incentive of people on benefits to take up work.

Duncan Smith, who appears to have won a major battle with Osborne, said tonight it was the “dawn of a 21st-century welfare system. To those that have been marginalised and abandoned to a life on benefits by Labour I say: we will get you back into work and in control of your life.

“For the most vulnerable I say: we will protect you. And to the taxpayer I say: here is true value for money, a system that invests in you and supports you in your time of need, but expects everyone in society to contribute and will no longer allow anyone to choose a life on benefits.

The next shoe to drop will be the fact that the Minimum Wage is another key factor that keeps people in idleness.  IDS will hopefully be addressing this issue as well, once he has got the first part of his new programme in place.

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4 Responses to “Mr Duncan Smith, Why Is Britain’s Minimum Wage Double That Of America?”

  1. Budvar says:

    Why is Britains minimum wage double that of America?

    Might it be because Americas cost of living is about half what ours is here in UK?

    A gallon of petrol is about £2.10/£2.20 an imperial gallon ours is over £6.

    Average home price in US is about £81k, average UK home price about £200k (give or take.

    Staple food stuffs are about 1/3 the price of ours.

    New car prices, it’s swings and roundabouts, some are cheaper others more expensive, but averages out about the same.

    They’ve no VAT, income tax is paltry compared to ours. Most states have a sales tax of about 2% but the really big tax fuck over for them is property tax. You don’t pay it and the sheriff evicts you and sells your property under you on the town hall steps.

  2. Anonymous says:

    Not long after I left school, in the eighties the only job I could get was working in a hotel split shifts from 10-2 and then from 5-close which was 11 through the week and 1-2 at weekends. For that I earned £60 per week. Rent for my one bed one room bedsit was £30 then add electric gas food by the end of the week I was eating spaghetti with oxo cube sauce. I did not go out drink etc and took the job as an alternative to going on the dole.
    Tell me how someone can live on the £3.50 per hour, how on earth with the minimum rent of £300 per month on housing association rates can someone afford to live on that ?
    Surely the property prices need to come down, commodity prices need to come down which means less speculators, less people making a living off the backs of others ??????
    have you not noticed how expensive food is getting? public transport is expensive, petrol and power/gas have risen above inflation

  3. Tapestry says:

    The EU maintains a keep out cheap supplies policy. It is achieved by negotiation as much as by tariff.

    Prices are starting to fall. Property prices are down by about 15% by my estimates, although this is not reported as they are trying to disguise deflation. They will fall a lot further yet.

    Fuel prices are criminal, but the speculators’ debts are so big they have to try to stop the bank bankruptcies somehow.

    The cost of government is criminal too and it needs smashing to pieces. The only way to cope with low wages is to have a benefit system that still pays out over low wages, as proposed by IDS. Lowering the minimum wage is the natural follow-on policy.

    The other factor should be that not all people are maintaining an independent household or digs. Many are sharing with established relatives.

    Either way, you are right that low pay is not easy to live on. But from low pay comes higher pay if you have any ability to work your way up either where you are or by moving to better work as it comes available. A recovering economy will have more and better jobs. Yet if wages are maintained at impossible levels, the economy will not recover.

    I worked for GBP 4 a week doing 40 hours a week as a thirteen year old in 1967. That hardly paid for my new boots. Yet the economy lifted and so did I, so that today I don’t need to work. But I worked for thirty years flat out to get to this point.

    My health suffered, but that’s life.

  4. Twig says:

    Surely the wage should match the productivity?

    The lefties just cannot understand that the world (or rather the UK) doesn’t owe them a living. If we carried on the way Labour were going it would eventually have ended in total reliance on the state as the productive eventually got fed up with supporting the massive cost of more and more benefit drongos and a bloated and non-productive state sector.

    God provides enough food for all the birds but he doesn’t throw it into their nests.

    The left want to abolish private education in order to abolish independent thought and place control into the hands of the state. We could then be taught to accept whatever the government want without question. Funny how they attack grammar schools and private schools when the problems are almost exclusively in the state comprehensives.

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