“Taxing employers’ profits as an incentive to raise wages” (A Williams, 6/11/15) is neither rocket nor economic science, but flawed socialist doctrine!
Companies amass profits through consumers buying their (rather than competitors’) ‘widgets’ at that magical, black-art price of ‘what the consumer will bear’.
Any increase in production costs (energy, taxes, wages, business rate) can force a costlier widget out of the market as consumers, even on ‘living wages’, seek ever cheaper, low-wage, imported widgets. No sales: no wages!
An employers’ greatest overhead is usually wages (plus 17 per cent ‘costs’).
Their work may only need an unskilled labourer on £5/hr.
If we force a £10 minimum wage, skilled workers on £10, technicians £20, plumbers £80 will all rightfully demand (with union support) pro rata pay rises to maintain pay differentials leading to wage inflation (and ever rising 60 per cent median ‘living wages’), a disproportionate increase in the cost of widgets, reduced sales, profits and inward investment.
Pondering their ‘Pareto Analysis moment’, employers could pare costs by replacing labour with automated processes and reduce skill levels to minimum wages by importing cheaper sub-assemblies.
Consumers – who remain supreme – still get their widgets and Ford Transits, but at the expense of skilled British workers and supporting industries, now on the dole!
Profits increase in inverse proportion to effort.
Manufacturers make the least (the Mini was produced at a loss... it led to British Leyland!) while Del Boy middle men and retailers (often avoiding business rates while offering profitable 50 per cent discounts on high mark-ups) make the most – yet they add no value to the product, while consumers pay VAT on the retailer’s profits. Crazy!
The better option, but totally abhorrent to moralising socialists, is for governments to allow lawful ‘tax avoidance’ through reinvesting ‘profits’, some as tax-free performance ‘bonuses or dividends’ to all employees - eg: the John Lewis retail partnership.
This won’t raise production costs, so saves jobs!
What’s it to be: low income with regular ‘fat bonuses’, no income, or Britain becoming a nation of internet shop-keepers?
Barry M Jones
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