The welfare state

Devils Kitchen has a fine piece attacking Kerron Cross today. Do read the whole article but the bit that spoke to me clearest was DK's attack on the National Minimum Wage, here's an extract:

"Some people are never going to be worth paying at all and will thus remain unemployed (unless they retrain, for instance, thus adding to their human capital worth). If you introduce a Minimum Wage of, say, £4, anyone who's labour is worth less than £4 an hour will never have a job.

As you raise that Minimum Wage (especially if you do so above the level of natural wage inflation) then you increase the number of people who labour is not worth that amount. As such, you increase the number of people who will never be able to get a job.

The consequences of this are fairly plain. That person will, for starters, never have the chance to better themselves at the expense of their employer, through in-job training, etc. They are left very poor and so their chances of being able to go and study to improve their human capital, and therefore their labour rent value, is also reduced.

So, you contribute to an ever-increasing underclass, an üntermensch, who will never get a job. As such, you propagate an increase in the number of people who will always be living solely off benefits. As you increase those benefits, you make it even less likely that getting a low paid job will be more profitable, given the time outlay involved in working, and thus further reduce the probability that these people will ever work again.

If you then introduce Child Benefits, your unemployed person can afford to have children (they become, in fact, an investment), and you end up with children being brought up in a home where no one has ever worked. And so, you increase the number of people who, in turn, will probably never work.

And the stupid thing is that you don't have to take my word for it: we have seen this happen over the last sixty years. We now have a reported 3 million households in Britain that are entirely dependent on benefits.

And as Labour ramps up the Minimum Wage, the number of households will only increase as you increase the number of people whose labour is not worth the wage that you have insisted must be paid."