Monday, 21 January 2013

Low wages and monopoly power

Ferdinand Mount has a fascinating article, fascinating at least for a man known for his support for the Conservative Party, in the Evening Standard today.  He urges companies to top up low wages.

He is right, of course, that the state can't carry on subsidising low wages through the welfare system as they are currently doing.  As he so rightly points out, this is how the Speenhamland system of outdoor relief worked in the eighteenth century - except that it didn't work.

Subsidising business is rarely an effective way forward, and it is completely unsustainable for taxpayers to be asked to subsidise bad employers in this way.  That is as good a reason as any why we have a deficit.

Mount's recent books about the way in which successive governments have created a new class of mega-rich has opened up a fascinating new divide in politics, at least as interesting as demonstrators camping outside St Paul's.

He is gargling with the word 'pre-distribution' just as Ed Miliband is.  This is an idea whose time as come.

But there is a problem around his contention that the government can't regulate and that "companies have to work out a solution between their accountants and their consciences".

He is quite right that we may prefer to shop at stores that pay living wages, and shun the companies where we are already paying for them to employ people on low wages.

That works, but only as long as we have the choice.  None of that kind of pressure can work where we have allowed monopolies to grow up.  In the recent furore about tax avoidance, the three companies that really took the pressure - Google, Amazon and Starbucks - showed exactly what will happen.  Starbucks still has competitors and it caved into public pressure.  Google and Amazon don't, and they rode out the storm.

Monopoly power is the key issue, and it is a traditional Liberal issue which the Liberals and their successors have quietly ignored for too long.

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