Comments for Why the 10p tax might speed up welfare reform at http://www.adamsmith.org , comment 1 to 3 out of 3 comments http://www.adamsmith.org Wed, 08 Oct 2008 09:13:13 +0100 FeedCreator 1.7.3 http://www.adamsmith.org/blog/politics/why-the-10p-tax-might-speed-up-welfare-reform-200805131369/#comment-272 Arthur, You raise an interesting question. If "Inflation is always and everywhere a monetary phenomenon" (Milton Friedman, A Monetary History of the United States 1867-1960), how come we continue to talk about rising commodity (esp. oil) prices and public sector wage demands as "inflationary". Assuming GB can keep his hands off the printing press, public sector wages either compete with other public spending or require higher taxes (which will be struck down in the long run by voters). Rising fuel prices will simply encourage efficiency and the use of alternatives (public transport or non-fuel consuming alternatives) and rising food prices will merely displace other spending (from luxuries to essentials). - Tom Papworth Thu, 22 May 2008 11:39:05 +0100 http://www.adamsmith.org/blog/politics/why-the-10p-tax-might-speed-up-welfare-reform-200805131369/#comment-208 Well said Arthur! To every argument there is an equal and opposite counter argument. - Mark Wadsworth Tue, 13 May 2008 12:54:09 +0100 http://www.adamsmith.org/blog/politics/why-the-10p-tax-might-speed-up-welfare-reform-200805131369/#comment-207 Interesting piece but could someone tell me why a "tighter workforce" leading to higher wages at the bottom is a problem. I would have thought this was to be welcomed. After all, is this not just the labour market doing what it is meant to do. In a tight labour market companies are encouraged to do several things: First they need to reallocate pay costs from the top to the bottom to retain workers and some would argue this was a social good as well as an economic good enabling more people to spend more on consumption. Second, companies are forced to look for more cost saving measures and higher productivity to keep profit margins high, another bonus for the UK economy I would have thought. Would the economy not also find its own solution by reallocating labour from peripheral activities for those that the market considered more important. Equilibrium here is the word. I am not aware that countries with populations considerably lower than ours have disproportionate exposure to inflation. The logic then says that we need to continually expand the labour force to avoid inflation and this is clearly nonsense. Can somebody also explain why these other effects are undesirable. If labour costs are higher in the UK then would there not be more pressure on reducing taxes and other 'social costs' we impose on our economy if we are to remain competitive in the global economy. And if the tightening of the labour market has the effect of reducing the difference between high and low pay then there would surely be less requirement for that Labour nonsense called tax credits - another bonus I would have thought. And finally, I thought that inflation was more to do with money than just supply and demand of labour. The cost of labour at the bottom might well rise but at the end of the day, we can only spend what we have so just as long as we do not continue to expand the money supply then rather than being a bad thing, wage increases at the bottom will not be paid for by a general rise in inflation but a combination of lower wages at the top, better productivity and lower tax and social burdens in the country. - Arthur Tue, 13 May 2008 11:54:21 +0100