Your compensation for being employed is the cost of employing you
This is something that all too many - sadly including all too many who rule us - fail to grasp. The total benefit of being employed is the total cost of employing someone. Only when we grasp that can we even begin to think about how wages are determined. For, of course, wages are only a part of that cost of employing someone.
Imagine, just as an example, that someone thought a free cup of tea every morning was a necessary part of an employment package. Sure, it’s trivial, tenpence at best. But that tenpence is now a cost of employing someone. Therefore we’ve just mandated that tenpence of the benefit of being employed must turn up as a cup of tea not as tenpence in the pocket. Which is, probably, a reduction in average wages. There are those who do not drink tea, those who would prefer tenpence to a cup of tea and so on. But it is now mandated that tenpence of their potential wages turn up as a cup of tea not as the potential tenpence in their cash wages. The only people better off in fact are those - possibly few - who value a manadatory morning cup of tea at more than tenpence. Well, and the teabag makers and the bureaucrats who get to monitor the process: OffTeaBag.
Now that we’ve got this:
Angela Rayner’s employment law reforms will act as a £5 billion “stealth tax” on workers, a report has warned.
Yes, of course.
But they will also work to suppress wages, effectively taxing employees by increasing costs for their bosses, according to analysis by the Institute of Economic Affairs (IEA).
The think tank said smaller pay rises will equate to a £5 billion “stealth payroll tax”, based on the Government’s own impact assessment of the cost on workers.
There is no other way this can work. The cost of employing someone has just gone up. Therefore the portion of the benefit of being employed that turns up in cash wages will fall. That’s just reality.
Increased employment rights pushes down wages. How glorious it is to have a union rep in power.
Tim Worstall