Wednesday, 6 July 2011

Social mobility (1) - Minimum wage

Where to begin in such a wide ranging and all embracing work such as a political biased philosophy! So I thought I would start at the bottom, quite literally so in fact; I shall start with a consideration of the 'bread and butter' worker in society, he/she who is most likely unskilled or semi skilled perhaps and works for a minimum wage rather be reliant on state handouts whilst being unemployed. I'm going to use financial data from the UK as the basis for my thesis however I expect that for those that are interested there will be similar information available in other countries which can be substituted using the same formulas.

It seems to me that the most likely incentive in mobilising a potential work force is remuneration. What is of most concern to an individual is what they can get out financially for the work that they put in. When taking welfare payments into consideration it is evident that there must be sufficient incentive to the unskilled worker to induce a working mentality in such a person therefore there must be a structure in place which dictates that employers offer a minimum wage, an hourly wage is most suitable, which will benefit the prospective employee more so than welfare payments.

The model that I am going to use to determine the preferable minimum wage in any given economic zone is based primarily upon the gross domestic product (GDP) of that zone and the number of people available to work aged 16 to 64. The model that I am proposing is my own model and not one that has been used by anyone else before however it gives surprising results in that the resultant minimum wage figure is not that different to the one already used in the UK, albeit a more favourable result for the employee.

GDP in the UK in 2010 was 1,514,309,840,000 (1 trillion 5 hunderd and 14 billion etc) with the number of people at working age 41,883,853. The number of people reliant on the welfare state on child benefit, pensions, unemployment and sick benefit, etc, withdrew a total of approximately 245,000,000,000 from the UK economy in 2010. This figure requires to be deducted from GDP before such is divided by the total number of people at working age and then reduced by 50 percent. The reason that GDP needs to be reduced by the welfare payment is so that all citizens in an economic zone are accounted for, and not accounted for twice, which is what would happen if all citizens were taken into account without discrimination viz. it would appear that a person on welfare would be given the minimum wage per week in his benefit in addition to what he/she was already receiving in benefit. The reason a 50 percent reduction is made to the final figure is to take into account the profit that an individual and/or business will make from their entrepreneurship. The fact that not all workers are paid a minimum wage but some receive salaries in excess of such is also accounted for by the reduction.

1,514,309,840,000 minus 245,000,000,000 divided by 41,883,853 equals 30,305.

30,305 divided by 2,080 (the number of working hours in a year: 35 per week x 52) minus 50 percent equals 7.28.

So based are the model I am proposing the minimum wage in the UK should be £7.28 per hour in 2011. I would suggest that such a figure should be revised bi-annually to keep pace with the economy in general, although I suggest that the hourly wage should never be revised downwards unless deemed necessary in exceptional circumstances.

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