Government must support employees who need a helping hand to climb onto the employment ladder and to take the first few steps up the ladder. Government does this by providing basic living costs that are as low as possible. Such support from government ensures job creation. This is what is meant by a ‘minimum wage’.
Thereafter as employees climb the ladder they will be able to support themselves by being rewarded through a process of ‘value exchange’ with private employers. This is where the debate over a ‘living wage’ is relevant.
Consumption is not free
Consumption has a cost and there are no free lunches. Nothing ‘consumed’ by humans in their process of living is ‘free’. All consumption has a cost attached.
Private sector must cover expenses and be profitable
Businesses in the private sector must generate income through wealth creation to cover all operating expenses. Public servants are paid from revenue generated from taxing the income generated by wealth-creating businesses.
Value exchange in private sector
Value exchange occurs in any private employment relationship. Employees provide skills in return for pay according to their ability to contribute to the wealth-creating process.
Seven business processing levels
There are seven levels of opportunity from low-skilled workers to executive management in the core wealth-creating process. The first two levels offer opportunities to employees with basic education and life skills to read, comprehend, write and do simple sums.
The next two levels require higher levels of formalised education and vocational training, but all still within the grasp of average diligent employees who are prepared to be responsible for their standard of living and to earn what they require as a ‘living wage’.
Role of government
Government has a specific role. It creates the economic environment to enable all ‘value exchange’ activities to take place. In particular it must ensure that basic living costs are kept within manageable bounds. That ensures that employees receive basic services and are at least able to pay-their-way.
Subsidies are not sustainable
Subsidies are never sustainable because they simply shift the costs elsewhere until that source of finance dries up. About four years ago saturation point was reached after employers were expected to subsidise the high basic living costs of employees. This was required under the ‘guilt banner’ of a ‘living wage’ but now this source of funding is drying up as unemployment numbers grow.
Executive remuneration packages
Total executive remuneration packages are in many instances out of all proportion to what they should be. Unfortunately this has been interpreted as a norm and representative of the income inequality level. Fortunately this is untrue because executive remuneration is controlled by shareholders who reward executives for what they are required to ‘deliver’ or face dismissal.
Economically sustainable levels
A proper analysis of income differentials across all other wealth-creating business levels shows that the differences are well within economically sustainable levels. But the area of greatest sustainability concern is at the lower levels of ‘value exchange’.
This sustainability concern occurs because the cost-of-living has been the main focus for pay adjustments. The focus should be economic growth or the economic well-being of individual businesses.
Tripartite solution required
Business, labour and government need to do a proper costing of the ideology of a ‘better life for all’ and with that as the benchmark, determine the contribution they are able to sustain because someone somewhere has to pay.
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Minimum wages are not meant to be living wages