Doing the pay cap shuffle

Lefty economics 101

The Guardian reckons it would be much more financially responsible to give public sector workers a pay rise than to not do

I won't start quoting large chunks of this incredibly boring article. Suffice to say, the author reckons that if you give 2 billion to NHS workers and they spend half of it, that's a 1 billion cash injection into the wider economy

For example, if there is a £2bn increase in wages for NHS workers and they spend just half of this in shops, then shopkeepers will also receive income.

Strangely enough, the article begins with a claim from the author that they understand economics better than the Government.

Luckily, we’re not quite that bad at maths. Unfortunately, the Conservatives are still persuading many with the dodgy maths of their public spending cuts.

The meat of the article proves they have no grasp on economic at all

If 2 billion quid is given to NHS workers, shopkeepers get 1 billion of it. All very well, but where does the 2 billion come from in the first place?

  • The Government pays NHS wages
  • The Government has no money
  • The Government gets it's money in general taxation
  • Tax comes from the private sector only (Public sector wages are paid by taxes, so public sector taxes just put back a little of what they've taken out)
  • Shopkeepers are the private sector
  • Shopkeepers (and the rest of us in the private sector) pay the original 2 billion and then get 1 billion back
Therefore, a 2 billion pay rise for NHS workers does not give a 1 billion cash injection to the economy, it takes 1 billion out of the economy by removing it from private sector pay ond giving it to NHS workers in their pay

The pay cap is in place because public sector wages have been ahead of the private sector for a long time and they need to be brought back in line, not further widened by a 2 billion pound gap

And there's one other thing missing from the 'analysis' in this article: How much does it costs to take 2 billion in taxes from the private sector and re-distribute it to public sector wages? How many beurocrats are emplyed in the huge task of collecting that money and moving it around?

If you take 2 billion in tax, there certainly won't be 2 billion left when it goes into the wage packets on the NHS. A large chunk of it will have been swalled up in the wage packets of other Government lackeys in the tax system

No, a 2 billion pound pay rise for the NHS is not an economically viable option. The best thing to do with that money is leave it right where it is, in the pockets of the taxpayer. It's the cheaper option and if we want to, we can still spend it in shops


C. F. Apollyon said...