Thursday, November 13, 2014

Tax credits serve as a subsidy for employers

From DM

Tax credits serve as a subsidy for employers that simply encourages them to drive down wages. Unscrupulous employers are tempted to push wages down to the national minimum. And, of course, the subsidy is paid for by higher taxes imposed on hard-working families who manage to earn enough to support themselves.
We saw the effect of tax credits and the way they push down wages only this week, when the Daily Mail revealed the UK’s biggest sandwich maker, the Greencore Group, wants to recruit hundreds of workers from Eastern Europe for its new factory in Northampton because it can’t find Britons to do the job.
But this is only the most recent example of the perverse effects of the wage subsidies.
For example, tax credits can also be claimed by people who say they are self-employed.
Many migrants have discovered that they can sell a few things on eBay, or collect a bit of scrap, or spend a little time selling door to door, or a charity magazine on the streets, and top up a meagre income with tax credits that make them better paid than many people who get up at 6am to put in a full day’s work.
By saying they are self-employed, these migrants get round the normal requirement that employees must work at least 16 hours a week to claim tax credits because it is impossible to check how many hours they do actually work.
There is also an impact on the wider economy and on our ability to reduce our crippling national debt.
The growth of low-paid jobs subsidised by other hard-pressed taxpayers partly explains why the tax revenue received by the Treasury has been falling, unravelling George Osborne’s plans to reduce the annual deficit.
We should surely be aiming to be a high-wage economy based on high productivity, not an economy propped up by low-paid jobs reliant on the mass migration of unskilled labour from poor countries.

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