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Please Don’t Raise My Wages!

 7 min read / 

Two months have already passed since George Osborne announced in his July Budget the rebranding of the National Minimum Wage along with its increase. The debate and furore over the controversial topic has since slowed to a simmer but the rise of Jeremy Corbyn from the deep left seeks to enliven such issues as the Conservative government tries to neutralise the appeal of the more socialist left whilst maintaining its business-friendly persona.

Around 5% of the UK workforce is currently paid the minimum wage but this is by no means an even distribution; whilst 10% in Northern Ireland and 4% of jobs in Scotland are minimum wage, there is also considerable variation within the English regions; just 3% in London compared to 7% in the North East. This is clearly an important political topic then; not only does it represent the ethos of the parties to low-paid workers in the eyes of many, it also disproportionately affects particular voting regions, in turn influencing their outcome.

5% of the workforce is not an inconsiderable amount of spending power to be playing with, but let us remember, however, that it actually affects more of the population than this. Whilst it directly increases the wages of those being paid the minimum wage, those jobs where the pay is slightly above this rate must also maintain their incentive for workers to remain in these particular roles. As a result the rates for these jobs will also increase over time, either because employers wish for them to remain more desirable in terms of salary or because they eventually fall in line with the minimum wage and then must increase along with it.

In terms of businesses themselves the effect can vary widely, as the impact of any change is determined by what percentage of the workforce is actually employed on the NMW but also what percentage the business’ wage expenditure makes up of the overall cost base. The sectors most affected will tend to be the retail and hospitality sectors as these employ a large number of relatively low-paid workers and are labour intensive, hence the impact on the stock price of companies such as McDonalds and Starbucks after the July budget.

Starting with the disadvantages of such a policy, it is fairly evident that it will increase the costs to businesses to some extent unless they change their operating practices. They can attempt to mitigate this effect by laying off workers, reducing the number of hours employees work, raising the prices of their products or negating this, either reinvesting less or accepting a lower profit. If they do indeed raise prices the consequence is both inflation and a decrease in the international competitiveness of domestic business, whereas less investment leads to reduced profitability and growth.

Any resulting inflation is particularly counter-productive as this erodes the very outcome the government was trying to introduce. How this actually transpires depends on the way a change is introduced; should the government decide to consistently increase wages at an increased rate, say an average of 5% rather than 3% per year, then this changes inflation expectations and is likely to change the long-term inflation rate of the economy, neutralising the wage increase. Should they however make a one off change and then increase the NMW at a similar rate to before then the benefit may persist.

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(Source: Gov.scot)

As for the decrease in international competitiveness this must be somewhat qualified. Increasing unit costs will usually lead to an increase of the costs of goods however the market may react to this policy move and re-evaluate the growth prospects for the country and devalue the currency. This would counter-intuitively negate the increase in costs and maintain growth prospects. However there are far too many influences on the exchange rate for this to be a lasting or clear-cut effect and so it is likely to be detrimental to the economy. More important though is the UK’s focus on services, which make up a large portion of its exports. Employees providing international quality services are unlikely to be on minimum wage so the companies employing them, although they will be affected indirectly, will not be raising prices to the same degree This, of course, means that although the UK will become even less competitive in terms of low cost manufactured goods, its services sector and therefore overall exports should not be damaged too heavily.

As for the advantages increased consumer confidence and spending is an obvious one. Those in favour of this policy would also argue that this feeds through to increased growth that would then benefit businesses as well as individuals, obviously the trade-off with inflation is key here to whether this would indeed be the case.

Increased productivity however is a much more certain outcome. Increased wages should make employees more satisfied with their employment and this feeds through to being happier and so more productive. Individuals are also less likely to frequently change jobs and less employee turnover translates to a reduction in the cost of training new personnel. Further, employees who remain in a job for a longer period of time are likely to become more capable and efficient adding additional value to the business.

Looking at the problem from another direction, just as it is unthinkable to double the minimum wage within the next month, it is also untenable to consistently allow real wages to decrease. Not only is this a socially undesirable outcome as it increases the level of income inequality but it also leads to either reduced consumer spending or saving which impacts on growth prospects of the economy.

What becomes increasingly clear on researching this topic is that the background in which this discussion is held is one of, if not the most, important factors that influence the viability of a policy adjusting the NMW. For example, if inflation is rampant or wages have already been consistently increased above inflation then the argument to increase them further is much weaker than if consumer demand is weak or the economy is nearing deflation, rather than listing the infinite possibilities however we can analyse the situation in which we currently find ourselves.

The Conservative government has already massively reduced the welfare budget and promises to cut it further still in the next parliament. The hope then is that any further reduction in spending might be in part offset by increased spending on the part of individuals. The UK is also experiencing very low inflation as it stands, a rise in the minimum wage could be a welcome boost to aggregate demand especially in light of the further government belt-tightening we are likely to see. This could in turn be a factor in giving the Bank of England MPC the confidence to raise rates and signal the UK’s sustained recovery. Mr Osborne has also promised to cut corporation tax to 19% in 2017 and 18% in 2020, which should compensate companies for at least some of their increased wage bills.

real-wages-2

(Source: Left Foot Forward)

In my opinion the optimal policy is one of slow change and forward guidance, it is an unquestionable truth that markets hate uncertainty but that is also true in large part for change too. Slow change allows markets to function effectively whilst forward guidance ensures that companies can plan for the future and avoids sudden job losses. As for this particular change I believe it is justified, despite the weakness in China and the Eurozone, the UK is recovering strongly and inflation is lower than the target rate. Although the size of the change is larger than would be ideal the country has seen no growth in real wages since 2009 and could well do with the extra consumer stimulus to aggregate demand.

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Companies

Uber Eats to Offer Europe Couriers Insurance

 1 min read / 

Uber Eats insurance

Uber has announced that it will be offering a free insurance package to its food couriers in nine European countries.

The company has teamed with AXA Corporate Solutions for the insurance product, which will be introduced from January 8 next year. It will cover personal accidents, cash benefits for hospitalisation, property damage and cover for third-party liability of up to a maximum of $1m. Uber eats operates in Austria, Belgium, Poland, Italy, the Netherlands, Portugal, Spain, Sweden and the UK.

If a driver is involved in an accident, they will simply need to fill in an online claim form available on the Uber Eats app.

Previously, both Uber Eats and Deliveroo have come under scrutiny over how workers are treated. In the UK, Deliveroo riders went to court to seek employment rights, including the minimum wage. The UK government has looked at whether the employment law needs to be changed to take account of modern working practices, such as the gig economy.

Keep reading |  1 min read

Companies

Google News: The Secret War Against Net Neutrality

 5 min read / 

Google Net Neutrality

Anyone watching Google News can see that mainstream news outlets are a monoculture, with 100 different outlets reporting essentially the same “big” story. That is, whatever is the top scandal of the day. With click-bait headlines the norm, mainstream news and fake news look indistinguishable. Readers struggle to tell the difference. It’s all negativity and shouting. That’s changing our culture, and not in a good way.

Google News is making the news monoculture worse by blocking independent news publishers seeking to join Google News. There’s an almost insurmountable headwind for new publishers who haven’t been “grandfathered in” to Google News. Google urges us to take action to support net neutrality while at the same time defeating net neutrality by giving favoured nations treatment to big business news organizations at Google News. Why is that a real problem? Let’s talk about what happened to news in Spain.

The Case in Spain

Spain’s repressive Google tax, and consequent Google News blackout, crippled independent news there. When that happened at the time, Google may have thought, serves Spain right for passing a stupid law. However, the suppression of independent news in Spain has had consequences. The Spanish news blackout by Google News played into the hands of the Spanish government seizing mainstream media, reducing mainstream news to official propaganda.

In its early days, Google News was a tremendous democratic influence for good. Smaller news sites you wouldn’t otherwise know about could get to the top of Google News based on merit. A colleague once wrote a story about a TV movie premiere starring Jennifer Love Hewitt. There was surprisingly big interest in this story. It was the only story that quoted Hewitt talking about her film. That story went to the top of the entertainment section of Google News on a Sunday morning and stayed at the top all day. It drove tremendous amounts of traffic to the news site that published it. They took a lesson from it.

Their success with that story on Google News changed their editorial mandate. The new marching orders? Find more stories that we can uniquely cover that will put us at the top of Google News. What Google had done, intentionally or not, was support diversity and make journalism better. For years that publication ranked on the front page of Google News almost daily. They survived on that traffic. It doesn’t work that way anymore. It isn’t how good you are. It’s how big you are that gets you into the Google News club today.

Difficulty for Small Publishers

In fairness to Google News, this publication, The Market Mogul, is carried by them, so clearly it’s not impossible for a new publisher to gain access. However, given their loud support of net neutrality, why doesn’t Google News have a program that nurtures net neutrality on their own platform? Why not help small publishers, rather than making it more difficult for them to launch and sustain themselves?

Maybe Google simply hasn’t thought about the consequences of not helping small publishers. After all, it can be more work to deal with them. They may have more questions to answer than establishment outlets. However, big mainstream publishers aren’t actually subject to the official rules. Google News isn’t about to drop the New York Times or Washington Post if they make a web template change that moves the author byline down a line or another superficial change that might confuse Google crawler robots.

A small publisher, however, is expected to play 100% by Google’s rules. A long-time Google News forum advisor talks about how things have changed at Google News:

In simple terms, the Google News guidelines have tightened up over time.  I joke that the NYTimes might not be accepted these days.  Yes, that tight.  So your goal is not to generate a marginally passable website that might get accepted into Google News, but one that is so wonderful that Google will drop all of your perceived competitors to find room for you.

Maturity.  If the site doesn’t have 6 months of strong journalism history to review, don’t bother applying.  Maybe 1 year in some niches.  And don’t be surprised to be rejected as 99% of all sites that apply will be rejected.  Think of this as a challenge and go forth and make the best possible news site in your niche.

Why should better journalism mean dropping a perceived competitor? Has the Internet run out of space?

If the above observation is correct, and it is judging from what small publishers have told me and the general feedback on the Google News forum, then Google News has changed. No longer a news democracy with room for every legitimate news publisher no matter what size, Google News has morphed into a walled garden that embraces big business. It’s the opposite of net neutrality. Google News has become a censor promoting the establishment viewpoint. Think that’s bad? It gets worse.

What billionaires think, is the establishment viewpoint. Billionaires control the mainstream press. Google News is boosting the 1%. Whether that’s Jeff Bezos, owner of the Washington Post, which continues to provide outstanding journalism, or Rupert Murdoch, owner and head of Fox News, which does not. Warren Buffet owns 31 news dailies and 50 weeklies. In the UK, five billionaires, Rupert Murdoch, Jonathon Harmsworth, Richard Desmond and the Barclay twins own 80% of the newspapers, plus TV stations, press agencies, book companies, and cinemas. None of the top UK billionaire press owners actually live in England.

Conclusion

A handful of billionaires, many tax avoiders living mostly beyond the law by bending it to their wills, has become our society’s thought overlords through their control of the press. And Google is helping them do it. Why has Google become a gatekeeper to enforce a news mono-culture? Will Google reconsider, stop suppressing small publishers and demanding they be “better” than the New York Times before allowing them a voice?

What society needs is news net neutrality.

Keep reading |  5 min read

Americas

Bulletproof Clothing: How US Fashion Is Going Ballistic

 2 min read / 

Bulletproof Clothing

As the US continues to allow civilians to carry weapons and gun violence becomes more of a concern, an increasing number of bulletproof apparel retailers are emerging across the country. Their target clients? The average Joe. Or at least those who can afford the hefty price tags associated with the “exotic” new fashion segment.

Miguel Caballero, a Colombian designer, sells his bulletproof blazers for 4,343.50 euros, and his tank tops for 2,023 euros. At a lower price, but still too high for most people, Joe Curran, who owns BulletBlocker, sells his bulletproof leather jacket for $875 and bulletproof classic two-piece suit for $1,200.

Source: Miguel Caballero

Caballero said that his clients include world leaders from South America and the Middle East, and international businessmen. Damien Ross, another manufacturer of bulletproof clothing, said that his clients are mostly college-educated, professional men, between the ages of 34 and 75.

Ross said:

“They [clients] see what’s happening on the news, and, any time they’re in a crowd or an area that can be prone to attack, they are concerned.”

Source: Bullet Blocker

Body armour manufacturing is a $465 million-a-year industry in the US, according to a report in August from Market Research. The retailers, who mostly entered the industry because of the surge in gun violence taking place around them, are presenting upscale bulletproof clothing, from blazers to tank tops.

Owning body armour is completely legal, and does not require a special permit or background check. However, guidelines vary from state-to-state, and felons are not able to purchase it.

Keep reading |  2 min read

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