torsdag 13 september 2007

Public Sector pay row resurfaces

I see this hardy perennial has come up again.

Nobody seems to mention how public sector labour costs are distorted by our tax system. One might have expected someone - commentators, union representatives, journalists, politicians, economists etc - to have referred to this. But it does not happen. In the face of this kind of blindness, problems are insoluble and all we get is strife.

Real wages are the goods and services that can actually be purchased in exchange for labour.

Owing to the way the tax system is constructed, it costs an employer over £1.80 in order to leave the employee with £1 of actual purchasing power. This is how we have achieved the seemingly impossible - the low wage, high labour cost economy.

In the public sector or course, where the labour costs are paid by the taxpayer, the money is given with one hand and taken away with the other. This is called churning. It is an expensive administrative exercise which produces nothing and achieves nothing, apart from deceiving most people about what is actually happening.

But the reality is that over 40% of the public service labour costs are actually tax which is paid straight back to the government. Lunacy or what?

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