There have been studies in America, where the minimum wage is set at the national, state and county levels. This means that when one jurisdiction makes a wage increase, you can she the results of the change in adjacent counties and states. One study is was reading, and I was picking studies that did not focus on the theory of a wage increase, but the studies that focused on what happened. One state wide minimum wage increase noted that in an adjacent state the low wage employment rose at the same rate as the state that raised the wage. This strongly suggests that employment and the minimum wage are not linked. The same research paper stated in the end that the major fundemental part of the United States economy was that single people who earned a minimum wage could only afford to live in a safe neighbourhood, in a adobe that cost 30% or less of their income, in 12 counties in the entire country. Not twelve states, twelve counties. This suggests that the minimum wage in America, is not a living wage.
The Left, which I am a member state that a minimum wage increase puts money in the hands of the working poor and that means that they have more spending money and that inturn means that they can afford better things including food and better accommodation. The money they spend goes directly into the local economy and more importantly, they spend all the money they recieve, which means that a minimum wage increase is a fundemental redistribution of money from e rich into the economy. It also means more taxes for the government and more services for the people, usually the poor but effectively everyone.
The wealthy typically do not spend more money when they get money. Typical people after spending money to get the acceptable level of creature comforts they prefer and their basic needs, they save their money. Meaning since the poor are by definition not meeting basic needs fully and with few comforts, they spend their money and the wealthy when they get more money they save it and don't spend it. You hear that they say that the invest their money, but that is a method of saving money and getting a higher return, if done properly. Investments don't create much for the economy, especially when compared to spending money.
The Right, suggests that a higher minimum wage will mean that corporations will get the money that they spend on new higher wages by cutting employees and raising the cost of products. And this means that the prices rise, increasing inflation and unemployment increases. Invariably they suggest that the best way to increase the plight of the poor is to give money to the wealthy so they can invest in the economy. See the above paragraph, giving more money to the wealthy instead does the opposite; it gives them more money and increases the income gap between poor and wealthy.
The most popular way that they tell people is to cut Corporate Income Taxes. Let's look at that. Corporations pay income tax. The net income then goes into a pot and it sits there. When the owner of the corporation wants money the money comes out of the pot and the money is then taxed as income, at the personal income tax. Seems simple enough, right? The wages are an expense of the corporation so that lowers the money in the pot so the corporation spends less money on corporate income tax, I think. I mean corporate tax is paid on profits. You can lower the amount of corporate profits by reinvesting the profits in the corporation and by paying employees. The problem is that the money you pay yourself can often be taxed at a higher rate than the corporate income tax, so most often the corporation ends up paying the owner less, basically their basic needs. And this is why you hear about people with Swiss bank accounts and banking in the Cayman Islands. These counties of convenience have different income tax laws, for various reasons like their government being funded off tourist sales taxes. So the corporation can move the money to an offshore account and pay its owners whatever they want to without having to worry about paying a massiv tax bill. The corporation then does not need to reinvest in the business to lower it's corporate taxes, they don't need buy better equipment to increase the efficiency of the business because once the profits have been taxed and deposited offshore, the owners get the money and it is theirs and not the corporation's.
It becomes more complicated when the corporation goes public and can be traded because the shareholders then become a factor. But I would fundementally say that the owner is the primary shareholder initially. This means that profits and dividends are likely taxed differently than income. They are income but investment income. I would bet that they are taxed lower than income tax and then there is Capital Gains tax that is taxed when the stock is sold at a higher price than when bought. But fundementally, this too can be done through offshore banks, because stock investing can be done anywhere in the world, so why not where the tax laws are lower?
Additionally, in many large production companies have research and development sections, because, fundementally, if you don't innovate your competition will and they might get part of your income when they do. R&D, is a corporate expense, it lowers the profits of a corporation and therefore lowers the taxes the corporation pays and the innovation increases the future profits theoretically. But the corporation, could patten the R&D innovations in those offshore countries, so that the patten profits are taxed lower or not at all.
Fundementally, ever since there have been wealthy people, wealthy people have been trying to keep more of their money in their own hands and away from the tax man.
I propose, that to stop this bleed of cash from a country, a cash export tax be imposed. Say 60-80%… with a caveat, investment of Capitol in the country where the money was made, reduces the rate 2% for every 1% investment. The company could theoretically reduce the tax to 0% by reinvesting 30-40% of its pot back into the company. I mean the company, bricks and motar or increased salaries, but no more than 10% into management. It could be all in bonuses for employees, general employees. It would not have to be in wage increases, but it could be. The baseline for salaries would be the national average for the type and anything above would count as investment, or they could just pay minimum wage and give each employee a bonus as to the profitability of the company, then 60-70% of the money could go to a foreign destination— like to the head office country or an offshore account. Or maybe, the corporation would chose not to remove the money from e country at all. Would shareholders be taxed more closely? Seems like also a good idea.
As to the starting question, minimum wages. They don't work 100% of they time. Small businesses are hurt more than corporations and corporations reduce employment and raise prices to get around the increase. A minimum gaurenteed income offered by the government for everyone would be a better way to do it. Poor and wealthy all get it and the wealthy are taxed more than the poor, the money comes back, the government gets it back in taxes and government shrinks because there is no management of different programs, no EI, no Wealfare, no Old Age security, no disability, just a Gaurenteed Minimum Income for everyone. A strong anti export tax would be needed, Snowbirds would be penalized for leaving the country with their GMI but other than that nothing. That would protect the big and the small business and increase the buying power of the poor. It would mean that the disposable income would increase and those that worked would have more. Simple and easy, but still would be objected to by the wealthy, whose taxes would be higher.
Lots of ideas here.
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