Is it true the minimum wage would have to increase by 20% if inflation was 5% just to stay the same.?

Question

Based on. For each pound ,the govern ment take 20% tax,13% NI and when we spend the balance 67% on say fuel,beer cigs food etc.they take an average 47%.in VAT and more taxes

But inflation goes up in real money.

Answer 1

I'm just staggered at the arrogance of Robert who assumes that all minimum wage earners spend their income on "beer and f**s".  Our minimum wage income goes on housing and food and bills, we are both non drinking non smokers.   And we're not chavs.

At least we work and don't sit on our arses claimng dole as Robert probably does.

Answer 2

No, that is incorrect.

Assuming the rates of taxation that you quote all stay the same, then the minimum wage would only need to increase at 5% , at the rate of inflation

Answer 3

I do not know the exact figures, but the problem is more basic - as so often, it is one of the government fiddling the figures.

The inflation rate (increase in the RPI) is an average of price movement in a collection of commodities. Now, things which are sharply increasing in price (food and housing, for instance) are under-represented in the RPI "shopping basket" while things like electronic goods whose prices are stable or even, in some cases, falling are over-represented. Luxury services (brazilian waxes for instance) are also included.

Poor people (on the minimum wage or on benefit) spend a higher than average percentage of their income on food and accommodation, and so suffer the worst effects of inflation. The benefits of cheaper computers, digital cameras and bikini waxes tend to pass them by. However, their income tends to rise only with the RPI, so that year on year their real income slowly falls, and can fall quite sharply when there is a sudden rise in petrol or food prices.

Again, taxes are not included in the RPI, despite being the price we pay for public services. As the price of petrol increases, the VAT payable rises together with the basic cost - but no allowance is made in income level. Similarly when council tax rises.

The whole system could not have been better designed if it had been deliberately planned to keep a large section of the population in permanent want.

Answer 4

Strange logic. Minimum wage earners pay a lot less than 20% tax.

VAT is 17% and stays the same. If most of your income goes on beer and f**s then if the rate of tax on those stays the same, then no effect.

So: a 20% increase in the minimum wage would allow you to buy close to 20% more beer and f**s. Enough to keep most chavs in paradise.

Edit: Wow! YA realises, at last, that the the word 'f**s' is not a term of abuse. There must be real people behind YA after all!