Brian Scott has published a critique of the so called Living Wage, and it should be compulsory reading for any politician that has treated the calculations done by Rev Waldegrave as a fit basis for public policy decisions. It is quite legitimate to have a view that wages should be higher, but to insist that the correct level is that calculated by Rev Waldegrave is a surrender to symbolism over substance.
The key findings by Scott are:
- Only 12% of low income households are two adults and two dependents, which the Waldegrave calculation is based on
- They assume you need 10 hours of childcare a week, even if the children are aged over 14
- They calculation of level of “basic necessities” is not based on any empirical measurement of the lowest cost of necessities, but merely a proportion of the average expenditure in deciles 1 to 5 (this one is key – it is a calculation based on the Browns should be spending as much as the Jones, and is not a caculation on how much income the Browns need)
- The calculation doesn’t account for some sources of household income such as trade-ins, sales, teenagers income (yet does include their costs) and school donation tax refunds
- The calculation double counts some expenditure such as childcare costs
- The calculation includes as a basic necessity costs such as Sky TV, pets, international travel and video games
- The calculation includes insurance for dwellings and mortgages, despite assuming they are renting
Friday, January 03, 2014
Living wage critique
I posted earlier some opportunity cost examples Brian Scott provided in his critique of the living wage calculations. Kiwiblog has now linked to his full published report.