Tuesday, 1 March 2011

miliband's mistaken

Article in the Times today who's main thrust is that Miliband disagree's with Mandelson that Labour should be comfortable with people getting "filthy rich". That people's income haven't risen in real terms, as real wages are at the same level as they were in 2003. It is unfair that the benefits of growth are accruing to the "filthy rich".

What he doesn't deal with is why the returns accrue to the wealthiest, or in fact why the wealthiest are wealthy. In Miliband's rather simplistic socialist view he neglects how or why wealth is created, it isn't just a process of dumb luck, or inheritence, or just that the wealthiest simply 'own the means of production', its the capital and risk taking create growth, rather than it just being a return on hours of work. Unless there are substantial productivity gains being made by increasing the skill of the labour pool, its logical that a growth generated by investment should increase returns to that capital.

Regardless the figure that is quoted as evidence for his blathering is that real wages will be the same next year as they were in 2003. The Raven has several problems with such a meaningless statistic.
1) wages are only a small part of REAL income for the poorest households, in fact for the poorest 20%, wages only make up a 25% of total consumption. When in real terms government spending has increased massively over that period it makes little sense to point to real wages when arguing about how well the poorest have done
2) "real" wages don't actually capture the benefits of gains from technology. ie. buying a phone in 2003 for the same price as one today would show 0% inflation, where in fact the quality of the product has improved greatly, in which case there is actual deflation.
3) picking two points in time is dishonest, given that real wages increased during the boom and have fallen back in the recession.

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