I try not to get too political and focus on personal finances, but a lot of my personal finance thoughts are up in the air at the moment. Also, this ad playing in the background is driving me nuts. I've recently begun to take a more active interest in politics, but at this moment I haven't chosen my desired federal party. So I in no way mean this as a pro-conservative rant.
The Liberal party (and previously the NDP party) were accusing the Conservative government of spending billions on corporate tax cuts. Taxes are income for the government, not an expense, so to say the government is spending more money is clearly just wrong. I equate this to saying you are "saving" money by buying a TV on sale. You aren't saving money, you are spending less. The distinction is important, because instead of buying the TV you could instead buy a mutual fund or put it into a high interest savings account. That is saving money.
The real question is why a government would chose to receive less income. I don't think anyone (a corporation or an individual) is excited to pay any taxes. Although, I think most of us realize that they are a necessary to provide the services ourselves and our fellow citizens rely on. We're both upset when services are cut and when taxes are raised. We want our government to do as much as it can with as little funds as it requires. Its a bit of a balancing game as our spending decreases and taxes increase and vice versa. The country lives on our gross domestic product (GDP) and our taxes.
Corporations differ from individuals because they actually provide jobs. A corporation spends its money on new technologies, human resources, expansion, etc. while individuals buy consumer goods. So it stands to reason that the higher the corporate taxes are the less growth and hiring a company will do. Less jobs in turn means less individual taxes to be taken from the government and less purchases and therefore less sales tax. So if a government can produce more income with a tax cut, it would be in their best interest (and ours) to do so.
Another thing to keep in mind is that a corporation, like an individual, can move. While not easy to do, it can (and has) been done. So lower taxes may draw corporations here, while higher ones can send them south.
These proposed cuts are designed to lower unemployment and boost GDP which would help pull us out of this recession. I tried to find evidence one way or the other to see if these tax cuts have been proven to actually do that, but the information is hard to come by. I believe mostly because these tax breaks are always discussed when the country is already struggling and the effects don't happen over night. Also there would be some limit to where these breaks would be efficient. If the economy was hot and employees were scarce, then the tax cuts would raise wages and increase inflation without actually improving the GDP. However, at least theoretically, in a slow economy these breaks just make perfect sense.
Regardless though, we're not talking about spending more money. We're reducing taxes to induce more business to come here or start up and give more people jobs. You should then have the exact same amount of money to spend on services as you did before if not more. Not giving the tax breaks doesn't mean you have billions more to spend. You have the same or less. Much less if the corporation shuts down or moves.
Wednesday, March 30, 2011
Thursday, March 17, 2011
BC Minimum Wage Increase
I guess in my excitement to have completed my exam, I guess I forgot to post last week. I'm sure you are all dying to know how I did. Well... me too. Two more months before I'll get the results. I think I passed, but at the moment I'm just enjoying having some time off.
I'm sure I've made it quite clear about my feelings on minimum wage in the past, so it won't be a big surprise that I'm not ecstatic about Christy Clark's recent announcement. It appears that it will be increasing by 75 cents every 6 months starting May until it reaches 10.25 by May 2012. As well the training wage will be abolished.
Minimum wage is always such a political topic, but I don't understand who it truly helps. I don't know a single person earning minimum wage so I don't understand who exactly is shouting for an increase. We always hear it is to help the poor people, but are there people truly starting at minimum wage and then waiting for it to go up? I always thought you worked hard and you are given raises. Generally we start young and gain experience and trade that experience for higher wages, but maybe I'm wrong.
What I do know is that I haven't had a raise in over 4 years. I also know that higher wages means higher costs, which means my expenses are going to go up accordingly. Having run a business (although admittedly for a very very short time), I also know that businesses have limited resources and can only afford to hire so many people. The higher the cost, the less individuals get work.
I guess one benefit (or downside depending on your view) of a higher wage is that it makes replacing people with technology more feasible. I'm sure you've noticed the self-check out lanes and pay at the pump gas stations. Sure, the low skilled workers will be without work, but these technologies provide more jobs for the skilled and highly educated work force like engineers.
Not only are you getting an increase if you make $8.00 an hour, but basically anyone earning less than $10.50 an hour will be getting an increase by law. Hopefully the companies can afford to give the people above that a raise too. Imagine the people that have worked hard to earn that $11.00 an hour, only to see a 16 year old just hired at $10.50 an hour with no experience.
Everything has consequences, and this is so obvious to me that it will increase everyone's costs to the point that the raise is meaningless. In the end, cost increases will follow the wage increases until $10.50 buys the same that $8.00 did and everyone is back in the same situation all over again.
Why are we rewarding those that don't gain skills or experience? Wouldn't it make more sense to provide incentives to go to school, learn a trade, to work harder?
I'm sure there are some exceptions. A mother, suddenly single, with no skills, forced into the work force for the first time perhaps. However, these groups are identifiable, unlike the masses receiving minimum wage including 16 year old boys and girls. Wouldn't childcare assistance for single parents be more cost effective in this situation? I have no issues with a lot of these ideas.
Maybe I'm wrong. There do seem to be a great deal of people that agree with a minimum wage. I just find it frustrating that it is used for political purposes, when I don't know who it is that we are truly helping.
I'd love to hear your views on this, especially if you disagree. What I really want to hear is who these people that we are supposedly helping are. Do you know any poor earning this wage personally? Is there a reason they need this help? Is raising the minimum wage the only way to help them?
Update: On my search to see who these people are I stumbled across these stats: http://www.statcan.gc.ca/studies-etudes/75-001/comm/5018829-eng.pdf
Summary:
Well there are clearly some people who truly need the money and are earning minimum wage will be struggling. However, does it make sense to raise the amount for everyone involved when most don't need to live off of that money. Choices have consequences, so should we as country take away those consequences? Approximately 2.6% of BC's population chose not to get a post secondary degree, chose to work in the service industry, and haven't been able to excel in that industry to achieve pay raises. Why should small businesses be forced to pay higher wages to 16 year old kids because of this small group? If the average wage is $19/hours, why are they earning $8?
I'm sure I've made it quite clear about my feelings on minimum wage in the past, so it won't be a big surprise that I'm not ecstatic about Christy Clark's recent announcement. It appears that it will be increasing by 75 cents every 6 months starting May until it reaches 10.25 by May 2012. As well the training wage will be abolished.
Minimum wage is always such a political topic, but I don't understand who it truly helps. I don't know a single person earning minimum wage so I don't understand who exactly is shouting for an increase. We always hear it is to help the poor people, but are there people truly starting at minimum wage and then waiting for it to go up? I always thought you worked hard and you are given raises. Generally we start young and gain experience and trade that experience for higher wages, but maybe I'm wrong.
What I do know is that I haven't had a raise in over 4 years. I also know that higher wages means higher costs, which means my expenses are going to go up accordingly. Having run a business (although admittedly for a very very short time), I also know that businesses have limited resources and can only afford to hire so many people. The higher the cost, the less individuals get work.
I guess one benefit (or downside depending on your view) of a higher wage is that it makes replacing people with technology more feasible. I'm sure you've noticed the self-check out lanes and pay at the pump gas stations. Sure, the low skilled workers will be without work, but these technologies provide more jobs for the skilled and highly educated work force like engineers.
Not only are you getting an increase if you make $8.00 an hour, but basically anyone earning less than $10.50 an hour will be getting an increase by law. Hopefully the companies can afford to give the people above that a raise too. Imagine the people that have worked hard to earn that $11.00 an hour, only to see a 16 year old just hired at $10.50 an hour with no experience.
Everything has consequences, and this is so obvious to me that it will increase everyone's costs to the point that the raise is meaningless. In the end, cost increases will follow the wage increases until $10.50 buys the same that $8.00 did and everyone is back in the same situation all over again.
Why are we rewarding those that don't gain skills or experience? Wouldn't it make more sense to provide incentives to go to school, learn a trade, to work harder?
I'm sure there are some exceptions. A mother, suddenly single, with no skills, forced into the work force for the first time perhaps. However, these groups are identifiable, unlike the masses receiving minimum wage including 16 year old boys and girls. Wouldn't childcare assistance for single parents be more cost effective in this situation? I have no issues with a lot of these ideas.
Maybe I'm wrong. There do seem to be a great deal of people that agree with a minimum wage. I just find it frustrating that it is used for political purposes, when I don't know who it is that we are truly helping.
I'd love to hear your views on this, especially if you disagree. What I really want to hear is who these people that we are supposedly helping are. Do you know any poor earning this wage personally? Is there a reason they need this help? Is raising the minimum wage the only way to help them?
Update: On my search to see who these people are I stumbled across these stats: http://www.statcan.gc.ca/studies-etudes/75-001/comm/5018829-eng.pdf
Summary:
- Just over 6% of workers in BC earn minimum wage.
- The lower the minimum wage the less people earning it or less.
- The average hourly rate is much higher than the minimum.
- Over 56% of those earning minimum wage are 19 or younger.
- Almost 25% of those earning minimum wage were part of a couple with the other earning more than minimum wage.
- For most it is a transitional period.
Well there are clearly some people who truly need the money and are earning minimum wage will be struggling. However, does it make sense to raise the amount for everyone involved when most don't need to live off of that money. Choices have consequences, so should we as country take away those consequences? Approximately 2.6% of BC's population chose not to get a post secondary degree, chose to work in the service industry, and haven't been able to excel in that industry to achieve pay raises. Why should small businesses be forced to pay higher wages to 16 year old kids because of this small group? If the average wage is $19/hours, why are they earning $8?
Friday, March 4, 2011
Random Thoughts
OK, another final exam is coming up yet again, and I'm totally not ready for this one. I've obviously burnt myself out, by taking too many semesters in a row without a break in an already accelerated program. So I'm looking forward to taking the next semester off! So I haven't really had any time to think about some of the topics I planned to write about. So, instead of slapping something together or writing nothing, I thought I'd just update you on some things I've been thinking about.
First, I really appreciated the comment about the unexpected expenses from FieryCanuck77 last week. I have started to budget $100/month to go into a contingency fund that I'll max out at about $2000-$3000. I don't think I really need to build it faster because the car and tires are new, the TV and appliances are fairly new (plus I plan to move soonish), and I'm prepared for most expenses. Lets face it, most expenses are predictable. Just because we ignore them doesn't mean we didn't know the tires would die one day. Rather than putting money aside for each individual item though, I decided a group contingency fund would work just as well.
Second, soon after writing about having all the expected items covered, I got a letter saying I owe my Water and Sewer bill. I was a little embarrassed to admit that I totally forgot about this one yet again. Actually I added a monthly amount to the budget, but when I noticed we never paid it, I assumed it was a mistake and removed it. Oops! However, we are okay, due to another mistake I made, which brings me to...
Third, while I was trying to determine where the money was going to come from when I take a pay cut, I noticed I had under estimated my wife's salary. Now, that was a happy mistake, I was glad to find. Before you question my math skills, let me explain. When I set it up, I didn't know what her deductions would be, or how the pay works. She gets night time premiums, weekend premiums, overtime, etc, etc. You need a math degree just to calculate an average. So until I had some real data to go on, I purposely budgeted the numbers lower. Now that I have 6 months of data to base this on, I have a much better picture of what to expect and thankfully it should be enough to cover my pay cut.
Finally, I'm looking into buying an investment property and I've come to the conclusion that buying in BC is not going to happen anytime soon. However, I did join the Real Estate Investment Network and there are a lot of investors that invest in properties of the province (or country). I'm still short the funds to make an investment anywhere, but at least this gives me a lot more options and will require a lot less time to come up with the funds.
Wish me luck on my exam! Now.... time to study hard!
First, I really appreciated the comment about the unexpected expenses from FieryCanuck77 last week. I have started to budget $100/month to go into a contingency fund that I'll max out at about $2000-$3000. I don't think I really need to build it faster because the car and tires are new, the TV and appliances are fairly new (plus I plan to move soonish), and I'm prepared for most expenses. Lets face it, most expenses are predictable. Just because we ignore them doesn't mean we didn't know the tires would die one day. Rather than putting money aside for each individual item though, I decided a group contingency fund would work just as well.
Second, soon after writing about having all the expected items covered, I got a letter saying I owe my Water and Sewer bill. I was a little embarrassed to admit that I totally forgot about this one yet again. Actually I added a monthly amount to the budget, but when I noticed we never paid it, I assumed it was a mistake and removed it. Oops! However, we are okay, due to another mistake I made, which brings me to...
Third, while I was trying to determine where the money was going to come from when I take a pay cut, I noticed I had under estimated my wife's salary. Now, that was a happy mistake, I was glad to find. Before you question my math skills, let me explain. When I set it up, I didn't know what her deductions would be, or how the pay works. She gets night time premiums, weekend premiums, overtime, etc, etc. You need a math degree just to calculate an average. So until I had some real data to go on, I purposely budgeted the numbers lower. Now that I have 6 months of data to base this on, I have a much better picture of what to expect and thankfully it should be enough to cover my pay cut.
Finally, I'm looking into buying an investment property and I've come to the conclusion that buying in BC is not going to happen anytime soon. However, I did join the Real Estate Investment Network and there are a lot of investors that invest in properties of the province (or country). I'm still short the funds to make an investment anywhere, but at least this gives me a lot more options and will require a lot less time to come up with the funds.
Wish me luck on my exam! Now.... time to study hard!
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