The living wage and tax

Does the living wage provide an argument for ending tax on the lowest paid?

Forbes blogger Tim Worstall writes, on his personal site:

Note, and nota bene, that the Living Wage is a pre-tax number. This is before the income tax and NI that is charged to these wages. If you take those off (and I’ve not done it for this year’s number but I have for previous years) you find that the living wage of £7.20 (or whatever) an hour is within pennies of the minimum wage of £6.19 (or whatever) an hour.

We don't actually know what the living wage will be this year (it's announced on 5 November), but I thought I'd re-run Worstall's calculations with last year's numbers anyway.

The living wage is calculated based on a full-time worker working for 38.5 hours a week. It's also calculated first for London, then downrated for the rest of the country according to cost of living differences, so we'll do the same. The London living wage is currently £8.30 an hour, and the living wage for the rest of the UK is £7.20 an hour. The national minimum wage when these rates were set was £5.93, but is now £6.19.

A full-time worker in London on the living wage earns £319.55 a week. A full-time worker out of London on the living wage earns £277.20 a week. A full-time worker on the 2012 minimum wage earns £238.32 a week, and a full-time worker on the 2010 minimum wage earned £228.31 a week.

To assess Tim's point, we subtract the basic income tax and NI charged on those wages. Someone on the London living wage pays £35.11 tax and £20.83 NI, leaving them with £263.61 a week. Someone on the non-London living wage pays £26.64 tax and £15.74 NI, leaving them with £234.82 a week.

So if you are out of London and paid the living wage, your income if you paid full NI and tax would be slightly lower than than the pre-tax value of the minimum wage – and even after the amount is uprated next month, it would only be a few pounds higher.

Does this then mean Worstall is right when he says:

It is not that wages are too low. The minimum wage is almost exactly what they say that poverty level is. It is that taxes on the poor are too high. Which is an easy problem to solve, something well within the government’s power. Stop taxing the poor so much.

Well, there's a few more stats to look at first. For one thing, the minimum wage is itself a pre-tax figure. Post income tax and NI, the minimum wage is £208.37, a solid £26 a week lower than the living wage. It's perfectly reasonable to think that, if the living wage could be lower without taxes, the minimum wage could be too.

Secondly, if there's one thing the whole comparison really highlights, it's that while the minimum wage may be acceptable in most of the country, in London it's grossly low. £55 a week, post-tax, is the difference between what it takes to live out of poverty in London and what you actually earn working 38.5 hours a week on the minimum wage.

But thirdly, and most important, the Living wage isn't actually calculated pre-tax. The Greater London Authority, the body responsible for calculating the London living wage, writes (pdf):

If means-tested benefits were not taken into account (that is, tax credits, housing benefits and council tax benefits) the Living Wage would be approximately £10.40 per hour.

Even with all means tested benefits taken into account, the total tax rate for many on the London living wage is likely to be positive; and it's certainly true that there are likely to be inefficiencies involved in taking money in the form of NI while at the same time giving it back as housing benefit. But simply arguing that ending tax on the minimum wage would make it into a living wage seems incorrect. Few, if any, on the living wage pay the maximum amount of tax as calculated above, for the very good reason that that would be a terrible idea.

This doesn't mean that there isn't still a valuable argument to be made about taking the lowest paid out of the taxation system; and it doesn't mean that it isn't deeply strange that people on the minimum wage have to pay money to the government and then ask for it back in kind; but the living wage doesn't really help us make those arguments.

Campaigners for a living wage in 1972. Photograph: Getty Images.

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Tetris and sleep deprivation: how we can help emergency workers cope with trauma

First responders are at serious risk of developing PTSD during events like the Paris attacks. 

Some people seem able to deal with anything. They save a stranger from bleeding out in a bombed restaurant, protect passers-by from heavily armed gunmen, pull dead and dying people out of collapsed buildings, and they keep going because it is their job. These people are first responders.

When trauma goes on for days, as it has recently in Paris, however, the odds of them bouncing back from the violence, death and injury they are witnessing rapidly diminishes. They are at greater risk of developing a severe stress reaction known as post-traumatic stress disorder (PTSD). One study found that the worldwide rate of PTSD among first responders is 10 per cent, much higher than the 3.5 per cent rate among those not involved in rescue work.

Tetris to the rescue

So how best to address the problem? Research is in its infancy, but there are some promising studies. Emily Holmes’ group at the University of Cambridge has been looking at the benefits of playing Tetris, a video game, after a traumatic experience. The idea is that this could block the consolidation of traumatic memories so they don’t “flash back” later on.

For the study, her team first traumatised people by showing them distressing footage from public safety videos. The next day they invited them back into the lab to reactivate the memories with still images taken from the videos. One group then played Tetris for 12 minutes while the other sat quietly. Over the following week, the group who played Tetris had about 50 per cent fewer unwanted memories from the films compared to the group who didn’t.

The team concluded that playing Tetris helped individuals because it soaks up their visual processing capacity, making it harder for the brain to consolidate the visual parts of a traumatic memory.

Since it takes about six hours for the brain to cement a memory, the key is to play the game soon after trauma or within six hours of re-activating the traumatic memory. How long the helpful effects of playing Tetris will last and whether it will translate into helping people after real-life trauma is still unknown.

Talking it through

Other techniques, such as “updating”, taken from a highly-effective talking treatment for PTSD, may be more practical and easier to implement.

Like a detective, updating is a technique that focuses on finding new information and linking it to the case, the past memory. This is necessary because when the brain and body are in survival mode during trauma, the mind finds it difficult to encode all the relevant facts. Often key pieces of information that could make the memory less traumatic are lost. Updating links new information to someone’s memory of their trauma to make it less upsetting.

But can updating help to reduce unwanted memories after trauma?

We carried out a study, published in PLOS ONE, in which we traumatised people by showing them terrifying films of humans and animals in distress. We then divided our participants into three groups. One group watched the films again but were given new information about how long people suffered and whether or not they lived or died – essentially, they were updated. The second group watched the same films again but without the new information. And the third group watched films of humans and animals who were not in distress. The updated group had fewer traumatic memories and PTSD symptoms than the other two groups.

Updating is now being used by some UK emergency services. First responders will gather after critical incidents and update their memories of what happened before they go home.

Sleep deprivation

There are other techniques that may be helpful. One study found that depriving people of sleep may be useful in the aftermath of trauma.

But the same study found that a week after the trauma, people who had been deprived of sleep had the same number of unwanted memories as people who had slept well afterwards. Consequently, it remains unclear whether there would be any long-lasting benefits using this method. There are, however, certainly health risks linked to lack of sleep.

Still looking for a solution

To develop preventative interventions, we need to study newly-recruited emergency workers who haven’t yet suffered on-the-job trauma and follow them over time, spotting which “coping styles”, present before trauma, may predict their reactions afterwards.

For example, some people naturally react to stressful life events by dwelling on them, thinking about why they happened for hours on end. This strategy, called rumination, has been linked to PTSD in people who survived car crashes.

If rumination predicts PTSD in first responders, then preventative interventions could train people to spot when they are dwelling on an event and refocus their attention to the task at hand.

When we have identified which factors heighten emergency workers’ risk of developing PTSD, programmes can be developed to target those vulnerabilities. Only then can an intervention, directed at first responders most at risk of developing PTSD, properly protect them in their line of work.

The Conversation

Jennifer Wild is a Senior Research Fellow in Clinical Psychology at the University of Oxford

This article was originally published on The Conversation. Read the original article.