Friday, 15 January 2016

Ricardo's Law of Rent/Wages, part the manieth.

Via City AM, from Landbay's Rental Index, December 2015:

Key findings

* Average UK rents climb 3.8%, twice as fast as wages...

Table 4: Top Ten 2015 Rental Fallers
1. Aberdeen City - annual rental change minus 12.8%
2. Aberdeenshire - annual rental change minus 10.2%

In other words, a year ago, about half of tenants' wages went on tax and essentials excl. rent and the other half all went on rent. Their wages went up by 1.9% tax and the cost of essentials remained approximately the same (price inflation +/- zero) so the balance, which all goes into rent, went up twice as fast.

Aberdeen wages are inflated by high wages paid in oil and gas industries, employment and wages in North Sea oil and gas have taken one hell of a knock over the past year, so rents have fallen disproportionately.

Simples. Basic maths and logic.

Funny how the Homeys happily trot out the statistics to back up the law of rent/wages; while simultaneously denying that the law of rent/wages exists.


Lola said...

It's the same denial as 'tax incidence'. Some commenter on a DT thread would not accept that although Corporation Tax is 'paid' by companies, the 'incidence' of CT falls on some combination of employees, customers, owners and possibly suppliers.

At least that's what I think.

Mark Wadsworth said...

L, yes, clearly corp tax is borne mainly by shareholders, that's the whole point. As long as shareholders get a credit for the corp tax when they declare their dividend income, that's OK. Sadly, the Tories have buggered this up starting next April, but there you go, it's not far off.

The Faux Libs claim that corp tax is passed on to workers in terms of lower wages, but that seems highly unlikely to me. I think this is just corporate special pleading.

Lola said...

MW. I can't prove it but I do think that a proportion of CT is borne by employees - employees being paid as a sort of profit share (as you have previously espoused, and with which I agree).

How can this be tested?