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An interesting question concerning Boohoo and the Leicester factories

Summary:
This might sound a little off the wall but we should take our economic illumination where we can find it. There have been claims of subcontracting factories in Leicester paying less than minimum wage. As we’ve already noted we think this is more about workers without work permits than anything else. But The Observer asks an interesting question:Rival retailers ask a good question: how is it possible to make a profit from £8 dresses in the minimum-wage UK?Think on the assumed answer to that question - that it isn’t. What does that tell us about the minimum wage?What it tells us is who carries the burden of the minimum wage. For things which are not profitable are things that don’t get done in a capitalist economy. Thus if it is not possible to sell £8 dresses at a profit in a minimum wage

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This might sound a little off the wall but we should take our economic illumination where we can find it. There have been claims of subcontracting factories in Leicester paying less than minimum wage. As we’ve already noted we think this is more about workers without work permits than anything else. But The Observer asks an interesting question:

Rival retailers ask a good question: how is it possible to make a profit from £8 dresses in the minimum-wage UK?

Think on the assumed answer to that question - that it isn’t. What does that tell us about the minimum wage?

What it tells us is who carries the burden of the minimum wage. For things which are not profitable are things that don’t get done in a capitalist economy. Thus if it is not possible to sell £8 dresses at a profit in a minimum wage economy then £8 dresses don’t exist as a result of the minimum wage. It is thus the consumer who pays for the minimum wage through having to pay £10, or £15, or whatever it is, as a result of that minimum wage.

The burden of the minimum wage lies on the consumers’ shoulders. Something that makes it harder to support that minimum wage.

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Tim Worstall
Tim Worstall is a British-born writer and Senior Fellow of the Adam Smith Institute. Worstall is a regular contributor to Forbes and the Register. He has also written for the Guardian, the New York Times, PandoDaily, the Daily Telegraph blogs, the Times, and The Wall Street Journal. In 2010 his blog was listed as one of the top 100 UK political blogs by Total Politics.

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