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April 13, 2007



Some may also say that the Public Sector isn't part of "the market" in the same sense as a private company. The boundary can be blurred of course, but the "key workers" are not necessarily subject to the same pressures. Salaries are often set quite arbitrarily in my experience of working in local government. Either that or it's at a level to tempt workers out of the private sector where pay is often a fair bit higher. As there is no obvious "private sector" alternative for the Fire Service, for example, it's difficult to know how someone can work out how much a fireman is "worth".

Returning to the article, it isn't just "key workers" who are having trouble buying houses either. Do they have more of a right to own a house? It's a complaint that's already come up of course, but that's related to the assumption that everyone *should* own their own home. For some people it's probably a disadvantage.


Why do you consider subsidised housing not to be a 'perk' of a job? And maybe a necessary one to attract staff?

Mark Wadsworth

I completely and totally agree.

If a "key worker" gets subsidised housing he or she becomes a tied worker, I had a friend who was stuck in a job he didn't like for a decade because it came with a very cheap flat.

Why not just let builders build a load more houses and then prices will come down? Demand appears to be price-inelastic, if we covered all suitable brown field sites with homes at average density, that'd be one or two million houses. And a ten percent increase in supply would lead to a much larger than ten per cent fall in prices. Twenty or thirty per cent maybe?

And it doesn't matter if all the new housing is luxury executive homes, everybody will just move up a rung on the housing ladder and so people at the bottom will at least be able to get on the newly vacated bottom rung.

And how do we achieve all this? Simple. Zoning and land value tax.

Councils and housing associations are sitting on another one million vacant properties and there are one million very poor pensioners who live in three-bedroom houses. LVT would sort them out as well.


Because no politician is going to take any action that brings house prices down. Such an action would leave too many people in negative equity, alienate the buy-to let crowd and ruin the "consolidate all your debts under one secured loan" daytime TV businesses. The most us non-homeowners can hope for is that sufficent action will be taken that house prices stop rising and stabilise in the long run, and wage inflation eventually enables us to obtain mortages.

I'm afraid I also disagree with you on the notion of a key worker, but then I'm not using market economics to establish my value system. We can have a society without premiership footballers, but one without cleaners, hospital workers, carers etc would not be worth living in. It is semantics I know, but Market economics explains why the latter earn peanuts, but it can't make a normative judgement as to whether we consider the job to be "key".

Mark Wadsworth

Market economics can probably also explain why house prices crash every eighteen years in the USA and the UK and have been doing so for centuries. Next crash pencilled in for this year.


Market economics can probably also explain why house prices crash every eighteen years in the USA ...

... and artificially maintained interest rates which are a bubble the Fed then pricks [in 2011, say].


Land Value Tax is a wonderful idea. The country is in a complete mess at the moment, people living all over the place for no better reason than because that's where they were brought up and their families are. LVT would make it much tidier, as people would be almost completely sorted out by income.

Peter Risdon

National pay bargaining makes it impossible for pay to reflect local conditions, such as housing costs (weightings just don't make enough difference). The failure, therefore, lies in refusing to allow the market to set pay rates, not in the market itself.

tory boys never grow up

The importance of a worker is indicated purely by the total rewards (wages + perks) employers offer him - because these measure the value of the worker's contribution and the scarcity of his skills.

Obviously the views of someone who knows the price of everything and the value of nothing. My kid's smiles clearly have no value because I don't pay for them

j.random hack

Your kid's a worker?


Many large retailers also set wages for their workforce nationally, so I don't see that as the prime cause of the problem.

william boot

I'm not sure you really believe that a worker's 'importance' is indicated purely by their reward. 'Value to the economy', yes, but then that's just tautological. 'Importance'isn't synonymous with 'value' and is too nebulous and multi-facected a concept to be defined in the market....or indeed by bureaucrats.

In school, we used balloon debates (aka direct democracy) to settle such matters.

My hunch is that were such key workers' wages determined in the private sector, they still wouldnt' be able to afford homes in London, just as many highly paid entry level management consultants and investment bankers can't. There is no reason for the job market and housing markets to be in a co-determined equilibrium because the wages in one market and prices in another have fundamentally different supply and demand conditions.

In short, build more houses, like someone above said (or encourage firms to move out of London)

Matthew Sinclair

The problem isn't that public sector pay is too low. Firefighters, for example, are probably paid too much in market terms as their positions are so easy to fill.

The problem is that a cumbersome bureaucracy makes it impossible to properly vary wages across the country. London weightings exist, of course, but are unresponsive. The solution is to stop making huge national wage bargains but that'll be a hard sell to the unions (who want to deploy your logic that this means we need more public sector pay in general).

One more reason for public sector decentralisation.


Do fire stations find it hard to recruit in London then?


it's this obsession with a "Housing ladder" What is wrong with renting?

Bob Deed

The FT this week points to the real solution - more house building. Key Worker subsidies just worsen the affordability problem.


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