Is it time for wage increases?

TheBigShort said:
Yes, thats why I said house prices will fall unless wages start to increase.
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I get you now. For a moment there I thought you were advocating higher wages in order to prevent prices falling.

Btw, are we breaking the guidelines regarding house prices? :p
 
Firefly said:
I get you now. For a moment there I thought you were advocating higher wages in order to prevent prices falling.

Btw, are we breaking the guidelines regarding house prices? :p
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Do you mean guidelines for mortgage lending? Not sure.
But when section 110 is closed, and if the ECB stops QE (funding vulture funds at 0%).
Add in uncertainty about Brexit (culminating in a weaker £) then I would expect a reversal in prices.
Pent up demand in first-time buyers wont be enough if the 20% deposit plus 3.5 LTV remain.
Only thing to keep it going will be wage increases (fuelled by fiscal stimulus).
 
I caught an interesting segment on BBC news at 10 / Newsnight last night where they showed Theresa May announcing (somewhat) of a change in policy away from monetary policy (interest rates) to a fiscal policy (taxes and spending). I think there are merits to both, but not being an expert or qualified in the area I really wouldn't know. I always however felt that relying on monetary policy is easier as you can increase / decrease interest rates quicker and the action is performed by the (independent) central bank. Fiscal policy is more difficult (when cuts need to be made) as it involves increasing taxes / cutting spending. I'm kinda old fashioned though and when I'm trying to balance the books at home I tend to look at what I am earning.
 
Firefly said:
think there are merits to both, but not being an expert or qualified in the area I really wouldn't know.
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Like I said before, there are actually no experts in this game, just self-proclaimed experts.

Firefly said:
I always however felt that relying on monetary policy is easier as you can increase / decrease interest rates quicker and the action is performed by the (independent) central bank. Fiscal policy is more difficult (when cuts need to be made) as it involves increasing taxes / cutting spending
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Correct, monetary policy provides more/less liquidity to the economy than fiscal policy can. But fiscal policy can be more targeted.
If the ECB lends to banks who in turn lend to large corporations, there is no gaurantee what the corporation will do with this new debt. Ideally, it would invest in research and product development, but if it simply buys out competitors or buys it own shares then productivity increases will be minimal.
On the other hand if government sanctions the construction of an underground rail system (assuming costed and required) then that new debt will boost employment, wages etc.. The problem with this is if the rail system turns out to be a great white elephant, then we will be worse off.
But the money supply is being increased through QE and Europe is still stagnating, this money is not creating the desired wealth effect.
 
Purple said:
Wage increases which are not tied to productivity increases are one of the worst things that can happen in any economy as it will ultimately result in a flight of capital. This is especially ture in a small open economy.
A reduction in property prices would be a good thing. The best way to get one is to increase supply. The best way to increase supply is for the construction industry to become efficient and productive through adopting methods of construction which have been common in most of the rest of the developed world for decades. How on earth could anyone look for pay increases in such an unproductive sector?
We have the the second highest spend on health in the OECD and the poorest outcomes. Do you want to reward the doctors and nurses and other people who work in the healthcare industry for collectively being so bad at their jobs?
Farmers already get about 75% of their income from welfare payments. Should we ask the Germans to give them more welfare payments?
Who exactly has earned these pay increases you are talking about?
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Purple, to my neglect I overlooked this post of yours and am only coming to it now. You raise some fair points, but there are also some counters to those points also.

"Wage increases which are not tied to productivity increases are one of the worst things that can happen in any economy...",

Theoretically at least, I would agree.
But alternatively, productivity increases which are not tied to an increase in capital investment are effectively a reduction in the value of labour.
And that is what has been happening over the last decade - do more for less.
But now, its the pay rise first that can often induce the productivity increase.

A reduction in property prices would be a good thing. The best way to get one is to increase supply.

I totally agree. This will involve a capital investment in a labour intensive industry, pushing demand on wages.
Your stuff about our construction industry being inefficient however, is, unfortunately babble. We were building 90,000 units at the peak! We had the people, the money and the means - we just didn't have the demand, nor the foresight. I tend to look at banks in that regard. But the construction industry did as was required.

Healthcare. I can only speak from my own experience, and say the health care in this country is excellent.
That is not to say the administration of the whole system is a complete mess.
My health insurance company, upon renewal, asks me which hospital I would like cover in!?! The Mater, Blackrock, or the Beacon.
Does it matter?
I dont care, just treat the ailment, thats all I want.

As for farming, if you think Germans wouldnt be inclined to pay more then you might be surprised!
The reason for farmer subsidies is nothing to do with Irish farmer dependency, but rather German agricultural policy.
After WWII , when the Allies had destroyed Nazi Industry, the country was impoverished. It was through an effective agricultural program, not industrial program, that the German economy began to rise again.
Since then, at the very heart of German political philosophy is the recognition that without food, and preferably an abundance of it, humankind will not progress, unite and live in peace.
Food, unlike ipads, rubiks cubes, steam engines, sandals, hospitals, power-steering, xbox, condoms, mid-week breaks to Madrid, the internet etc...is actually really important. So important, that without it, everything else is basically redundant.
It was the Germans that established the EU farmer subsidy program. The basic premise was this - as long as people didnt starve, they could progress. By paying a guaranteed amount of income to farmers, should ensure an abundance of available food.
 
TheBigShort said:
Your stuff about our construction industry being inefficient however, is, unfortunately babble. We were building 90,000 units at the peak! We had the people, the money and the means - we just didn't have the demand, nor the foresight. I tend to look at banks in that regard. But the construction industry did as was required.
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This piece of your comment stuck out like a sore thumb. It is only true if you call the ability to fling up vast numbers of shoddy dwellings that nobody wants "efficient".

A tremendous amount of boom time building was in the wrong places, of the wrong type, of extremely dubious quality, not suitable for family living, and without surrounding amenities or infrastructure. Even given that a lot of the blame can be pinned on planners, lenders, and government policy, there is still plenty of blame left over for the construction industry.

Specifically regarding the efficiency question, it seems to me that dwellings are still being constructed using pretty much the same methods as fifty years ago. There may be some newer materials but the basic planning, design and modularity is mostly unchanged. I've always been amazed that our drab little cookie cutter housing estates without an ounce of individuality seem for some reason to be more expensive to build than much more tailored houses that you see in suburban parts of the Netherlands, Belgium and Germany (to take a few examples). And it certainly isn't because we build them to a higher spec, quite the reverse.

I expect that new technology will overtake us in spite of ourselves in the next decade. Robotically constructed high rises and 3D-printed houses are almost certainly on the horizon in that sort of timeframe. And that's according to industry insiders, not sci-fi authors. If we can sort issues like planning policy and land hoarding in a similar period, there may be some hope.
 
dub_nerd said:
It is only true if you call the ability to fling up vast numbers of shoddy dwellings that nobody wants "efficient".
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That was my point. You cant blame the actual architects, engineers, trade workers, labourers etc. They were simply acting to demand and fulfilled their end of the bargain.

The developers, planners, financiers, failed at their end.
 
TheBigShort said:
You cant blame the actual architects, engineers, trade workers, labourers etc. They were simply acting to demand and fulfilled their end of the bargain.
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You can certainly blame them for shoddy work and low standards. But there's a lot of blame to go around and a lot of it is shared across disparate groups.
 
dub_nerd said:
You can certainly blame them for shoddy work and low standards. But there's a lot of blame to go around and a lot of it is shared across disparate groups.
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True to an extent of course, Priory Hall et al. But by and large, building standards were kept high. As demand went beserk, standards would invariably fall.
The point I am trying to make is that we have all the people (then and now) we need to build stuff, or reasonable acess to them, high skilled or no, through the EU.
In decades gone by, like the eighties we trained people to build, but as there was nothing to build they went to America.
 
Ok, let's agree that if people are led by the nose and forced to do the right thing we have a chance of putting up some decent dwellings. I still fancy they will be replaced by robots sooner rather than later, so maybe we won't have to worry about it.
 
TheBigShort said:
Purple, to my neglect I overlooked this post of yours and am only coming to it now. You raise some fair points, but there are also some counters to those points also.


"Wage increases which are not tied to productivity increases are one of the worst things that can happen in any economy...",


Theoretically at least, I would agree.

But alternatively, productivity increases which are not tied to an increase in capital investment are effectively a reduction in the value of labour.

And that is what has been happening over the last decade - do more for less.

But now, its the pay rise first that can often induce the productivity increase.
Click to expand...

I take your point on the reduction in value of labour but I see that as a result in the inclusion of a couple of billion of people in developing (and now developed) countries in the international economy. We are a little poorer in terms of labour value but they are vastly better off than they were. A good thing, I’m sure you will agree.

I see no reason why an increase in wages will lead to an increase in productivity. You have not suggested how one would follow the other or any thread of cause and effect.


TheBigShort said:
A reduction in property prices would be a good thing. The best way to get one is to increase supply.


I totally agree. This will involve a capital investment in a labour intensive industry, pushing demand on wages.

Your stuff about our construction industry being inefficient however, is, unfortunately babble. We were building 90,000 units at the peak! We had the people, the money and the means - we just didn't have the demand, nor the foresight. I tend to look at banks in that regard. But the construction industry did as was required.
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Housed can and should be pre-fabricated in factories and assembled on site. It’s much cheaper and gives a much better quality product. It also removes much of the costly labour and vastly speeds up the whole process. That’s how it’s done, to varying degrees, in most other countries. There is no need for any bricklayers, carpenters, plasterers etc during initial construction or during the first fix stage.

We built lots of shoddy properties during a credit and tax break fuelled boom. That is irrelevant in a discussion about efficiency in the sector.



TheBigShort said:
Healthcare. I can only speak from my own experience, and say the health care in this country is excellent.

That is not to say the administration of the whole system is a complete mess.

My health insurance company, upon renewal, asks me which hospital I would like cover in!?! The Mater, Blackrock, or the Beacon.

Does it matter?

I dont care, just treat the ailment, thats all I want.
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Personal anecdotal experiences are not a relevant response. That’s what RTE does. We shouldn’t lower ourselves to their level where everything is a human interest story and emotion trumps evidence and reason.


TheBigShort said:
As for farming, if you think Germans wouldnt be inclined to pay more then you might be surprised!

The reason for farmer subsidies is nothing to do with Irish farmer dependency, but rather German agricultural policy.

After WWII , when the Allies had destroyed Nazi Industry, the country was impoverished. It was through an effective agricultural program, not industrial program, that the German economy began to rise again.

Since then, at the very heart of German political philosophy is the recognition that without food, and preferably an abundance of it, humankind will not progress, unite and live in peace.

Food, unlike ipads, rubiks cubes, steam engines, sandals, hospitals, power-steering, xbox, condoms, mid-week breaks to Madrid, the internet etc...is actually really important. So important, that without it, everything else is basically redundant.

It was the Germans that established the EU farmer subsidy program. The basic premise was this - as long as people didnt starve, they could progress. By paying a guaranteed amount of income to farmers, should ensure an abundance of available food.
Click to expand...

I’m well aware of the history of the EU and the CAP. I’m also aware of the tens of millions of people it condemns to poverty and the people it, and our other protectionist policies, kills l across the developing world.

There’s no way that a 75% subsidy is required to make sure Europe can feed itself. In fact we are less productive in land use than other developed countries and regions with similar climatic and arable land stat’s because of our subsidies which result in small and inefficient farms. We have good environmental outcomes only because we outsource those problems to developing regions of the world; we import vast amounts of what we consume from countries with very bad environmental records because we are unwilling to produce it ourselves. In short we cause death and poverty along with environmental destruction but we do it to darker skinned people elsewhere so that’s ok. Then we pat ourselves on the back.
 
Protocol said:
Is it time for profit decreases?

40% net profit margins............

http://www.askaboutmoney.com/threads/selling-my-business.200754/
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Are you suggesting people should be punished for being good at running their business?
If my neighbour writes an App which is very popular and makes 75% profits, say an extra €200,000 a year, is it not enough that the State will take over half of it in direct taxes and a quarter of what's left in sales taxes?
Someone posted recently that Irish personal taxation is based on jealousy and charity. It's hard to disagree.
 
Well what should happen is competition should drive down prices and profits.

Doesn't seem to happen in some sectors in Irl, though.

Example:

Sudocrem 400g = 10.59 euro Tesco Irl

UK = 5.50 GBP Asda, 5.80 GBP Tesco, or approx 6.50-7.00 euro
 
Protocol said:
Well what should happen is competition should drive down prices and profits.

Doesn't seem to happen in some sectors in Irl, though.

Example:

Sudocrem 400g = 10.59 euro Tesco Irl

UK = 5.50 GBP Asda, 5.80 GBP Tesco, or approx 6.50-7.00 euro
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The reason prices are higher in Ireland is generally because wages are higher. In the case of supermarkets a longer supply chain and economies of scale come into it. In general terms the cost of living is a result of the cost of labour. If we are no more productive than the British (and we aren't) that means higher ages = higher costs. That's why things are cheaper in Spain; lower wages = lower costs.
The protected sectors and the so-called professions are exceptions. That's particularly the case with the medical industry since it has the double whammy of being mostly state funded and having barriers to entry through both the incompetence of the State and their own restrictive practices.
There is still over supply in the legal industry but demand is catching up fast.
 
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