Is it time for wage increases?

[Firefly]

Please tell me, why should we grow an economy and who should benefit from a growing economy?

The first question is a very interesting one. I think fundamentally, it comes from our desire as humans to improve ourselves. This, together with competition (both with others and with ourselves), drives the desire for growth. This is true for kids wanting to be on the starting team, to teens wanting to get the highest grades, to adults trying to provide the best for themselves and their families. Nothing new there, but just some context.

Specifically, growing an economy provides employment and reduces unemployment. Extra taxes can be raised to fund public serices and the mood of the people is generally "good".

The second question is difficult to answer and I say that not wanting to avoid the question, but rather, again, it depends. Like most things in live, the amount of money people get paid is never going to be fair, for everyone. There are those who happen to be at the right place at the right time and who get lucky. I would recommend Malcolm Gladwell's book Outliers - it's a great read on this topic.

For most people though, we get paid what the market can bear. For employees this generally comes down to individual skills (the level and market demand for same) and the profitability / solvency of their employer. For those in the private sector, this comes down to the profitability of their employer, for those in the public sector, it comes down to the current level of spending, raising taxes or borrowing. At some stage for either, there are limits to what can be paid before either goes down the swanney.

For a growing economy, we should expect to see wages (in the main) increasing. The breakdown of how much of the extra money goes to workers and how much goes to the owners is always going to be difficult to assess. Again, the market helps here - those with the best skills (experience, marketability) will tend to be rewarded more. It is up to the owner to decide on how much to allocate to wages. If they don't spend enough their people will leave (unless they can't get something better somewhere else, which is the case for a lot of people but they won't admit it!).

Just because an economy is growing should not mean that all wages should rise however, and certainly not by the same amount. If there were to happen we sould have equality of outcome and we certaily don't want this unless we want to live in a communist / solcialist utopia.

How would borrowing remove homeless people from the streets?

The government could borrow to build or buy houses for the homeless.

I'm sorry to bring public sector wage rises into this again, but it is for illustrative purposes as this wage demand is obviously current. According to Colm McCarthy, if the increases given to the Gardai recently were replicated across the public sector, it would require 1bn or more in spending. Let's instead say this money went into housing for the homeless. According to Daft, the average price of a house in Dublin is 314,311. 1bn buys 3,182 houses per year. According to the Peter McVerry Trust, there are 6,709 homeless people in Ireland. This figure includes 2,426 children, so it's probably 4,283 adults & families. This means that instead of increasing wages in the public sector, we could eradicate homelessness in 2 years, plus the State would own the houses outright. You might argue that that level of purchasing would increase prices, but if you offered any builder 315k for a development of 6,000 houses I'm sure you'd get them built.

http://www.independent.ie/opinion/c...l-lead-to-fresh-fiscal-disaster-35191635.html
http://www.thejournal.ie/house-prices-rising-across-the-country-2-2860216-Jul2016/
https://www.pmvtrust.ie/news-media/facts-and-figures/

Edit: Can you please remove your 3rd sentence in post #299 ?

Do you expect private sector workers to pay deposits on housing? Or are you talking about state agencies implementing a housing development plan? Or other?

I'm genuinely not sure where this question comes from or what it means. If you wish to expand further, I will gladly reply.

 

[Purple]

Dont be so daft. In a growing economy, all sectors should benefit, "a rising tide..." and all that. We have a growing economy. Who should benefit?

If a rising tide raises all boats then how come, in your view, wealth is being concentrated amongst the rich?
As to who should benefit; those who who earn it.

It could be that too, absolutely. Alternatively, the service could be out-sourced and licensed to the private sector altogether? Reducing jobs in the Public Sector, increasing them in the Private sector?

The State has a terrible record in interacting with the Private Sector. It generally gets screwed. If it gets better at it then yes, it should outsource as much as possible and minimise their pension liability.

 

[TheBigShort]

I know it's off topic.

Yes it is.

I wouldn't just borrow because rates are zero. It would depend on the project and the return to the economy / society in general.

My bad, you see inherent in the topic of creating a fiscal stimulus was the assumption that stuff needs to get done. That there are opportunities out there to improve the productivity and delivery of goods and services (in all sectors). That could be costed IT programmes, roads, education and research and development, health care, the list is endless.
All of which costs money. Money is cheap. But money is beholden to monetary policy through QE. QE is stuffing bank balance sheets. Banks are starting to lend again, but lending could be for anything from top range motor car, to ipads. All of the crap that people borrow too much for and run up debt.
Instead targetting essential services, upgrading infrastructure will offer the opportunity for real productivity increases, improving living standards, benefiting the population at large through higher incomes, etc.

 

[jjm]

firefly What about Maslow Hierarchy of needs.The First manager of the US company I work for was into maslow Hierarchy of needs,To this day you can see the results. Managers came and went some tried to change the culture ,I do a lot of voluntary work Which brings me into contact with a lot of people public/private service.They one thing I come across is a lot of unhappy people in jobs .Because where they work there are so many levels of pay people all doing there best .Lots of people retired early because of system.

 

[Firefly]

Yes it is.

Which is why I called it out. Have you anything else from that paragraph you would like to discuss? Do you see how we can eradicate homelessness in 2 years for the same cost as something which is being demanded by a subset of workers? If you had a choice, would you increases wages in the public sector or eradicate homelessness? I would chose the latter.

Money is cheap.

You've mentioned this before and there is no doubting that money is cheap, currently. From Colm McCarthy's article again...

"In normal circumstances a heavily indebted country would face much higher interest costs on reborrowing, as it must do every year as old debts mature and fall due for repayment, and on fresh borrowing. But the European Central Bank (ECB) has been buying government bonds at a spanking pace, keeping interest rates artificially low.

Cheap borrowing costs have flattered the Irish Budget numbers for each of the past four years. This will end, possibly as early as 2017, when things get back to normal - the declared aim of the ECB's policy."

What do you think is going to happen when the NTMA tries to raise money on the markets post QE?

We have a perfect storm brewing....Brexit, lower corporation taxes in the US and the end of QE. Any one of these could seriously affect things here. All three? Disaster. Now is not the time to increases wages, but to act prudently and put something aside.

Banks are starting to lend again, but lending could be for anything from top range motor car, to ipads. All of the crap that people borrow too much for and run up debt.

I agree 100%. People are buying like it's 2006 and even worse on credit.

 

[Firefly]

firefly What about Maslow Hierarchy of needs.The First manager of the US company I work for was into maslow Hierarchy of needs,To this day you can see the results. Managers came and went some tried to change the culture ,I do a lot of voluntary work Which brings me into contact with a lot of people public/private service.They one thing I come across is a lot of unhappy people in jobs .Because where they work there are so many levels of pay people all doing there best .Lots of people retired early because of system.

Hi jjm2016,

Maslow's Hierarchy of Needs is an interesting one alright. Of course, it would be wrong to say that just paying people more money would make them happier. The companies who top The Great Places to work come to mind. You'll find a lot of those companies pay average wages but their staff are happier as a result of being provided challenging & interesting work and promoting cross-learning & development in the organisation. Team nights out also help! As a result, not only is staff retention higher but the company can attract better staff more easily.

Firefly.

 

[TheBigShort]

but across the public sector wages increases are being sought at the moment.

And private sector

http://www.rte.ie/news/2016/1115/831926-private-sector-unions-pay/

There are those who happen to be at the right place at the right time and who get lucky.

I haven't read Outliers but have heard about the concept. But your comment is hardly conducive for establishing a stable economic environment.

Like most things in live, the amount of money people get paid is never going to be fair.

Agreed.

For most people though, we get paid what the market can bear

What is paid as a whole is limited to what the market can bear. But as you have pointed out it is rarely fair.

For a growing economy, we should expect to see wages (in the main) increasing.

Agreed.

The breakdown of how much of the extra money goes to workers and how much goes to the owners is always going to be difficult to assess.

Certainly those in control of extra money would like you to think so. That is why, as you have pointed out, it is never fair.

Again, the market helps here - those with the best skills (experience, marketability) will tend to be rewarded more.

Generally, but as you have pointed out, its rarely fair.

It is up to the owner to decide on how much to allocate to wages.

No it is not. Wages allocated should be by agreement between employer and employee. If one side has total control then the unfairness will exacerbate.

Just because an economy is growing should not mean that all wages should rise however,

Actually, in a growing economy, everyone should see a benefit. Not equal in nature, but if a person works and the economy grows, this should ultimately result in higher incomes in general terms, if not equal terms.

and certainly not by the same amount.

Monetary or % amounts?

The government could borrow to build or buy houses for the homeless.

This is fiscal stimulus. Targeted at house building. Some of the families you mention are probably builders, plumbers, electricians, maybe architects and surveyors, maybe administrators, machine operators, lorry drivers, deli workers, shop assistants, landscape gardeners, designers, mechanics etc, etc all of whom would benefit from going back to work. Fiscal stimulus could provide that, increasing wages, reducing unemployment, reducing welfare benefits, eliminating the costs associated to the State. Increasing productivity, reducing debt burdens.

If a rising tide raises all boats then how come, in your view, wealth is being concentrated amongst the rich?
As to who should benefit; those who who earn it.

"A rising tide..." should raise all boats. It rarely does. Some people end up with more boats than they need, others never get a boat in the first place.

What do you think is going to happen when the NTMA tries to raise money on the markets post QE?

Interest rates will rise, inflation will rise, the cost of borrowing will rise. Better to borrow and invest now at 0% than wait.

Now is not the time to increases wages, but to act prudently and put something aside.

Now is exactly the time to increase wages, generating demand, reducing unemployment, reducing welfare benefits, increasing tax revenues, generating budget surpluses. That way there will be something to put aside.
If the State is still borrowing today just to keep things ticking over, how do you put something aside?
If people are borrowing on credit to buy, its because they have no savings.

 

[Firefly]

Certainly those in control of extra money would like you to think so. That is why, as you have pointed out, it is never fair.
Generally, but as you have pointed out, its rarely fair.
Actually, in a growing economy, everyone should see a benefit. Not equal in nature, but if a person works and the economy grows, this should ultimately result in higher incomes in general terms, if not equal terms.

Apologies, a typo on my behalf. I have updated my post to read "Like most things in live, the amount of money people get paid is never going to be fair, for everyone." This leads into the following point I was making about people being in the right place at the right time and the Outliers book

 

[Firefly]

And private sector

http://www.rte.ie/news/2016/1115/831926-private-sector-unions-pay/

The cynic in me says that this is being put out there by the unions to legitimise their claims for wage increases in the public sector. No sooner had the LUAS drivers obtained an increase, we had Benchamrking 2.0 in full swing.

In any case I don't agree with wage claims by unions in the private sector either. It should be down to the company and the individual employee how much wages should be paid. It's no one else's business. I worked in the recent past with someone who has the same title as me. He was the most exceptional IT professional I've ever worked with. He constantly has companies chasing him he is so good. He left his last job to go contracting "to make a few bob". His last salary? 120,000. He was worth every penny. He is starting a cloud consultancy and I've no doubt he will be a millionaire by the time he is 40. Should he be subject to collective bargaining and get the same increase as everyone else?

I haven't read Outliers but have heard about the concept. But your comment is hardly conducive for establishing a stable economic environment.

I agree - and it's why centralised planning rarely works.

No it is not. Wages allocated should be by agreement between employer and employee. If one side has total control then the unfairness will exacerbate.

In an ideal world I agree with you and in all cases it's true at the beginning of the employment contract. However, the company ultimately decides on any wage increases. If the employee is paid enough based on what they can demand elsewhere or if the company cannot afford increases, none will be given.

Actually, in a growing economy, everyone should see a benefit. Not equal in nature, but if a person works and the economy grows, this should ultimately result in higher incomes in general terms, if not equal terms.

I agree with you there, but again blanket increases are bad - it's back to equality of outcome nonesense. Those who deserve more should get more. And before you ask, those who deserve more are those who build marketable skills & get things done.

Monetary or % amounts?

I'm not sure what you are referring to here

This is fiscal stimulus. Targeted at house building. Some of the families you mention are probably builders, plumbers, electricians, maybe architects and surveyors, maybe administrators, machine operators, lorry drivers, deli workers, shop assistants, landscape gardeners, designers, mechanics etc, etc all of whom would benefit from going back to work. Fiscal stimulus could provide that, increasing wages, reducing unemployment, reducing welfare benefits, eliminating the costs associated to the State. Increasing productivity, reducing debt burdens.

I agree it is fiscal stimulus. I am not against this, but I would prefer that we would be running a surplus and paying down existing debt rather than taking on additional debt. The example I gave was showing how for the same money, rather than increasing wages in the public sector we could eradicate homelessness. I've asked you which you would prefer we did but I haven't seen your answer yet..

 

[Firefly]

Interest rates will rise, inflation will rise, the cost of borrowing will rise. Better to borrow and invest now at 0% than wait.

Now is exactly the time to increase wages, generating demand, reducing unemployment, reducing welfare benefits, increasing tax revenues, generating budget surpluses.

The government does not pay down its debt, it merely rolls it over to new debt when it falls due. As you have said yourself, rates cannot get lower, so when we need to re-finance this debt it will be at a higher rate than what it is currently. Just like all those suckers buying cars on PCP, they are ultimately going to be paying higher rates down the road and eventually paying off the original loan for something they consumed years ago.

If the State is still borrowing today just to keep things ticking over, how do you put something aside?

Cut costs and / or grow income. Same for anyone.

If people are borrowing on credit to buy, its because they have no savings.

And unless absolutely necessary they shouldn't borrow. Same for the government.

 

[TheBigShort]

The cynic in me says that this is being put out there by the unions to legitimise their claims for wage increases in the public sector.

Or to reap some reward for contributing to a growing economy? If not, who should benefit from a growing economy?

No sooner had the LUAS drivers obtained an increase, we had Benchamrking 2.0 in full swing.

Ive already given you the background of the LUAS drivers claim. When it came to arbitration, 18% was agreed upon. Transdev still ploughing ahead with lucrative expansion plans.

In any case I don't agree with wage claims by unions in the private sector either.

Of course you dont, but thankfully every worker has the right to decide who represents them.

It should be down to the company and the individual employee how much wages should be paid. It's no one else's business.

If the employee wants a trade union to represent their rights thats none of your business.

He was the most exceptional IT professional I've ever worked with. He constantly has companies chasing him he is so good. He left his last job to go contracting "to make a few bob". His last salary? 120,000. He was worth every penny. He is starting a cloud consultancy and I've no doubt he will be a millionaire by the time he is 40. Should he be subject to collective bargaining and get the same increase as everyone else?

If he chooses to subjected to collective bargaining then yes. If he chooses not to then no.

However, the company ultimately decides on any wage increases. If the employee is paid enough based on what they can demand elsewhere or if the company cannot afford increases, none will be given.

Or if they are being exploited they can strike for better conditions. See Luas as an example.

I agree with you there, but again blanket increases are bad - it's back to equality of outcome nonesense.

I really thought we had moved on.

Those who deserve more should get more.

Yes of course.

And before you ask, those who deserve more are those who build marketable skills & get things done.

But that is every single worker to greater or lesser degrees!

I agree it is fiscal stimulus. I am not against this,

Hoorayy!!

but I would prefer that we would be running a surplus and paying down existing debt rather

Which would you prefer, pay down debt or leave the homeless without a home?

The example I gave was showing how for the same money, rather than increasing wages in the public sector we could eradicate homelessness.

Yes, what is your point here? You are making a policy decision to eradicate homeless instead of public sector pay increases. So what? Either way it is a fiscal stimulus which is what I have been arguing for.

I've asked you which you would prefer we did but I haven't seen your answer yet..

I would prefer to eradicate homelessness. Did you think I would say otherwise?

The government does not pay down its debt, it merely rolls it over to new debt when it falls due.

In monetary terms yes, as a % of GDP it can be paid down.

so when we need to re-finance this debt it will be at a higher rate than what it is currently.

True, but because of increased employment, budget surpluses we will be better prepared.

Just like all those suckers buying cars on PCP, they are ultimately going to be paying higher rates down the road and eventually paying off the original loan for something they consumed years ago.

Yes, if we apply the same bankrupt monetary policy of growing the economy through credit expansion and on the back of wage restraint. It is a policy that has run its course.
On the other hand if workers are rewarded appropriately for their efforts in growing the economy in the first place through higher wages, less debt will be taken on. Or at least a lower % of income will be subsumed by debt.

And unless absolutely necessary they shouldn't borrow. Same for the government.

True. I would say borrowing to resolve increasing numbers of homelessness is necessary, wouldn't you? Or should we just leave them as they are and hope for the best, that we are in the right place at the right time?

 

[TheBigShort]

https://www.theguardian.com/busines...oliberalism-robert-skidelsky?CMP=share_btn_tw

Somebody else supporting a policy of fiscal stimulus, increasing borrowing and agreeing that QE credit expansion is finished.

"Trump has also promised an $800bn-$1tn programme of infrastructure investment, to be financed by bonds, as well as a massive corporation tax cut, both aimed at creating 25m new jobs and boosting growth. This, together with a pledge to maintain welfare entitlements, amounts to a modern form of Keynesian fiscal policy (though of course not identified as such). Its merit is its head-on challenge to the neoliberal obsession with deficits and debt reduction, and to reliance on quantitative easing as the sole – and now exhausted – demand-management tool."

Would such a policy increase wages?

 

[TheBigShort]

Back in Ireland;

[broken link removed]

More private sector workers demanding better terms and conditions through higher wages. Well done.

 

[Purple]

What is paid as a whole is limited to what the market can bear. But as you have pointed out it is rarely fair.

That's not the case with the Public Sector. They just bully the Government into giving them more of other people's money.

Actually, in a growing economy, everyone should see a benefit. Not equal in nature, but if a person works and the economy grows, this should ultimately result in higher incomes in general terms, if not equal terms.

Not true; if the economy just gets bigger, i.e. more people working in it, then there is no particular reason there should be pay increases.

The cynic in me says that this is being put out there by the unions to legitimise their claims for wage increases in the public sector. No sooner had the LUAS drivers obtained an increase, we had Benchamrking 2.0 in full swing.

Agreed. Very few people in the Private Sector are in Unions as the Unions managed to close down the businesses they got their claws into.

Or to reap some reward for contributing to a growing economy? If not, who should benefit from a growing economy?

The additional people working in it.

Or if they are being exploited they can strike for better conditions. See Luas as an example.

Do you really think the LUAS drivers, the best paid tram drivers in Europe before the strike.

Which would you prefer, pay down debt or leave the homeless without a home?

What would you prefer; wage increases in the Public Sector or give the homeless a home?

 

[Firefly]

Ive already given you the background of the LUAS drivers claim. When it came to arbitration, 18% was agreed upon. Transdev still ploughing ahead with lucrative expansion plans.

I've no problem with that. Transdev obviously have the funds to pay for increases in wages and as you have said are "ploughing ahead with lucrative expansion plans." More power to them. My point was that this kicked off Benchmarking 2.0 where workers in another organisation (which is borrowing to consume) are demanding higher wages. You have said that we shouldn't borrow to just raise wages, so how should these wage demands be met?

Of course you dont, but thankfully every worker has the right to decide who represents them.

I agree.

If the employee wants a trade union to represent their rights thats none of your business.

It becomes my business if I have to pay for their wage increases through higher taxes or more borrowings, or if the school my child goes to closes down.

If he chooses to subjected to collective bargaining then yes. If he chooses not to then no.

I agree, but my point was that an organisation that gives everyone the same increase in pay would never attract him

I really thought we had moved on.

I don't understand what you mean. I was referring to the nonesense that is equality of outcome.

But that is every single worker to greater or lesser degrees!

There are workers out there who have never advanced themselves and are crap at their job, always sick etc. I don't think they should get a penny of an increase in wages. If they don't like their pay levels, find another job. Giving them higher pay means that someone else is subsidising them

Which would you prefer, pay down debt or leave the homeless without a home?

Offered a choice between the 2 I would happily eradicate homelessness. I think it's a national disgrace that we, one of the richest countries in the world, have homeless children in our country. But rather than borrowing more money to fix it I would reduce current spending instead. I would reverse the measures introduced in the budget for example and put the money into eradicating homelessness.

Yes, what is your point here? You are making a policy decision to eradicate homeless instead of public sector pay increases. So what? Either way it is a fiscal stimulus which is what I have been arguing for.

I would prefer to eradicate homelessness. Did you think I would say otherwise?

My point is that (1) you have said that we shouldn't borrow just to give someone a pay rise and (2) you prefer to eradicate homelessness rather than increasing pay in the public sector. So why argue further for pay increases....why not instead put your efforts into promoting the eradication of homelessness, as you have said yourself, you would rather fix this first?

On the other hand if workers are rewarded appropriately for their efforts in growing the economy in the first place through higher wages, less debt will be taken on. Or at least a lower % of income will be subsumed by debt.

I agree. Let the market decide what's fair!

True. I would say borrowing to resolve increasing numbers of homelessness is necessary, wouldn't you? Or should we just leave them as they are and hope for the best, that we are in the right place at the right time?

As mentioned, I think fixing homelessness should be a national priority. I think this should be funded from existing taxes though rather than defaulting to increased borrowings.

 

[riddles]

If there is a free for all in terms of cash to fund everything - then why aren't private sector workers given a tax concession to compare with PS worker increases.
Why is Noonan still dipping into self funded private sector pensions?
Alas, I don't hold out much hope for us in the medium term - we have at the worst possible time a very high cost base with all the essentials spiraling out of control.
We have pension commitments which are not currently being funded. A shrinking appetite for bonds will make funding our 182 billion national debt almost impossible.
But I guess we are as a nation predisposed to blunder from one disaster to another.
Our leaders are the highest paid in world relative to their individual responsibilities.

 

[jjm]

post 313 To be fair The protest is about the fact we don't have allowances for people who have children in this country back in the eighties when we were a lot poorer than now. we had better tax allowances for people who had children,If you look at the Private sector union pay demands Mr Douglas who is General Secretary of Mandate says we will engage with those who Genuinely can not afford Increases,.The people who work in these company s have children too you know.I suspect this post will bring our the closet Far right who don't realize they are on the far right in there thinking.I am all for giving the people who are rearing the next generation a break.I don't mind paying more tax to help out.

 

[Firefly]

https://www.theguardian.com/busines...oliberalism-robert-skidelsky?CMP=share_btn_tw

Somebody else supporting a policy of fiscal stimulus, increasing borrowing and agreeing that QE credit expansion is finished.

"Trump has also promised an $800bn-$1tn programme of infrastructure investment, to be financed by bonds, as well as a massive corporation tax cut, both aimed at creating 25m new jobs and boosting growth. This, together with a pledge to maintain welfare entitlements, amounts to a modern form of Keynesian fiscal policy (though of course not identified as such). Its merit is its head-on challenge to the neoliberal obsession with deficits and debt reduction, and to reliance on quantitative easing as the sole – and now exhausted – demand-management tool."

Would such a policy increase wages?

Interesting you are referencing the policies of a clear winner of capitalism. In any case, as per above, Trump seeks to finance this with new bonds. Given that he has previously said he would default on bonds if the going got tough, he might have a job! Also, he is looking to reduce corporate tax. Interesting that, as most of the Left argue for higher corporation taxes.

 

[Firefly]

If there is a free for all in terms of cash to fund everything - then why aren't private sector workers given a tax concession to compare with PS worker increases.
Why is Noonan still dipping into self funded private sector pensions?
Alas, I don't hold out much hope for us in the medium term - we have at the worst possible time a very high cost base with all the essentials spiraling out of control.
We have pension commitments which are not currently being funded. A shrinking appetite for bonds will make funding our 182 billion national debt almost impossible.
But I guess we are as a nation predisposed to blunder from one disaster to another.
Our leaders are the highest paid in world relative to their individual responsibilities.

Excellent post.

 

[Firefly]

Back in Ireland;

[broken link removed]

More private sector workers demanding better terms and conditions through higher wages. Well done.

Forgive me if I am wrong, but are these not mainly creche workers working for private companies? If so why are they protesting at the government? Should the government interfere with every private sector worker not happy with their lot? Surely, if the workers are unhappy they should be focusing their efforts on their employers?