Wages: The real competitiveness problem.

There is lots of talk about increasing competitiveness etc at the moment. The government is still spinning the same nonsense about “The Knowledge Economy” as if it is a magic wand that can sort out all of our problems. We need to get the stuff inside the box right before we can start thinking outside it. The bottom line is that as a nation we all get paid too much. The public sector get paid more than the state can afford to pay them and the private sector get paid more than it sustainable to make them competitive in an open international market.

We aren’t just way out of kilter with Poland and China, we are way out of kilter with the UK and Germany. As an example I got an email from a recruitment company today offering candidates for jobs here and in Northern Ireland. Accountancy Technicians here are looking for €26k-€28k a year. The same sort of people are looking for £12k-£14k per year in the North.

Forget about everything else when it comes to competitiveness; we need to cut wages significantly right across the country. There are, of course, exceptions, but on a macro level it is our biggest problem.

There is not point in cutting wages unless social welfare rates drop significantly. We alre already in a situation whereby it is not worth working in lower paid jobs. Reduce wages and a lot more people will switch to social welfare, thus increasing our unemployment.

We should export our knowledge as to how not to run a country. That's the knoweldge that we have over here.
Yes, wages are too high, social welfare is too high - but debt is a big problem, and will become worse if we reduce wages/ SW - so we are trapped in a vicious circle.

I'll take a 20% pay cut if PTSB write off 20% of my mortgage

Good luck to those NI people on living on £12-£14K down South. As csirl says, for a start they would be better off on the dole.

There's only so far you can cut wages before people are unable to pay their mortgages, put food on the table, use energy etc. As DB74 said, people might be more willing if the equivalent was knocked off their mortgages !

Cost of living and debt are irrelevant. When you buy a can of beans or a computer in a shop will you pay twice as much because it was produced in a country with high levels of personal debt and living costs? If you are purchasing goods or services for your company will you pay a premium because a particular supplier has a higher cost base? Why would anyone think that people in other countries would pay a premium for our goods or services when given the opportunity we won’t do it ourselves (hence the cross boarder shoppers).

I agree that welfare rates have to drop and I agree that when everything else falls our personal debt levels will still be the same. That’s why we are so screwed; we can’t regain competitiveness because we are so indebted.

This thread illustrates the core problem with Ireland.
I can't see a way out of the vicious circle. As taxes increase the problem will only get worse as people default.

(On a personal level, I nearly always now buy goods off the internet. I feel that I'm in competition with highly paid public sector and MNC people whenever I go to buy something in Ireland. This really annoys me. I'll soon be booking my 'dental holiday' to Hungary.)

The conundrum with this argument is that we are not actually living beyond our means, in the sense that we are expected to have a balance of payment surplus this year and indeed a very good balance on goods and services (countered by interest payments and repatriations).

The OP's proposition fails because it looks at the problem from the wrong end.
If costs are cut then people can begin to live on less, but cutting wages and/or social welfare and expecting people to be able to cope with existing overpriced goods, services and utilities, is utter nonsense.

The main indices of utilities, education and communication all rose according to the consumer price index for 2010.
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All areas where the state controls the costs - what does this tell us about the potential to survive this recession?
The only places necessary to cut now are the costs of these essentials, with the social welfare trailing this by a year to allow some benefits to accrue.

But the cutting the cost of an over qualified and over staffed and underworked civil service can start tomorrow.
Whether its a three day week or redundencies, we seriously need to get these costs down ASAP.

And confidentiality be damned - we seriously need a survey or our debt on a household by household basis so that we can see the actual problem not be waffled at by poor mouths with income shortfalls that have two or three foreign properties and a yacth they can can sell off to mitigate their borrowings.

Let's get real on this people and not just focus on cutting the social welfare or berating the costs of working in Ireland without doing a bit of homework and realising that it costs a lot to live here.
This is the main problem facing our return to competitiveness, not the social welfare bill - introduce competition to drive down costs and properl assess the cost of government and administration.

When this cost has been driven down, and this includes the cost of our civil service, then you can look at reducing the social welfare.
Doing it the other way is a typical Capital vs Labour strategy that will end up beggaring the weakest sections of our society.

ONQ.

My wages are down 10% +.

I pay more income tax.

But, what has happened to my costs????

• Electricity price = UP.
• House Ins = UP.
• Some GPs (admitedly anecdotal evidence) = 55 to 60 = UP.
• Solicitors asking 2000 for conveyancing of a house up to the stage before signing of contracts!!!
• The list goes on and on..................

I accept the two pay cuts I've taken, but I want to see more cuts in my "overheads".

Ireland's wages are generally not out of line, it's non-wage incomes that are too high.

One point:

I'm not convinced that industial / factory wages are too high here.


"Professionals" = sol / med consultant / dentists / doctors, etc., yes they are too high

Public sector = yes, a bit high, but have taken two cuts

Shops are still charging too much. The likes of Maplin's are still 30-40% higher in their Dublin shops than in their NI/UK shops.

Agree Towger. I also do some online buying, a quick example was a pair of trainers that were priced at 140 Euro in a shop in Dublin, I bought them for 44 Pound online plus delivery.

It hasnt been publicised so much recently but how many people are still taking the trip North to do their shopping in Sainsburys? I suspect in the run up to christmas that those numbers will increase.

While wages for the same job may be lower in NI - the cost of living is also lower.

This thing about shops charging too much or screwing us over is rubbish at this stage. There is little doubt that there was profiteering during the boom but I would love to meet any retail shop that can make vast profits through overpricing during the biggest economic collapse in the Western World. If a shop is charging more here than in the UK, it is because the costs here are higher. We still have upward only rent reviews for God sake. Look at the minimum wage and cost of employing young people and the cost of employing people at weekends compared to the UK.

Look at restaurant prices. Am amazed that these places make any money.

I agree that the cost of employing people is shops in Ireland is high compared to the UK. Upwards only rent reviews are gone now, they can't be put into leases anymore. I don't think any of the smaller shops can make huge profits at the moment but there is still a marked difference between the euro price and sterling price in the bigger shops like Topshop etc.

missdaisy said:

Upwards only rent reviews are gone now, they can't be put into leases anymore.

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Okay they don't apply to new leases but they still apply to the vast majority of leases that were in existence before this year.

That is true but it means that the rent is the higher of the rent as is or the market rent so in reality the rent is not rising. Also most landlords are actually agreeing rent reductions with their tenants.

missdaisy said:

I agree that the cost of employing people is shops in Ireland is high compared to the UK. Upwards only rent reviews are gone now, they can't be put into leases anymore. I don't think any of the smaller shops can make huge profits at the moment but there is still a marked difference between the euro price and sterling price in the bigger shops like Topshop etc.

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Upward only rent reviews are still in practice. True, they can't be put in to new leases, but there are still loads of companies that are locked into them. My own company is an example. Not possible to move location either.

missdaisy said:

That is true but it means that the rent is the higher of the rent as is or the market rent so in reality the rent is not rising. Also most landlords are actually agreeing rent reductions with their tenants.

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Don't know where you get your info from but talk to retailers in Dundrum shopping centre and in St Stephens Green SC and on Grafton St to name some and ask them about rent reductions.

I guess it is only in Cork then that landlords are agreeing rent reductions with tenants.