Unions, Minimum wage and Jobs

This is a big blob of the economy I cannot ever get my head completely around.

I have a notion that minimum wage is a bad idea for any economy, yet I have no basis for that notion.
I always feel unions have shot their own feet when they push and push for higher wages, to be eventually rewarded with closures and job losses. Although this is different for the public sector.

This evening, 590 insurance jobs are going to India (over 3 years). Well why not ? I would do the same if I was a Hibernian shareholder, I think.

Anyone got any clear wisdom on this ?

A minimum wage is a great idea as long as prices and wages continue to spiral upwards; in an economy where these items could fall, if ever, then yes it's going to be a problem isn't it ? although that might be looking at it too simply.

It can have a different meaning too in a wider context - as a part of Europe we complain that we may be losing our tax sovereignty and suchlike but we can do all sorts of things like minimum wages and tax and VAT to change the ultimate flows of money that are around. A high minimum wage attracts employees but not employers unless there's a low corpo tax ... The money is therefore in the hands of the consumer ... so when there is high turnover of goods and services ... my god it's complicated shite.

Couldn't a high minimum wage leave us a bit inflexible ?

minimum wages in Europe
http://www.eurofound.europa.eu/eiro/2005/07/study/tn0507101s.htm

Yeh, and see the table in that link Audi, isn't that just perfect for promoting a migration of jobs ?

Auditor #9 wrote:

Couldn't a high minimum wage leave us a bit inflexible ?

minimum wages in Europe
http://www.eurofound.europa.eu/eiro/2005/07/study/tn0507101s.htm

Not necessarily. Our non-wage costs of social insurance and pension contributions are much lower than in other countries. We can reduce our non-wage costs while keeping the minimum wage high to remain attractive to both employers and employees.

EvotingMachine0197 wrote:

Yeh, and see the table in that link Audi, isn't that just perfect for promoting a migration of jobs ?

The hourly rate there for Ireland (€7) would end up giving you a higher wage after one week in Ireland than you would after a month in Romania, Bulgaria and Latvia combined

feckin hell

Ard-Taoiseach wrote:

Auditor #9 wrote:

Couldn't a high minimum wage leave us a bit inflexible ?

minimum wages in Europe
http://www.eurofound.europa.eu/eiro/2005/07/study/tn0507101s.htm

Not necessarily. Our non-wage costs of social insurance and pension contributions are much lower than in other countries. We can reduce our non-wage costs while keeping the minimum wage high to remain attractive to both employers and employees.

Irish employers are always giving out stink about non-wage costs. Rent, transport, energy and waste are usually on their list.
Coupled with a high min. wage, and unions pushing on large swathes of middle earners wages, isn't it bound to end in tears all round ?

Quote :

Irish employers are always giving out stink about non-wage costs. Rent, transport, energy and waste are usually on their list.
Coupled with a high min. wage, and unions pushing on large swathes of middle earners wages, isn't it bound to end in tears all round ?

The Spanish people told me: Ireland is good for saving lots of money. You have no life if you want to do that but it is good for saving money. Can an economy be specialised to this degree ? that people come here to save then feck off back to Latuania to buy the house ?

Can it really be sustained for a long period as an attractive force, this high minimum wage ?

Auditor #9 wrote:

The Spanish people told me: Ireland is good for saving lots of money. You have no life if you want to do that but it is good for saving money. Can an economy be specialised to this degree ? that people come here to save then feck off back to Latuania to buy the house ?

It's workable since we receive a large number of cheap, well-skilled people which reduces wage inflation and provides the human capital we need to continue to grow.

Ard-Taoiseach wrote:

Auditor #9 wrote:

The Spanish people told me: Ireland is good for saving lots of money. You have no life if you want to do that but it is good for saving money. Can an economy be specialised to this degree ? that people come here to save then feck off back to Latuania to buy the house ?

It's workable since we receive a large number of cheap, well-skilled people which reduces wage inflation and provides the human capital we need to continue to grow.

Which is fine for services which have to be delivered here by their nature, hotel industry, agriculture, construction etc.
But it's devastating for engineering/manufacturing type services.

EvotingMachine0197 wrote:

Which is fine for services which have to be delivered here by their nature, hotel industry, agriculture, construction etc.
But it's devastating for engineering/manufacturing type services.

Not necessarily since we can increase the skill base required in our manufacturing industries. Indeed Ireland has been better than most other rich world countries in maintaining an industrial base of factories employing people and producing.

Manufacturing employment is in fact increasing in Ireland.

Ard-Taoiseach wrote:

EvotingMachine0197 wrote:

Which is fine for services which have to be delivered here by their nature, hotel industry, agriculture, construction etc.
But it's devastating for engineering/manufacturing type services.

Not necessarily since we can increase the skill base required in our manufacturing industries. Indeed Ireland has been better than most other rich world countries in maintaining an industrial base of factories employing people and producing.

Manufacturing employment is in fact increasing in Ireland.

Quote :

The figures also show strong employment growth in the financial sector,
up 7,200 over the year to 85,100. In the industrial sector, employment
rose by 1,800 to 241,500.

Up 1,800 to 241,500 is +0.7% per annum. That doesn't even cover the population increase.

EvotingMachine0197 wrote:

Up 1,800 to 241,500 is +0.7% per annum. That doesn't even cover the population increase.

True, but in other major industrialised countries, that figure is declining.

Are you sure manufacturing wouldn't run into some inflexibilities with the minimum wage, Ard ? I suppose it is a skilled industry so it's not going to suffer the vagaries of lower wage brackets anyway.

It's interesting because Ireland is a fairly spendy place so maybe the money isn't tied up in capital, assets and savings but floating around being active. Isn't that how we are different to Germany ? They save everything...

What does economics say about activity, Ard ?

Auditor #9 wrote:

Are you sure manufacturing wouldn't run into some inflexibilities with the minimum wage, Ard ? I suppose it is a skilled industry so it's not going to suffer the vagaries of lower wage brackets anyway.

Well, minimum wages do affect flexibility in the regard that they limit the free play of market forces to determine wage rates to levels above the minimum wage. As well as that, minimum wages can be used as a benchmark for those higher up to be paid and to determine wage rates.

I accept that minimum wages are an inflexibility, but not an onerous one.

Quote :

It's interesting because Ireland is a fairly spendy place so maybe the money isn't tied up in capital, assets and savings but floating around being active. Isn't that how we are different to Germany ? They save everything...

Our savings rate is actually quite similar to the Germans and has remained high as we have enjoyed our boom. What people forget about debt levels in our economy is that most people are simply borrowing to buy houses. That's not debt in strict sense, it is more of an investment into a capital good. Therefore we must deduct mortgages from debt levels to see how truly profligate and easy with cash we have become in our boom which is not that much.

Quote :

What does economics say about activity, Ard ?

Activity? In what sense?

Activity is obviously applicable to any sector but activities in different sectors are very different from each other in terms of resources, sustainability etc. Like evm says above about the hotels and hospitality - that's different from manufacturing and beside that there is the public service and other sectors which involved economic activity. How do these different sectors join onto each other ? It's too general a question for this thread so feel free to skip it but it's just going through my cranium anyway...

Don't worry i'll just skip it there.

The minimum wage is not much. A problem of globalisation is the race to the bottom - firms set up in a shed with a government grant and as soon as wages and living costs rise move on. The ultimate is when there are children locked in a cellar working for nearly nothing. There was a report about eastern european sailors on freighters off Cork starving on mouldy food and with no wages. Is that what we want?

The ideal would be a world in which no one is working for starvation wages. How would we get to that? Would the worker co-ops be the answer?

I just heard on the radio that the CIF are talking about rejecting the National Wage Agreement because their members can't afford to pay ... Can anyone throw any more light on that ?

It's in The Examiner now

Quote :

CONSTRUCTION employers could today collapse the new national wage agreement if, as expected, they vote against a deal that they say will cost them €200 million a year.


Senior union sources have already indicated there can be no national agreement if the 200,000 employees in the construction sector do not receive the 6% pay increases it imposes.

Furthermore, SIPTU has said a no vote would represent “nothing short of national sabotage” and demanded the Government withhold lucrative public contracts from those employers not willing to accept a deal in the national interest.

Nevertheless, the Construction Industry Federation (CIF) expects a no vote in today’s ballot of the 3,000 employers it represents.

If they were to back the deal it would require them, after a three-month pay pause, to pay their workers 6% over 21 months. Ahead of negotiations, the CIF had demanded a 12-month pay pause to allow employers ride out the current slump.

Last week, CIF director general Tom Parlon said the deal, as it now stands, would cost the construction industry €200m a year and result in 4,000 job losses.

Read More - Examiner

Nobody is building anything apart from public contracts.

Construction workers wages are not low and prices are going down.
Trade Unions always seem to trade off jobs for wages when things are contracting.

The other side of this is that accepting wage restraint is not going to "save" the economy. And are the company owners proposing to reduce their profit rate on these public contracts "in the public interest" ?
Are they ****.

Is the current minimum wage under threat ?

Minimum wage should not become a barrier

RTE.ie wrote:

The Minister for Labour Affairs has said he hopes the minimum wage does not become a barrier to employment.

Pointing out that the Irish minimum wage is the second highest in Europe, Billy Kelleher said the changed economic environment needs to be taken into account.

The Minister said he would be reluctant to give his personal views but a rate that is 'fair and equitable' is needed. He said the issue is now before the Labour Court and he said a constant review of the rate is taking place. The current rate is €8.65.

I wonder how people made recently redundant will take the Unions shutting the social welfare office for a day.