Basic Economic Errors

Borrowed, for illustrative purposes, from elsewhere, with names changed to protect the stupid:

C wrote:

B wrote:

A wrote:

If a company comes in from say America into Ireland and is underpaying its employees in comparison to the rest of the market then one of two things will happen.

It wont get enough people working for it.

or

Its staff turnover will be horrendous and unsustainable.

Or every other company is forced to reduce its standards and wages to compete now that one compnay has been given an exception from the long- and hard-fought for standards of pay and protection..

but sure thats the whole idea isn't it?

Or they will recruit Eastern European migrants who will work for the lower rates as they are entirely unaware of the cost of living here until they arrive.

What is wrong with the points offered by posters B and C?

ibis wrote:

Borrowed, for illustrative purposes, from elsewhere, with names changed to protect the stupid:

C wrote:

B wrote:

A wrote:

If a company comes in from say America into Ireland and is underpaying its employees in comparison to the rest of the market then one of two things will happen.

It wont get enough people working for it.

or

Its staff turnover will be horrendous and unsustainable.

Or every other company is forced to reduce its standards and wages to compete now that one compnay has been given an exception from the long- and hard-fought for standards of pay and protection..

but sure thats the whole idea isn't it?

Or they will recruit Eastern European migrants who will work for the lower rates as they are entirely unaware of the cost of living here until they arrive.

What is wrong with the points offered by posters B and C?

Apart from the fact they are pessimistic moaning lefties preaching from the comfort of their boring civil service jobs or undergrad Arts students on the doss at this time of the morning?

Well Im no economist - far from it - but they would appear to be ignoring the laws of supply and demand - which has never been a strong point for the left to be fair.

I'm not sure if there's a deep economics lesson in here or if it's a trick question. But, nonetheless, I proffer the following suggestion as a self-confessed and stupid - in terms of all things economics-related, leftie.

They've ignored that Business A isn't actually in business if either of the two scenarios predicted by A occur. So B and C relate to a scenario other than that presented by A?

Do they have anything to do with post A?

ibis wrote:

Borrowed, for illustrative purposes, from elsewhere, with names changed to protect the stupid:

C wrote:

B wrote:

A wrote:

If a company comes in from say America into Ireland and is underpaying its employees in comparison to the rest of the market then one of two things will happen.

It wont get enough people working for it.

or

Its staff turnover will be horrendous and unsustainable.

Or every other company is forced to reduce its standards and wages to compete now that one compnay has been given an exception from the long- and hard-fought for standards of pay and protection..

but sure thats the whole idea isn't it?

Or they will recruit Eastern European migrants who will work for the lower rates as they are entirely unaware of the cost of living here until they arrive.

What is wrong with the points offered by posters B and C?

B is wrong since pay is not the only determinant in labour market movements. Job satisfaction, difficulty in moving to new jobs, contractual arrangements and so on all impede pay being the sole determinant in the labour market. Other companies wouldn't be "forced" to change wage rates since wage rates aren't the only deciding factor.

C is wrong because Eastern Europeans aren't entirely unaware of wage rates in Ireland and would be more attracted to higher-paying jobs elsewhere in Ireland.

B was obviously lunching on magic mushrooms prior to posting and C is deeply insecure and feels threatened by the hordes of foreigners who will first take his job and then his woman (perhaps he hasn't one in the first place).

Quote :

A wrote:
If a company comes in from say America into Ireland and is underpaying its employees in comparison to the rest of the market then one of two things will happen.

It wont get enough people working for it.

or

Its staff turnover will be horrendous and unsustainable.

A's assumption appears to depend on the unlikely combination of full employment locally and zero mobility of labour. The "rest of the market" is international and not Irish. The company won't stay in Ireland unless the wages costs (corrected for tax/grant benefits) are the lowest of any comparable location internationally.

Turnover in call centres is horrendous (to do with the work more than the money) but apparently sustainable. Turnover is not a big issue if there are plenty of replacements and the job is straightforward.

I really don't know what A is on about, so there's not much point in me looking at poor old B and C.

Damnit, cactus flower beat me to it.
I was going to say that it really depends on the level of employment in the area.
Also for cactus' point on turnover - the same applies to manufacturing jobs. Most of these are fairly basic production line jobs, and there was a time over the last few years when the only people factories could get to work for them were junkies and people without a single word of English.
If conditions were the same now as they had been with regard to the level of employment then no company would survive for long unless they offered staff a competitive package.
But with that aside, if there's a high level of unemployment, as long as a company is paying more than an employee would otherwise receive on social welfare then they won't have much trouble filling vacancies.

AfricanDave wrote:

Damnit, cactus flower beat me to it.
I was going to say that it really depends on the level of employment in the area.
Also for cactus' point on turnover - the same applies to manufacturing jobs. Most of these are fairly basic production line jobs, and there was a time over the last few years when the only people factories could get to work for them were junkies and people without a single word of English.
If conditions were the same now as they had been with regard to the level of employment then no company would survive for long unless they offered staff a competitive package.
But with that aside, if there's a high level of unemployment, as long as a company is paying more than an employee would otherwise receive on social welfare then they won't have much trouble filling vacancies.

That is a fair point - but from the point of view of a company hiring employees the social welfare system is a competitor. In the 80's the Irish dole often out-competed entry-level or rural jobs once tax and costs had been factored in, especially if you were also receiving child benefit.

Quote :

That is a fair point - but from the point of view of a company hiring employees the social welfare system is a competitor. In the 80's the Irish dole often out-competed entry-level or rural jobs once tax and costs had been factored in, especially if you were also receiving child benefit.

It still is. RTE's Paddy O'Gorman still occasionally meets people at post offices and dole queues and invariably he talks to women in a certain situation who will admit that they will lose their benefits if they go to work. Those benefits are substantial even still and if your priority is keeping the roof over your kids' head and food in their little bellies then losing a variety of allowances for a job that may not last longterm and which will cost you money if you have to factor in childcare is not financially worth it.

ibis wrote:

AfricanDave wrote:

Damnit, cactus flower beat me to it.
I was going to say that it really depends on the level of employment in the area.
Also for cactus' point on turnover - the same applies to manufacturing jobs. Most of these are fairly basic production line jobs, and there was a time over the last few years when the only people factories could get to work for them were junkies and people without a single word of English.
If conditions were the same now as they had been with regard to the level of employment then no company would survive for long unless they offered staff a competitive package.
But with that aside, if there's a high level of unemployment, as long as a company is paying more than an employee would otherwise receive on social welfare then they won't have much trouble filling vacancies.

That is a fair point - but from the point of view of a company hiring employees the social welfare system is a competitor. In the 80's the Irish dole often out-competed entry-level or rural jobs once tax and costs had been factored in, especially if you were also receiving child benefit.

This only applies to a proportion of the population, mainly parents of several children. In a period of high unemployment ( if the business was still viable, considering there would be market shrinkage ) there would be likely to be applicants without child dependents.

I interviewed a large group of men once ( I think it was everyone unemployed in the whole town ), thanks to Mary Harney who required everyone on the dole for more than six months to attend x number of interviews. Almost without exception I found they were in reality employed in the home looking after disabled parents or wives or were single parents. I think these days they are called "Carers". The ones who weren't Carers had disabilities. This was before the time of 'full employment'.

cactus flower wrote:

ibis wrote:

AfricanDave wrote:

Damnit, cactus flower beat me to it.
I was going to say that it really depends on the level of employment in the area.
Also for cactus' point on turnover - the same applies to manufacturing jobs. Most of these are fairly basic production line jobs, and there was a time over the last few years when the only people factories could get to work for them were junkies and people without a single word of English.
If conditions were the same now as they had been with regard to the level of employment then no company would survive for long unless they offered staff a competitive package.
But with that aside, if there's a high level of unemployment, as long as a company is paying more than an employee would otherwise receive on social welfare then they won't have much trouble filling vacancies.

That is a fair point - but from the point of view of a company hiring employees the social welfare system is a competitor. In the 80's the Irish dole often out-competed entry-level or rural jobs once tax and costs had been factored in, especially if you were also receiving child benefit.

This only applies to a proportion of the population, mainly parents of several children. In a period of high unemployment ( if the business was still viable, considering there would be market shrinkage ) there would be likely to be applicants without child dependents.

Even so. A job I had back in the 80's as a temporary assistant in the civil service paid, for a full week, about £20 more than the 'supplementary benefits' friends of mine were getting - for which I worked a full five day week, and on which I was taxed. As to 'competition' - my friend who previously had the position simply introduced me to her boss as her replacement.

cactus flower wrote:

I interviewed a large group of men once ( I think it was everyone unemployed in the whole town ), thanks to Mary Harney who required everyone on the dole for more than six months to attend x number of interviews. Almost without exception I found they were in reality employed in the home looking after disabled parents or wives or were single parents. I think these days they are called "Carers". The ones who weren't Carers had disabilities. This was before the time of 'full employment'.

In Cootehill, in the 80's, a good chunk of the 'unemployed' women worked in the local mushroom business whenever that work was available - cash in hand. Of course, the guys who drove the Virginia Coop milk tanker used to park it outside the Garda station and go in to get their dole.

One thing I think could be important in answering the original question - When was it posted first?
I ask this because I think if the company was moving to Ireland in today's economic climate the situation would differ greatly than if it was, say, six months ago.

AfricanDave wrote:

One thing I think could be important in answering the original question - When was it posted first?
I ask this because I think if the company was moving to Ireland in today's economic climate the situation would differ greatly than if it was, say, six months ago.

There's not all that much extra slack in the system - unemployment is still about 5%, long-term unemployment only 1.4%. However, if we took an unemployment rate close to what it was when I graduated - 17% of 20-25 year olds (it was 28.1% for 15-19 year olds!), then, yes, wages would fall. They won't fall because one company lowers their wages - they'll fall because applicants will accept lower pay rates.

ibis wrote:

They won't fall because one company lowers their wages - they'll fall because applicants will accept lower pay rates.

This is what I meant earlier when saying it depends on levels of unemployment and the social welfare etc.
However, although there may not be much difference in unemployment figures between now and six months ago, there is a big difference in attitude towards the economy. Both in the media and in consumer sentiment.
If I was out of work now I would be a bit more desperate about finding and holding a job than I would have been six months ago.

AfricanDave wrote:

ibis wrote:

They won't fall because one company lowers their wages - they'll fall because applicants will accept lower pay rates.

This is what I meant earlier when saying it depends on levels of unemployment and the social welfare etc.
However, although there may not be much difference in unemployment figures between now and six months ago, there is a big difference in attitude towards the economy. Both in the media and in consumer sentiment.
If I was out of work now I would be a bit more desperate about finding and holding a job than I would have been six months ago.

Agreed. What you need to look at at the moment in Ireland is not the unemployment rate, but the numbers of vacant posts.

Wages generally are determined both by the employer's need for labour and the ability of the employer to pay. If the rate of profit declines the employer will reduce overheads (including the wages bill) or go out of business.

The third important factor is the freedom of the employees to negotiate and to undertake industrial action on wages. Organised and unionised work forces are in the position to negotiate higher wages when the money is there to pay them. There are european firms with operations in Burma that use semi-slave labour: you don't go and ask the boss for a rise there if you value your neck. In the US the employer's solution sometimes used to be to shoot the Union leaders.

The existence of corporatist wage agreements, as in Ireland, can be an influence, but the bottom line is that if a company can't pay the agreement, it can't be made to pay. If a work place is non-Union, it is not likely that the employees would be in the position to complain if an agreement is not paid.