Minium wage to be increased to €9.15 from €8.65

[Purple]

I think the link between pay and needs of employer is already established in that few employers will get staff below Social Welfare rates.

That's the key point; the rate on Welfare, based on a 39 hour week, is €4.82 per hour. Realistically this means that nobody will work for less than €7 an hour. A high minimum wage traps unskilled people in the welfare system as their labour will never be worth that minimum wage so they are effectively unemployable. It's all well and good to have a Labour Party pushing for this but their members are well educated people from affluent suburbia who have no contact with the people what this impacts on.

 

[T McGibney]

The inescapable fact is that higher labour costs for entry-level work positions are making those positions redundant and businesses are automating their systems and processes to eliminate those positions.

I spent the first half of my 20's working for £2-£3 per hour in an accountancy firm generally doing handwritten repetitive tasks such as manual bank reconciliations, VAT returns & payrolls. (For much of that time, there was one computer in the place & about 6 typists for about 35 accounts staff).

Those functions no longer exist, as consumers of accounting services won't pay circa €10 per hour for manual bookkeepers or typists.

 

[44brendan]

Those functions no longer exist, as consumers of accounting services won't pay circa €10 per hour for manual bookkeepers or typists.

And there in a nutshell is the conflict between the minimum wage and the supply of employment. Wages are a cost and any increase in this cost will lead to a downturn in profitability unless it can be offset elsewhere. This can either be a reduction in employees, an increase in prices or less likely a cut-back in other operating costs. SME's remain the most significant employers in the country and in general they operate on extremely tight margins. An increase of 6% in the wages bill can be the difference between marginal profitability and loss-making for a business. In many cases on a per hour basis the business owner will be coming in well below minimum wage levels. 48 hour weeks would be like holiday time for many SME owners.
One of the unintended consequences of increases in minimum wage is a reduction in available employment. just take a look at any small town/village in Ireland and the number of vacant retail units that are likely to remain unlet/unsold given the deterioration in the market and the high associated costs of running these businesses in the current climate. I know 1 village where the last retail shop/post office has now closed down and the locals are looking to run a shop on a volunteer basis.

 

[Purple]

The inescapable fact is that higher labour costs for entry-level work positions are making those positions redundant and businesses are automating their systems and processes to eliminate those positions.

I spent the first half of my 20's working for £2-£3 per hour in an accountancy firm generally doing handwritten repetitive tasks such as manual bank reconciliations, VAT returns & payrolls. (For much of that time, there was one computer in the place & about 6 typists for about 35 accounts staff).

Those functions no longer exist, as consumers of accounting services won't pay circa €10 per hour for manual bookkeepers or typists.

I agree. That also means that the training costs for employees is getting more expensive. Unless the state has paid tens of thousands of Euro training someone in a job specific course at 3rd level then that cost has to be borne by the employer. A high minimum wage makes that more expensive. That, combined with our rubbish apprentice training system, means that businesses in my sector are now even less likely to take someone with low or no skill levels and train them up to a level where they can command a high wage.

 

[newtothis]

Ford increased wages to reduce staff turnover as well as to attract the required skill levels. In 1914 Ford hired 52'000 people to fill 14'000 positions. People walked off the lines, stopping the entire production process. This cost was massive, as was the cost of training and just finding people. In short an increase in the headline rate reduced total labour costs..

This is more than a little confused, and sounds like someone trying to adjust the facts to suit themselves. I was simply using it as an (extreme) illustration of the point that if you want to increase productivity you pay more, not less. This tallies with my own experience in business: you pay more to attract better staff at a net benefit to the business.

I have no issue with someone saying they don't want to (be forced to) pay higher wages because it'll hurt their profitability. It's a straightforward point. The argument that you used that it affects competiveness and/or productivity of an entire country, and indeed is the only thing that affects it, is a much more contentions one though: where's the proof? Do highly productive and/or competitive economies have particularly low minimum wages? Are those with higher minimum wages particularly uncompetitive? What is the correlation (if any) between minimum wage and average living standards (or any other economic indicator)?

I'd also argue that businesses suffering in rural towns has nothing to do with the minimum wage level: it's because there's little demand for what's on offer. If a business is so marginal that a ~5% increase in minimum wage (presumably less as a % of the overall wage bill, and significantly less than their overall cost base) it tips them over the edge, they have bigger problems.

 

[T McGibney]

I'd also argue that businesses suffering in rural towns has nothing to do with the minimum wage level: it's because there's little demand for what's on offer. If a business is so marginal that a ~5% increase in minimum wage (presumably less as a % of the overall wage bill, and significantly less than their overall cost base) it tips them over the edge, they have bigger problems.

Practically all owner-operated startups are marginally profitable in the early stages. Many are loss-making and payback can take a long time. Increase their costs, and you increase the chances they won't last, or won't ever get off the ground.

And rural businesses struggle for profitability because they don't have sufficient flexibility to reduce their costs relative to their competitors in order to compensate for lower demand.

 

[Purple]

This is more than a little confused, and sounds like someone trying to adjust the facts to suit themselves. I was simply using it as an (extreme) illustration of the point that if you want to increase productivity you pay more, not less. This tallies with my own experience in business: you pay more to attract better staff at a net benefit to the business.

Can you give an example of where you feel I am trying to adjust the facts to suit myself?

How on earth can you suggest that just paying more will increase productivity? You will have the same people, the same processes and the same inputs and outputs. With an increase in the minimum wage and the knock-on increases throughout the labour market everyone gets a pay rise so you don’t even get better or more skilled people as there is no relative change. Therefore it runs counter to your own experience above.

I have no issue with someone saying they don't want to (be forced to) pay higher wages because it'll hurt their profitability. It's a straightforward point. The argument that you used that it affects competiveness and/or productivity of an entire country, and indeed is the only thing that affects it, is a much more contentions one though: where's the proof? Do highly productive and/or competitive economies have particularly low minimum wages? Are those with higher minimum wages particularly uncompetitive? What is the correlation (if any) between minimum wage and average living standards (or any other economic indicator)?

I have never suggested that it is the only thing that affects the competitiveness of this or any other country. There are a number of things that influence competitiveness but if only one of them changes that that is the only thing that is affecting it at that time, ergo if the only change is a drop in wages then competitiveness goes up and if the only change is an increase in wages then competitiveness goes down. This is particularly the case in a small open economy like ours.


In the Ford example the increase in pay for some employees resulted in a lower staff turnover and so net lower wage costs, as it is and was a capital intensive industry wages constituted a relatively small proportion of unit costs and so reduced labour disruption resulted in a greater return on capital; there was more than one factor. If the increase was as a result of a government mandated wage rise then Ford would not have made his company more attractive but simply have had to pay more and still have the same problems of staff turnover.

I'd also argue that businesses suffering in rural towns has nothing to do with the minimum wage level: it's because there's little demand for what's on offer. If a business is so marginal that a ~5% increase in minimum wage (presumably less as a % of the overall wage bill, and significantly less than their overall cost base) it tips them over the edge, they have bigger problems.

In general terms I agree but with Tommy's caveat above.

 

[Gerry Canning]

I can agree with wanting to attract staff @ minimal cost and the potential of initial minimum wages giving untrained employess a progressive skill based ladder and better wages.
I can agree that any staff must have enough to live on.
And theres the rub?
Because that is a difficult one to square.

I worry when I see senior staff paid a large multiple of floor staff,
I worry when senior staff feel an entitlement to wages well in excess of floor staff.

I understand that in economies where the differential in wages between highest and lowest is small, that these societies are more cohesive.

 

[T McGibney]

I understand that in economies where the differential in wages between highest and lowest is small, that these societies are more cohesive.

I don't really get this? By that logic, economies (or localities) without highly profitable businesses should be better off than those with them? I don't accept that for a second.

 

[Purple]

I can agree with wanting to attract staff @ minimal cost and the potential of initial minimum wages giving untrained employess a progressive skill based ladder and better wages.
I can agree that any staff must have enough to live on.
And theres the rub?
Because that is a difficult one to square.

No, do it through a social transfer; social welfare. If we want businesses to pay for it then increase corporation tax but do it openly and call it what it is.

I worry when I see senior staff paid a large multiple of floor staff,
I worry when senior staff feel an entitlement to wages well in excess of floor staff.

I agree.

I understand that in economies where the differential in wages between highest and lowest is small, that these societies are more cohesive.

Agreed there as well.

 

[Purple]

I don't really get this? By that logic, economies (or localities) without highly profitable businesses should be better off than those with them? I don't accept that for a second.

It depends on the net income disparity. That's why people who earn more pay more tax. We have high levels on pretax income disparity but low levels of after tax (net income) disparity because we people on low incomes pay no income tax, people in the middle pay very little tax and people at the top (top 10% of earners) pay very high levels of tax.
The downside is that we have a strong disincentive to work hard or be entrepreneurial.

 

[T McGibney]

I don't understand. Take the recent example of Ballyconnell, Co. Cavan and nearby Derrylin, Co. Fermanagh when Sean Quinn was in his pomp.

Both towns were typified by relatively small numbers of senior Quinn staff who earned significant fortunes and a larger cohort of people who earned an awful lot less in comparison, but got by nonetheless. Each enjoyed great prosperity for decades, creating social facilities and amenities that were the envy of other similar towns. Quinn's eventual collapse sent both towns into an economic tailspin, eliminated the high earners and put a lot of ordinary workers onto the dole.

Although this cured the relative "inequality", it would be difficult to argue that it has improved the social capital of the area and that either Ballyconnell or Derrylin are now more "cohesive" than when they enjoyed prosperity.

 

[Purple]

At a macro level countries with low levels of net income disparity have lower levels of crime.

 

[T McGibney]

Is that really true, though? If the theory fails at the micro level, it's unlikely to stack up at the macro level. And again it's counterintuitive to suggest that economies with highly profitable businesses would be better off without them.

 

[newtothis]

Practically all owner-operated startups are marginally profitable in the early stages. Many are loss-making and payback can take a long time. Increase their costs, and you increase the chances they won't last, or won't ever get off the ground.

And rural businesses struggle for profitability because they don't have sufficient flexibility to reduce their costs relative to their competitors in order to compensate for lower demand.

Believe me, I know all about startups and marginal profitability in the early stages, having gone through it twice. The reality is that staff have to be paid somewhere close to the going rate for the job (which has nothing to do with what the person is "worth" by the way). In the early stages of owner-operated startups typically the only way to get round the marginal (or lack of) profitability is for the owner to be paid close to or actually nothing. I've been there, done that, but it is not sustainable.

You say "rural businesses struggle for profitability because they don't have sufficient flexibility to reduce their costs relative to their competitors". That sounds like to me an argument for a race to the bottom: a town full of low-wage workers who can't afford to do anything (like, spend their wages in the local town perhaps?). I'd suggest the reason they struggle is because their sales are weak because they are not offering what people want. Look at all the empty pubs: are you seriously suggesting the correct business decision to address the profitability of a struggling pub is to reduce the wages? I'd argue it would be to look at something to bring more customers in, by delivering what people actually want today rather than try and sustain a business in what is a changed world. There are plenty of examples where this has been done, and thriving businesses created as a result. I've sat and listened to business owners complain about high wage costs in their next-to-empty businesses; I've yet to hear it from those with businesses with people queuing out the door to get in.

 

[Purple]

This tallies with my own experience in business: you pay more to attract better staff at a net benefit to the business.

Just to reply to that point specifically; you don't pay more to attract better staff. You pay more than the other guy to attract better staff. This is nothing like the same as a universal pay increase.

 

[Purple]

The reality is that staff have to be paid somewhere close to the going rate for the job (which has nothing to do with what the person is "worth" by the way).

The going rate is exactly what people are worth (from a wage perspective).

That sounds like to me an argument for a race to the bottom:

What does that mean? The phrase is often used by cossetted groups seeking to protect their inflated wages, restrictive practices and conditions that are generally damaging to the public at large.

I'd suggest the reason they struggle is because their sales are weak because they are not offering what people want.

People want groceries that cost the same as the Supermarket in the nearest large town. That's not possible without economies of scale and wages that are similar per unit cost to the Supermarket. As the local shop can't match them on volume they need lower wages.

 

[newtothis]

The going rate is exactly what people are worth (from a wage perspective).

What does that mean? The phrase is often used by cossetted groups seeking to protect their inflated wages, restrictive practices and conditions that are generally damaging to the public at large.

People want groceries that cost the same as the Supermarket in the nearest large town. That's not possible without economies of scale and wages that are similar per unit cost to the Supermarket. As the local shop can't match them on volume they need lower wages.

In terms of how you were using the word, I took it that you meant "worth" to be their value to the company (i.e. their contribution to net profits). Wages are set much more by the going rate for the job (an external factor) rather than by worth (an internal factor) in that sense.

The race to the bottom is where if your only competitive response is to reduce wages and your competitor's response is the same you'll end up in a downward spiral to some end point. I'd argue that this is not a smart thing for any business or economy to be engaged in. A better response, both at a micro and macro level, is to increase the value of what you are doing, which typically will involve producing more of what people want and/or at a higher value.

A local shop will never be able to compete on cost grounds with a large supermarket, regardless of what they pay: their problem is not their wage bill, nor is it their solution.

 

[Purple]

In terms of how you were using the word, I took it that you meant "worth" to be their value to the company (i.e. their contribution to net profits). Wages are set much more by the going rate for the job (an external factor) rather than by worth (an internal factor) in that sense.

I was not aware of your definition of worth, in that context. Wage rates are set by market value in the real economy. That's the way it should be anyway.

The race to the bottom is where if your only competitive response is to reduce wages and your competitor's response is the same you'll end up in a downward spiral to some end point. I'd argue that this is not a smart thing for any business or economy to be engaged in. A better response, both at a micro and macro level, is to increase the value of what you are doing, which typically will involve producing more of what people want and/or at a higher value.

Again, that's your definition. In such circumstances both businesses would fail as over time people would just get jobs in another sector.

A local shop will never be able to compete on cost grounds with a large supermarket, regardless of what they pay: their problem is not their wage bill, nor is it their solution.

It's part of the problem and part of the solution. I am willing to pay more for a liter of milk in my local shop but not, for example, €10, so price will always be a factor and therefore input costs will also always be a factor.

 

[Sophrosyne]

I spent the first half of my 20's working for £2-£3 per hour in an accountancy firm generally doing handwritten repetitive tasks such as manual bank reconciliations, VAT returns & payrolls. (For much of that time, there was one computer in the place & about 6 typists for about 35 accounts staff).

Those functions no longer exist, as consumers of accounting services won't pay circa €10 per hour for manual bookkeepers or typists.

Doesn't this rather strengthen Newtothis' point in that we cant live in the past.

Getting hung up on the minimum wage sounds a bit Downton Abbey.