Is it time for wage increases?

both TheBigShort and firefly agree they hope to get a Pay increase. If all goes to plan and we don't want to borrow the next question is how are we going to pay TheBigShort pay increase .Will the pay increases in the private sector wages generate enough in tax to provide the services require along with TheBigShorts Pay increases. Do we cut back on the services we already have .Do we do away with some of the tax breaks if so which one.If we cut back on services which services. Do we increase taxes on all taxpayers or some taxpayers only.I say taxing Foreign direst investment is out If we had taxed them higher before now wages would be lower in both the public and private sectors .In other words the have prices in there tax advantage in the wages they pay. CAN WE AGREE ON WHO PAYS MORE TAXES.TheBigShot is getting His/Her pay Increase already Agreed and like firefly may get a little bit more no harm in asking.Wages are on the way up for employers who can afford to pay more according to firefly .The only question who Gets there snouts in the trough first.
 
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TheBigShort said:
I have, but if you are not happy with it then so what?
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You haven't. You have argued that a spending program will increase activity in the economy and that many in the private sector will benefit. I agree with this, many will. And possibly the number of public sector workers may increase, but you haven't shown how anyone in the public sector can expect higher wages.


TheBigShort said:
The topic is not about increasing public sector wages. It is about increasing wages across the economy to provide for stable, properous economic environment that will provide quality services and private investment.
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You are the one who is asking who should benefit from a growing economy, yet you are not able to show how public sector workers can expect their wages to increase as a result of a stimulus package!

TheBigShort said:
And because of all those left-wing governments we have had to date that we have ended up where we are?
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I would say the biggest mistake was not following a counter-cyclical pattern of government spending. During the boom was the time when the government should have been spending way less money. We are hell-bent on pro-cyclcical spending - spend when the economy is doing well (Sure we can afford it) and spend when the economy is in the doldrums (to stimulate demand).


TheBigShort said:
And im asking you where would you re-direct the money? What will that do? It is robbing peter to pay paul. So cut healthcare funding to build houses? Or close schools to build a motorway?
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We are (thank goodness) limited by the amount money we can borrow. We can no longer print our own money. So, if we can't borrow and we can't print, that leaves either raising taxes or cutting spending. Where do you think the money should be found since you're the one advocating this stimulus package?

TheBigShort said:
But you cant simply run an economy on the basis that borrowing is ok if its an emergency, but not ok otherwise. Thats what every tinpot basket case in Africa does.
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You're the one saying the system is broke and we need something new. I am saying, let's try and live within our means for a while. We almost achieved it this year if it wasn't for the budget.

TheBigShort said:
Yes, the fastest growing economy in Europe. Propelled by a policy of providing 0% loans from the ECB to banks and governments through QE.
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The 0% deal is available to all countries in the EU. Why are we the fastest growing economy in Europe?


We've been there and I agree with you - it's madness!

TheBigShort said:
But if I am struggling with childcare payments, then perhaps I shouldn't have had children (this was actually said to me once).
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That must have been a difficult thing to hear and I am sorry for you. It is insensitive in the extreme. Having said that, children are expensive and I know after we had our second we decided to call it quits on a number of factors, and unfortunately cost was a factor, albeit a small one.

TheBigShort said:
Certainly the government should not interfere in the free-market and provide additional supports to workers in that sector. That would cost the taxpayer!
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I would be very slow to argue that the government should get involved in private business. Where do you draw the line? Should the government help out the Spar in Dundalk as the shoppers are currently going to Newry?

TheBigShort said:
No, we need to stimulate the economy through increased borrowing for cash-strapped citizens by buying stuff they don't need and worse, its on credit.
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Again, I agree. Crazy stuff.
 

Great post. And that's the problem I have with so many on the Left. Their intentions are admirable and are great at the "Why" but unfortunately fall down on the "How", unless it involves borrowing!
 
But are they really on the left I suspect not.It was the center that let it out of control The real left are a small part of the problem .It is the center parties who have and still are falling over one another to be reckless. At one stage today you sounded like one of the bearded brethren I thought your shadow would come after you. The people in power need to provide a better health service . better supports for young family where parents have to go out to work . I have no problem paying more tax provided we get the service .There is a lot we could do if the people in power kept the usc and stopped playing games.
 
Firefly said:
You haven't. You have argued that a spending program will increase activity in the economy and that many in the private sector will benefit.
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Only because you identified a situation where you agreed borrowing would be required. And in turn, I showed how such a stimulus could benefit private sector workers, even to the point that their wages would increase. I showed you this with regard to IT workers also.
So its not rocket science. If the government identified that we needed more nurses and doctors, the a fiscal stimulus could be used to the point that nurses and doctors wages started to increase in order to attract more of them into the system. Ditto, for any area of the public service.
Another way to increase wages in the public sector is to reduce the numbers and expect same output from fewer workers, increasing productivity, contributing to growth in the economy. This will surely create an upward pressure on wages.
But im not here to advocate wage increases for one sector or another. I am advocating adopting an economic policy or model, that is spurred by fiscal stimulus instead of QE.

Firefly said:
I would say the biggest mistake
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By a left-wing government? Yes? Or no?

Firefly said:
We
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As in the Irish people who elected left-wing governments?

Firefly said:
We are hell-bent on pro-cyclcical spending
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Left-wing governments, again?

Firefly said:
We are (thank goodness) limited by the amount money we can borrow.
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I dont advocate wreckless spending and borrowing, that is what QE is effectively. The debasement of our currency by unelected central bankers in the control of investment bankers.

Firefly said:
We can no longer print our own money.
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Yes, we have ceded a great deal of sovereignty to unelected central bankers.

Firefly said:
So, if we can't borrow and we can't print, that leaves either raising taxes or cutting spending.
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A combination of taxes and cuts has been the austere policy for 6-7yrs. The economy is growing again, but growth is driven by a policy of cheap credit expansion that is based on asset purchasing program, stuffing bankrupt banks with free money to boost balance sheets. It is a debasement of our currency and we will pay a heavy price for this if incomes dont start to rise.

Firefly said:
Where do you think the money should be found since you're the one advocating this stimulus package?
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Instead of restricting governments to 3% fiscal pact and allowing banks to load up with practically unlimited free to lend in the manner that they see best.
An undemocratic centralized corporate controlled economy.



Firefly said:
The 0% deal is available to all countries in the EU. Why are we the fastest growing economy in Europe?
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Im not disputing that the economy is growing. Im disputing the manner in which it is growing. It is being propped up on unsound economic money printing policy designed to create, in Draghis words, "a wealth effect", so that we can start our borrowing spree again.

Firefly said:
We've been there and I agree with you - it's madness!
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And we are going there again if we are not careful.


It was a stupid comment from some air-head. I laughed. Reproduction is a human condition, not a financial stress test. By that reasoning large swathes of Africa would be extinct now. It was actually poor starving Irish families that reproduced greater numbers during the Famine more so than more affluent families.

Firefly said:
I would be very slow to argue that the government should get involved in private business. Where do you draw the line? Should the government help out the Spar in Dundalk as the shoppers are currently going to Newry?
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You distinguish between essential services and discretionary services for a start. If the government wants two parents to go to work, childcare structures need to be in place. High costs dettering both parents from entering the workforce represents a market failure.


Firefly said:
Again, I agree. Crazy stuff.
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Bill Gross, head of Janus Capital Investment



Criticizing Trumps policy to cut corporate tax because it will favour capital at the expense of labour.

"Corporations are fighting structural headwinds, demographic ageing, technological displacement of jobs...overleveraged balance sheets. They focus on the bottom line instead of public welfare. Government must step in, not by reducing taxes which will only increase profits at the expense of labour. But by being the employer of last resort in hopefully a productive way"

What on earth could he mean by being the employer of last resort?
My guess is he is advocating fiscal stimulus (hopefully in a productive way) that will result in a transfer of wealth from capital to labour.
 
I am expecting Trump lower tax rate to hurt Ireland where a company have a plant in the USA making the same parts as in Ireland .They may pull some back to the USA then we will have some Fun.They did not see Trump winning how come they are so smart all of a sudden
 
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TheBigShort said:
Instead of restricting governments to 3% fiscal pact and allowing banks to load up with practically unlimited free to lend in the manner that they see best.
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Firstly, thanks for answering the question. Up until now it wasn't clear..either you weren't answering the question, or I have been unable to decipher what you were providing. I think I have it now. If I am correct, you are basically saying that (1) you are in favour of wages increasing and (2) you are advocating increased government borrowing for a stimulus package in order to achieve these wage increases.

I would disagree with this as I think we are heading into an extremely dangerous time over the next 2-3 years. There is a Perfect Storm brewing. The nearest cloud is Brexit and the untold damage it will do. Next up is the ending of QE by the ECB. Once this ends, the State will need to borrow from the market. Our current 0% rates could easily jump back to 6%, meaning that any bonds expiring after next year will cost much more to finance. If we reversed the budget in Oct we would have balanced our books. Next year we would have had a surplus. When QE ends the markets would view us much better and the cost of this re-financing would be much lower.
Next up is Mr. Trump and his proposals to reduce corp tax in the US. This will at best halt in-ward investment into Ireland and at worst result in a flight of operations back to the US. Lastly, we have the rise of the far-right nutjobs in Europe. This will lead to further protectionism and all the nasty stuff that goes with it. Apologies if I am sounding dramatic on this, but I believe now is the time to buckle down and put on the rain gear rather than booking that foreign holiday.

As well as the above, I think the economy is improving and growing faster than anywhere in Europe. Yes, interest rates that are too low are helping, but the rest of Europe has the same "deal" from the ECB, why are we growing faster?


TheBigShort said:
Another way to increase wages in the public sector is to reduce the numbers and expect same output from fewer workers, increasing productivity, contributing to growth in the economy. This will surely create an upward pressure on wages.
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We constantly hear how public sector workers are over-burdened, so I don't think reducing numbers further would be sustainable.

TheBigShort said:
By a left-wing government? Yes? Or no?
As in the Irish people who elected left-wing governments?
Left-wing governments, again?
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This could be argued till the cows come home. You have the leader of the party that was in power all through this declaring himself a socialist. We had increases in public sector numbers & pay, increases in the OAP and the dole. That's all left wing politics. On the other hand you have the PDs with their pro-market policies and tax breaks for builders & developers. So I wouldn't see a left-wing government per se, but rather a government with both Left and Right policies.


TheBigShort said:
I dont advocate wreckless spending and borrowing, that is what QE is effectively.
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The government gets exceptionally bad value from the money it spends in some areas. Fiscal stimulus could produce equally bad results. Check out the Ballybrophy train thread for instance where each passenger could be chauffeur driven for less than the price of the train fare we subsidise.

http://www.askaboutmoney.com/threads/train-cost-tax-payer-€550-per-journey.201303/#post-1493908


That's true, however in large parts of Africa having a large family is a status symbol. It was as you said a stupid argument, however the number of kids does affect our pocket.


That's a fair point and I knew it when I posted it. However, I think the agenda is not for government support, but to be brought under goverment provision, i.e. for those workers to become public servants.
 
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firefly theBigShort pick a country Lets say Germany seeing they helped bail us out . Benchmark Ireland to services to Germany services or any other country for that matter . Do we want and are we prepared to pay to have them. Are we prepared to unwind Everything stopping us from achieving our goals.Lets say pensions public/private. child care .health service. Dole.Housing.
 
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Firefly said:
I think I have it now
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Great, we can on?

Firefly said:
I would disagree with this as I think we are heading into an extremely dangerous time over the next 2-3 years.
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Ive been in the workforce for 25yrs and outside 5 or 6 of those years dangerous headwinds in one form or another has always been the mantra. During recession, wages should be subdued to build recovery. During economic expansion wages should be restraint to aid recovery and growth. Always the same, restrain wages but allow unlimited profits.

Firefly said:
The nearest cloud is Brexit
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I have my views on why I believe Brexit wont happen here, certainly not as Farage, Johnson have painted it anyway

http://www.askaboutmoney.com/threads/good-time-to-buy-sterling.199676/

But assuming I am wrong, it is still not a cause to impede fiscal stimulus that will generate wage increases. Brexit is the by-product of the same wage restraint/credit expansion policy experienced here, across Europe and the US.
In other words, we are looking at a global transfer of wealth from capital to labour in the developed world. That is why I post commentary and articles from US investors and billionaires. They are effectively saying the same thing. Economies need more wages and less capital reward.
That is why we have a fragmented Irish parliament, a divided US, Brexit, Le Pen, etc
That is why this site has topics such as the squeezed middle, cut the dole etc.
How we go about transferring wealth to the worjing population at large is another matter.
We can do QE, which is ok as a way to stop meltdown, but no good for sustainable development (think property, stock market , credit expansion bubbles).

Firefly said:
Our current 0% rates could easily jump back to 6%, meaning that any bonds expiring after next year will cost much more to finance
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They will jump back to 6% and higher if we turn off QE and curb government spending.

Firefly said:
If we reversed the budget in Oct we would have balanced our books.
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Our deficit is 1 to 2%. Our growth is 4% +. This is living within our means. If you borrow €2,000 + €100 interest and the value of what you produce increases by €3,000 then you are growing the economy.

Firefly said:
Next up is Mr. Trump and his proposals to reduce corp tax in the US.
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All remains to be seen. I am sceptical about this (or the dreaded consequences if it does occur)but assuming I am wrong, then trump will be a one-term president, and the US (and everywhere) will be in worse state than now. No rain jacket will protect us from the economic calamity.

Firefly said:
This will at best halt in-ward investment into Ireland and at worst result in a flight of operations back to the US
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Im sceptical about this, it may slow somewhat, but with TTIP in the bin for now, I dont expect much interference in FDI as a consequence of Trump policy.

Firefly said:
Lastly, we have the rise of the far-right nutjobs in Europe.
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A consequence of a wage restraint/ credit expansion policy.

Firefly said:
I believe now is the time to buckle down and put on the rain gear rather than booking that foreign holiday.
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If consumers dont spend, if governments dont spend, then corporations have no markets.

Firefly said:
We constantly hear how public sector workers are over-burdened, so I don't think reducing numbers further would be sustainable.
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Im not advocating it, just used to show how wages could rise in public sector as you requested. But lets not try go there.

Firefly said:
We had increases in public sector numbers & pay
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And reductions in numbers and pay cuts.

Firefly said:
The government gets exceptionally bad value from the money it spends in some areas
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Yes, but the private sector can also provide very bad value too. Take a look at the landscape and the empty apartment blocks etc. Aside from the financial disaster, it bordered on an environmental calamity.
There is no doubt when the private sector does something good, it is generally better at it than the public sector. The problem is, the private sector cannot provide essential services without profit. Take law & order for example. If it were privatised, the biggest growth industry would probably be prisons.
In all, as stated earlier, we live in one of the richest countries in the world. It is relatively safe and politically stable.
For sure, train lines with empty carriages are a problem, but so are empty houses.
 
TheBigShort said:
Great, we can on?
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Yip!


You might have heard these things, but they weren't acted upon. We had a boom until 2008 where the largesse of everything including wage increases needed to be reversed.

TheBigShort said:
I have my views on why I believe Brexit wont happen here, certainly not as Farage, Johnson have painted it anyway
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I have my doubts too to be honest. But if it does come to pass I expect a lot of volatilty..we may gain in some areas (financial sector job relocating here maybe) but there could be major problems in other areas (Think of all the energy we import from the UK for example).

TheBigShort said:
How we go about transferring wealth to the worjing population at large is another matter.
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This is the crux of what I would like to know. The "How" bit. Lets say for argument's sake we embark on a fiscal stimulus package to build 6,000 homes for the homeless. Using the average house price of 315k, this would come in at 1.9bn. Let's say we build them near Dublin, Cork, Limerick and Galway. The unemployed electricians & block layers in those areas will see a direct benefit. They'll go from unemployment to being paid. What about the part-time deli worker in the Spar in Donegal town? How will he/she see an increase? We've already spent 1.9bn....Do we keep going? And once those houses are built, what then? Those electricians & block layers will be back looking for work. It's fine to say borrow for things, but this will have to be repaid down the line.

TheBigShort said:
They will jump back to 6% and higher if we turn off QE and curb government spending.
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Perhaps, perhaps not, but if I was buying a government bonds and had a choice between a country balancing their books and a country running a deficit, I would be looking for a higher return from the latter.

TheBigShort said:
Our deficit is 1 to 2%. Our growth is 4% +. This is living within our means. If you borrow €2,000 + €100 interest and the value of what you produce increases by €3,000 then you are growing the economy.
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Basing our borrowing on our growth levels is not correct in my opinion. It works well until growth falls and we need to cut costs and go through all the pain we have done recently again. Borrowing should not be a target!

I agree, except for the last bit. Of course if really bad things happen we will be affected, but doing so from a stable place would be better. See what happened to Greece when they ran into trouble? They had nothing in reserve and massive debts. I blame Charlie McCreevey for many things, but if we didn't have the pension reserve fund we would have been in serious trouble. Time to build this up again..


TheBigShort said:
If consumers dont spend, if governments dont spend, then corporations have no markets.
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Consumers are spending. The government spends a huge amount of money - billions. I'm not looking for a reduction is spending at all, just not an increase.


TheBigShort said:
Yes, but the private sector can also provide very bad value too. Take a look at the landscape and the empty apartment blocks etc. Aside from the financial disaster, it bordered on an environmental calamity.
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I agree and a lot of those companies are gone now.



I agree 100%. If there is ever even the slighest sign that the police would be privatised, I'll be scrambling on a plane somewhere.[/QUOTE][/QUOTE]
 
TheBigShort said:
http://m.independent.ie/business/irish/eu-power-grab-sees-creation-of-budget-ministry-35221841.html
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Ireland is not one of the countries being asked to spend more, however.

Instead, the Government was told that spending increases and tax cuts fuelled by "volatile" tax revenues risk breaching EU budget rules this year and next.

Looks like we're spending enough already!

If we didn't have so many give-aways in the budget just gone and not as many demands for wage increases (not for any stimulus package, just plain and simple demands for higher wages (which you have agreed we should not borrow for)).
 
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Here is the opening post. The context was set in a global sense. The concept of fiscal stimulus is taking hold across the developed world.
It is time for wages to rise.



Ireland is not one of the countries being asked to spend more, however.

True, not yet anyway.
 
Looks like wage increases are also being sought in Hungary.

Hungary will cut its corporate income tax to the lowest in the European Union, reducing the levy by more than half in some cases, as prime minister Viktor Orban turns to budget steps to boost growth ahead of parliamentary elections.

“Lowering the corporate tax will boost growth, enable companies to cover the costs of much-needed wage raises and will also help investments,” said Peter Virovacz, an economist at ING Bank in Budapest.

Mr Orban is making use of his increased fiscal wiggle room after he narrowed the budget gap to the smallest in 20 years in 2015.

http://www.irishtimes.com/business/...ate-below-ireland-s-to-lowest-in-eu-1.2872354

It's interesting that Hungary is lowering taxes to achieve the result whereas the idea being suggested here is to borrow...
 
Firefly said:
It's interesting that Hungary is lowering taxes to achieve the result whereas the idea being suggested here is to borrow
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Yes, it goes back the 'how' it should be achieved. No doubt reducing corporate tax can induce an pressure on wages, but the benefit will predominantly felt in higher capital returns. This would defeat the purpose.
I would more agree with this sentiment from Bill Gross.

"Corporations are fighting structural headwinds, demographic ageing, technological displacement of jobs...overleveraged balance sheets. They focus on the bottom line instead of public welfare. Government must step in, not by reducing taxes which will only increase profits at the expense of labour. But by being the employer of last resort in hopefully a productive way"

Would you?
 

Seeing as you're so keen on infrastructure spending, it's interesting that you didn't mention his quote below in the same interview:

"his policies of greater defense and infrastructure spending combined with lower corporate taxes to invigorate the private sector continue to favor capital versus labor, markets versus wages, and is a continuation of the status quo."


As you have mentioned, this topic is about raising wages in the global context. In Ireland, after a particularly difficult number of years, we have arrived at the current state with already high levels of wages:

  • An unemployment rate below 10% and falling all the time
  • A competitive tax rate that both the EU wants to change and The Donald wants to emulate
  • The envy of the world regarding foreign direct investment - largely as a result of our tax rate
  • Almost balancing our books

Looks like we are pretty much there and perhaps this is why EU has not told us to spend more. Since 2008 we have been spending far more that we were taking in in taxes. Doesn't this represent the stimulus package you are after? Have we not completed it already?
 
Firefly said:
his policies of greater defense and infrastructure spending combined with lower corporate taxes to invigorate the private sector continue to favor capital versus labor, markets versus wages, and is a continuation of the status quo."
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I read that as 1) military defence spending as not being productive - in other words, the US will dispose of old military stock, typically by dropping it on some unfortunate country that is not on the same page.
2) 'combined with' being the critical part of the comment. As stated, reducing corporate taxes will increase wages to a point but the greatest benefit of the infrastructure spending will end up rewarding capital far in excess of labour. That is why he says "Governments must step in, not by reducing taxes which will only increase profits at the expense of labour."
The point being, infrastructure spending is good, but if you reduce taxes, the overwhelming benefit will go to profits instead of labour.
The sentiment in the article is to redress the imbalance between capital and labour, in favour of labour.
The sentiment of fiscal stimulus is taking hold in the developed world, would you agree?
Perhaps not yet in Ireland, but we usually follow at some point.
The concept of fiscal stimulus in the articles I have listed is to reward labour over capital. Would you agree?
 
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