Is it time for wage increases?

[TheBigShort]

Wage increases across the Eurozone are a good idea.

Hooraay! That settles that then.

Wage increases in Ireland at the same time are a bad idea.

Ah boo! not settled.
Ireland is in Eurozone. How can wage increases across the eurozone be good thing and a bad thing at the same time?
In the context of trying to attain an inflationary rate of 2%, I think it is agreeable now that wage increases are an effective way of achieving that.

 

[Firefly]

Yes, particularly if prices rise to offset oil increases and wage demands follow. If wage demands don't kick in, or are not met, then this will be the most significant factor in keeping inflation subdued.

Oil prices alone could cause inflation to rise to or above the EU's inflation target of 2% without any need for wages to increase.

 

[Firefly]

Wage increases across the Eurozone are a good idea.
Wage increases in Ireland at the same time are a bad idea.

But, we have the lowest wages in Europe

 

[RETIRED2017]

You are kidding right? The government raided the national pension reserve as soon as things got out of control.
In any case, why the persistent referral to Irish government and Irish wages?

The topic is about the ECB and its attempt to create a 2% inflation rate in the Eurozone.

Germany is the biggest trading bloc of the Eurozone.
I've attached an article that claims that deals to increase wages in Germany will help the ECB to achieve its inflation target of 2%.
I've argued that wages increases are inflationary, and if some inflation is what is desirable, then wage increases are the best to go about it, not QE.
Do you agree, or not?

As you said Germany is the biggest trading bloc of the Eurozone ,
For change do a bit of reading about German Manufacturing A good place to start would be Old World Tiger How Germany Became The China of Europe written for the times on Feb 24 2011 by Michael Schuman,
By the way The company I worked for last 35 years until I retired Manufacture and supply this segment of the German market in 2008/2009 we were taking on people to meet a spare parts market brought on because in the down turn machinery was being refurbished rather than replaced,

I am glad for the people I used to work with because there wages unlike most in Ireland are linked to German Manufacturing ,

As someone who can see that higher inflation hits the people who have to spend all of there wages to live the hardest .I don't agree with you unless you are prepared to to take home less money to fund a system like they have in Germany for Workers long term,

When you look at How the Germans fund for there workers then look at how Ireland fund for there workers future you will see the so called Socialist posters on hear do not care once they are looked after Themselves,

 

[TheBigShort]

Oil prices alone could cause inflation to rise to or above the EU's inflation target of 2% without any need for wages to increase.

Yes they could. But only if the oil price results in higher consumer prices. If that happens you can expect wage demands to follow to keep up with the price of living.

The issue here is that the ECB is trying to reach an inflation rate of 2% across the Eurozone. It has chosen QE as the method in which to bring that about. To my mind all it has done is raise asset prices, which are typically (inexplicably imo) excluded from inflation figures. In my opinion there is not one shred of evidential material to suggest that QE is any use for this purpose.

I'm simply arguing that wages are inflationary. I think that is agreeable? So if the aim is to induce inflation, then policies that give rise to wage increases will create the inflation that is being sought. Such as governments raising minimum wages, sectoral pay agreements would help also, increased capital expenditures and tax reforms creating employment are other measures. These are broadly government policies, outside the remit of ECB.

I don't even agree with the concept of a 2% inflation target - I think that is based on hocus-pocus economics. Just as the Growth and Stability pact is an artificial construct devoid of any real economic understanding. The principle of sound prudent financial management and growth is fine, but has no bearing in reality to the infinite and constant variable activities in economies that lead to circumstances where prudent government spending is simply futile. There are times when governments should invest heavily into their economies, other times when they shouldn't.

But we are where we are, as part of the Eurozone, monetary policy has been ceded to the ECB. The ECB wants 2% inflation (why 2%? why not 3%?). It has chosen QE to do this - where is the concept of stability that is ingrained in the fiscal pact now?

 

[TheBigShort]

As someone who can see that higher inflation hits the people who have to spend all of there wages to live the hardest .I don't agree with you unless you are prepared to to take home less money to fund a system like they have in Germany for Workers long term,

I'm not sure what it is you don't agree with me about? I'm not advocating for higher inflation, the ECB is! It wants 2% inflation, I don't! I never said I did.
What I did say was that wages were inflationary. If the ECB aim (not my aim) is to get 2% inflation, it is my view that policies that induce wage demands are more effective to realizing that aim.
If wages increase by 4% (as the minimum wage in Ireland has done, as the pay deals in Germany will do) and the inflation rate remains subdued, those workers are benefitting.

Where they will lose out is through the continuing depreciation of their currency through QE. Guess what? House prices are unaffordable to many people once more -typically those people who have to spend all their wages to get by.

I'm not suggesting that wage increases should be on-going on a perpetual basis, I'm suggesting that there is scope now, throughout the Eurozone, to raise wages and improve the standard of living for working people. It will also assist the ECB in achieving its inflation target to 2%.

 

[RETIRED2017]

I'm not sure what it is you don't agree with me about? I'm not advocating for higher inflation, the ECB is! It wants 2% inflation, I don't! I never said I did.
What I did say was that wages were inflationary. If the ECB aim (not my aim) is to get 2% inflation, it is my view that policies that induce wage demands are more effective to realizing that aim.
If wages increase by 4% (as the minimum wage in Ireland has done, as the pay deals in Germany will do) and the inflation rate remains subdued, those workers are benefitting.

Where they will lose out is through the continuing depreciation of their currency through QE. Guess what? House prices are unaffordable to many people once more -typically those people who have to spend all their wages to get by.

I'm not suggesting that wage increases should be on-going on a perpetual basis, I'm suggesting that there is scope now, throughout the Eurozone, to raise wages and improve the standard of living for working people. It will also assist the ECB in achieving its inflation target to 2%.

If wages go up the amount people are allowed to borrow also goes up As you said inflation also goes up the only people winning are the people who are already well off,

People who need to spend all of there wages to live are most affected by the high cost of living in Ireland ,

 

[TheBigShort]

If wages go up the amount people are allowed to borrow also goes up As you said inflation also goes up the only people winning are the people who are already well off,

Says who?

If wages go up, over and above the rate of inflation, then wage earners benefit - they have more purchasing power. This does not automatically correlate with increased borrowing. In fact it can reduce personal debt levels significantly. I would suggest that, given the experience of the last ten years, personal debt levels will fall first before it starts to increase again. (this is actually occurring at the moment)

If the loan sharks in the financial institutions try to capitalize by offering increased credit, well that's another days work.

 

[RETIRED2017]

[QUOTE="TheBigShort, post: 1554461, me

If the loan sharks in the financial institutions try to capitalize by offering increased credit, well that's another days work.[/QUOTE]

There are also well connected groups who would capitalize on wage increases who don't care what affect wage increases have once more money is transferred to them the don't care about the common good and need to be called out for what the are another version of the above,

 

[Purple]

Hooraay! That settles that then.



Ah boo! not settled.
Ireland is in Eurozone. How can wage increases across the eurozone be good thing and a bad thing at the same time?
In the context of trying to attain an inflationary rate of 2%, I think it is agreeable now that wage increases are an effective way of achieving that.

Wage increases in the Eurozone will increase inflation across the whole zone but we are already paying ourselves more than our mainland counterparts so we should stop and let them catch up.
The problem with wage increases in the wealth creating private sector is that they are used by the Brethren (bearded or otherwise) to stoke claims for increases in the non-wealth creating State sector.

 

[Purple]

Says who?

If wages go up, over and above the rate of inflation, then wage earners benefit - they have more purchasing power. This does not automatically correlate with increased borrowing. In fact it can reduce personal debt levels significantly. I would suggest that, given the experience of the last ten years, personal debt levels will fall first before it starts to increase again. (this is actually occurring at the moment)

No, but it leads to a loss of competitiveness, a reduction in exports, an increase in imports and growth based on a consumption bubble rather than wealth generating export growth. That's what turned the real growth of the early 90's into the bubble of the late 90's/ early 00's

 

[Purple]

When you look at How the Germans fund for there workers then look at how Ireland fund for there workers future you will see the so called Socialist posters on hear do not care once they are looked after Themselves,

Ouch! Very true though.
Socialists in Ireland aren't interested in working people. They are interested in people who don't work.

 

[Firefly]

The issue here is that the ECB is trying to reach an inflation rate of 2% across the Eurozone.

You seem awfully concerned about the EU meeting its inflation rate as you keep mentioning this. Do you mind me asking where your interest in inflationary policy has come from?

 

[TheBigShort]

The problem with wage increases in the wealth creating private sector is that they are used by the Brethren (bearded or otherwise) to stoke claims for increases in the non-wealth creating State sector.

Ya! I think we have been through all this before. Simple examples, the budget for Dept of Justice - €2.6bn, providing for Gardaí, Court services, prison services etc.

Without it, the insurance industry would collapse. Without the insurance industry, the whole economy would shut down.
How is a €2.6bn spend on Dept of Justice not considering to be wealth creating I just don't know?

 

[Purple]

Says who?

If wages go up, over and above the rate of inflation, then wage earners benefit - they have more purchasing power. This does not automatically correlate with increased borrowing. In fact it can reduce personal debt levels significantly. I would suggest that, given the experience of the last ten years, personal debt levels will fall first before it starts to increase again. (this is actually occurring at the moment)

Since borrowing limits are set as a multiple of incomes as wages increase the price of houses will increase by the same multiple. That is until supply meets demand.

 

[Purple]

How is a €2.6bn spend on Dept of Justice not considering to be wealth creating I just don't know?

I know you don't. That's the problem.

 

[TheBigShort]

You seem awfully concerned about the EU meeting its inflation rate as you keep mentioning this. Do you mind me asking where your interest in inflationary policy has come from?

Sorry, but this is how we go around in circles. You ask a question, I try to answer. I ask you a question (or questions) and you don't answer.

I'm simply arguing that wages are inflationary. I think that is agreeable?

But we are where we are, as part of the Eurozone, monetary policy has been ceded to the ECB. The ECB wants 2% inflation (why 2%? why not 3%?). It has chosen QE to do this - where is the concept of stability that is ingrained in the fiscal pact now?

When you at least try to answer some questions, then perhaps we can move on, otherwise there is no point in continuing.

 

[RETIRED2017]

Wage increases in the Eurozone will increase inflation across the whole zone but we are already paying ourselves more than our mainland counterparts so we should stop and let them catch up.
The problem with wage increases in the wealth creating private sector is that they are used by the Brethren (bearded or otherwise) to stoke claims for increases in the non-wealth creating State sector.

To be fair to the Brethren (bearded or otherwise) they only exist because some people see them as Socialist most are bottom feeding capitalist sucking off there brothers and sisters they only reason they exist in Ireland is because the people who don't like them keep electing the same people FF/FG /LAB who feed them,

 

[TheBigShort]

I know you don't. That's the problem.

I'm sorry, I don't understand your perspective.
We live, or so we are told. in one of the richest countries in the world. Are you suggesting otherwise? Are we a poor country, or a wealthy country? If we are poor, can you back it up pls with some data, links, references?
If we are a rich country, (there is plenty of data to suggest we are), where did the wealth come from? The magic leprechaun economy?

 

[Firefly]

I'm simply arguing that wages are inflationary. I think that is agreeable?

I agree.

But we are where we are, as part of the Eurozone, monetary policy has been ceded to the ECB. The ECB wants 2% inflation (why 2%? why not 3%?). It has chosen QE to do this - where is the concept of stability that is ingrained in the fiscal pact now?

I have no idea and I never really got behind the idea of QE at all anyways.

So....you seem awfully concerned about the EU meeting its inflation rate as you keep mentioning this. Do you mind me asking where your interest in inflationary policy has come from?