Is it time for wage increases?

[Purple]

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?

We are a rich country, as is every country in Europe. That came from an export driven economy which was built from the mid 80'd to the mid 90's. Much of that was based on our location; we just had to learn to trade with our rich neighbours for most of the growth to happen, and from a harvesting other countries taxes.
Are you suggesting that our police force and judicial system is vastly better than a country like Botswana?

 

[TheBigShort]

I agree.

Hooraay! That's that settled then

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?

I'm not at all concerned about the ECB meeting its inflation target. The ECB, it would appear, very concerned about meeting its inflation target. So much so, they have engaged in a €3trn-€4trn money printing operation.
My interest in inflationary policy comes from the fact that I have a stake in the economy.

 

[Firefly]

Yes they could. But only if the oil price results in higher consumer prices.

I'm not sure whether or not the price of oil is included in the official inflation rate, however rising oil prices affects the price on consumer goods - more expensive to manufacture and transport etc. Over in the US, the recent increases in oil prices have already affected the price of consumer products:

https://www.rte.ie/news/business/2017/1213/927148-us-consumer-index/

 

[Purple]

I'm not at all concerned about the ECB meeting its inflation target. The ECB, it would appear, very concerned about meeting its inflation target. So much so, they have engaged in a €3trn-€4trn money printing operation.
My interest in inflationary policy comes from the fact that I have a stake in the economy.

If the question is "Is increasing wages a better and more equitable tool to stimulate an increase in inflation?" then my answer is yes.

 

[Firefly]

Hooraay! That's that settled then

What's settled exactly? I am agreeing that wages are inflationary...hardly ground breaking?

I'm not at all concerned about the ECB meeting its inflation target.

Then why keep bring it up? Why not just admit that you just want to see higher wages and the fact that it might help inflation is beside the point?

 

[TheBigShort]

We are a rich country, as is every country in Europe. That came from an export driven economy which was built from the mid 80'd to the mid 90's. Much of that was based on our location; we just had to learn to trade with our rich neighbours for most of the growth to happen, and from a harvesting other countries taxes.
Are you suggesting that our police force and judicial system is vastly better than a country like Botswana?

Talk about rabbit holes!

In order to grow an economy it needs a lot of things. One of them would be political stability, another would be access to education, health services etc. A functioning judiciary supported by adequate law & enforcement is also a plus for attracting investment. Environmental protection measures is another. Policies that support free trade is another. The list is endless, from democratic values and legislature to social supports for children with learning difficulties.

 

[TheBigShort]

If the question is "Is increasing wages a better and more equitable tool to stimulate an increase in inflation?" then my answer is yes.

Thank you. That is my point.

The other point is, the ECB thinks QE is the tool stimulate inflation. I disagree.

 

[RETIRED2017]

Hooraay! That's that settled then



I'm not at all concerned about the ECB meeting its inflation target. The ECB, it would appear, very concerned about meeting its inflation target. So much so, they have engaged in a €3trn-€4trn money printing operation.
My interest in inflationary policy comes from the fact that I have a stake in the economy.

We need to take money out of the economy in Ireland to fund pensions in the future which will be anti inflationary which is in our long term interest to ensure there will be money there when required in the future,

Whether we like it or not our take home pay has to drop in Ireland to fund for the future and the Fund needs to be ring fenced ,

First call on any extra tax taken in should be to replace the money taken out of the pension fund along with adding to the fund each year,

 

[TheBigShort]

What's settled exactly?

That we agree that wages are inflationary.

I am agreeing that wages are inflationary...hardly ground breaking?

Absolutely not, as I stated in the very first line, in the very first post of this topic.

In the context of general economic theory, wage increases are inflationary.

And that's the whole point. If the ECB wants inflation, and wages are inflationary....go figure!

Instead the ECB have embarked on a money printing scheme at levels never witnessed in the history of humankind in order to stimulate inflation. When, without having to break any ground, the answer is simple and obvious. Don't take my word for it;

https://www.theguardian.com/busines...b013613fffb49a#block-57d16664e4b013613fffb49a

Draghi: We need higher wages

https://www.rte.ie/news/business/2016/0907/814967-us-federal-reserve-be/

Some thoughts from David McWilliams

"If any single indicator can tell where the economy is headed it might be wages...stagnant wage growth has been one the hallmarks of the weakest economic recovery since WWII"

Then why keep bring it up? Why not just admit that you just want to see higher wages and the fact that it might help inflation is beside the point?

I keep bringing it up because I believe the QE program is ultimately deflationary - that is, my currency, my savings, are being deflated by the very thing that is supposed to stimulate inflation.

 

[Purple]

In order to grow an economy it needs a lot of things. One of them would be political stability, another would be access to education, health services etc. A functioning judiciary supported by adequate law & enforcement is also a plus for attracting investment. Environmental protection measures is another. Policies that support free trade is another. The list is endless, from democratic values and legislature to social supports for children with learning difficulties.

yes, those things are necessary in order to create the environment in which wealth generating economic activity can take place but they are not wealth generating.
We need rain for grass to grow, for cows to feed on, for milk to be produced, for cheese to be made from... but rain is not cheese. see? Same thing.

 

[Purple]

Thank you. That is my point.

The other point is, the ECB thinks QE is the tool stimulate inflation. I disagree.

I agree with you on both counts but neither indicate that wage growth is a good thing for the Irish economy or Ireland generally and certainly not outside the wealth generating sector of the economy; internationally traded goods and services, (particularly those provided by Irish companies).

 

[TheBigShort]

I agree with you on both counts but neither indicate that wage growth is a good thing for the Irish economy or Ireland generally and certainly not outside the wealth generating sector of the economy; internationally traded goods and services, (particularly those provided by Irish companies).

Wage growth is generally a good thing for every economy, notwithstanding if wage increases exceed productivity levels. But it would take a lot of wages increases in Ireland to even come close to the current productivity levels.

 

[Firefly]

And that's the whole point. If the ECB wants inflation, and wages are inflationary....go figure!

Higher wages are not the only thing that cause inflation. Higher evergy prices also lead to higher prices.

If we simply increase wages for everyone, what do you think will happen prices? They will increase and then you'll be back here advocating even higher wages to counteract the effects of inflation!

I keep bringing it up because I believe the QE program is ultimately deflationary - that is, my currency, my savings, are being deflated by the very thing that is supposed to stimulate inflation.

You have mentioned QE over and over again and I think we are all in agreement with you. With respect I don't think that is why you are bringing this up. I think it's because it suits your narrative for higher wages. As per above, if inflation was running at say 5% I have no doubt you would be calling for even higher wages to counteract the effects of inflation.

One basic question if I may. Assuming the boffins in the EU calculate that raising wages by 3% would enable inflation to rise to its state target of 2%, how do you think this could be achieved fairly across every sector, every industry, every town/village,city, across the entire EU on an equal basis?

 

[RETIRED2017]

TheBigShort
. But it would take a lot of wages increases in Ireland to even come close to the current productivity levels.[/QUOTE]

If you take out all of the companies who are hear because of our low tax and all of the people who earn a living Indirectly from the same sources ,
if anything happens to the above over the next 20 years we will be in a sorry state,

 

[TheBigShort]

Higher wages are not the only thing that cause inflation. Higher evergy prices also lead to higher prices.

I agree. But as you have pointed out, oil has doubled in price recently. Inflation has barely moved over the same period.

If we simply increase wages for everyone, what do you think will happen prices? They will increase and then you'll be back here advocating even higher wages to counteract the effects of inflation!

Prices will start to increase.

You are assuming something that has not happened. I have been party to, in the past, to wage agreements that increased wages less than the inflation rate, wage deferrals to assist with bringing down the inflation rate, and even wage cuts.
As for 'advocating even higher wages to counteract the effects of inflation', what do you think will happen if inflation does, somehow, reach 2% and there have been no wage increases?
The point behind all of this is that there is scope to increase wages, probably at levels over and above the desired inflation target rate of 2%, thus protecting, and increasing, the value of those wages for the betterment of the Eurozone economy as a whole.
Why do think the ECB itself has said "we need higher wages"?
Again, don't take my word for it, I have posted plenty of links on this thread that support my views.

With respect I don't think that is why you are bringing this up. I think it's because it suits your narrative for higher wages.

With respect, you are wrong and again making assumptions. See previous paragraph.

As per above, if inflation was running at say 5% I have no doubt you would be calling for even higher wages to counteract the effects of inflation.

I'm not calling for higher wages.
I'm merely pointing out that wage increases are inflationary. The ECB is calling for higher inflation, it has called for higher wages,

Draghi: "We need higher wages".

That is my point, I agree with Draghi - if the ECB is to attain its 2% inflation target rate, we need higher wages. Not QE.

Assuming the boffins in the EU calculate that raising wages by 3% would enable inflation to rise to its state target of 2%, how do you think this could be achieved fairly across every sector, every industry, every town/village,city, across the entire EU on an equal basis?

I don't know how this could be achieved fairly across every sector, every industry, every town/village, city, across the EU on an equal basis. Do you?

 

[TheBigShort]

If you take out all of the companies who are hear because of our low tax and all of the people who earn a living Indirectly from the same sources ,
if anything happens to the above over the next 20 years we will be in a sorry state,

I agree. But what it has to do with this topic I'm not sure.

In any case, this topic which started in Sept 2016 is somewhat outdated.

Wage increases are being felt across the Irish economy, and also in other parts of the eurozone. Notably Germany.
Inflation is on its way, as desired by ECB (not me!)

What will happen to the QE €trns however? God only knows!

 

[Firefly]

I agree. But as you have pointed out, oil has doubled in price recently. Inflation has barely moved over the same period.

It will obviously take time...existing goods will have already used up energy at the lower prices. This is why IMO it would be better to wait until the effects are known before looking at rising wages.

Prices will start to increase.

And if prices start to increase, which direction do you see wages? See where this is going? A spiral..

I don't know how this could be achieved fairly across every sector, every industry, every town/village, city, across the EU on an equal basis. Do you?

No idea either. I would have thought a socialist would have ideas though....equality n'all...

 

[RETIRED2017]

I agree. But what it has to do with this topic I'm not sure.

In any case, this topic which started in Sept 2016 is somewhat outdated.

Wage increases are being felt across the Irish economy, and also in other parts of the eurozone. Notably Germany.
Inflation is on its way, as desired by ECB (not me!)

What will happen to the QE €trns however? God only knows!

Wage increases are being felt across the Irish economy since 2016 I agree for the most part . Some are having a party including myself.Others not so good,

 

[TheBigShort]

It will obviously take time...existing goods will have already used up energy at the lower prices. This is why IMO it would be better to wait until the effects are known before looking at rising wages.

What if oil prices fall in that time? Because of low demand in economies, due to stagnant wages?
You are still avoiding the basic point. It is the ECB, not me, that wants 2% inflation.
Can you offer them any advice on how it could be achieved in eurozone economies?
I have suggested wage increases. The ECB agrees. Other central banks, economists, business people have all pointed to wage constraint as a cause of the lack of any inflation. I have linked their commentaries throughout this thread.
The message is getting through, wages are increasing across the eurozone, notably germany.
If its inflation they want, this is how to get it, not QE.

And if prices start to increase, which direction do you see wages? See where this is going? A spiral..

Do you not consider that wages can grow in excess of its inflationary impact? The minimum wage has grown 4.3% since this topic started, economic growth continues.

No idea either. I would have thought a socialist would have ideas though....equality n'all...

Sorry to disappoint you. I didnt think the concept of equality was exclusive to socialists.

 

[Firefly]

What if oil prices fall in that time?

Then consumer prices should fall, which means people can buy more so the less need to raise wages.

You are still avoiding the basic point. It is the ECB, not me, that wants 2% inflation.
Can you offer them any advice on how it could be achieved in eurozone economies?

I'm sure the EU has an army of economists and as I am not an economist myself I wouldn't even try. I'm not against wage increases per se, but I don't see increasing wages as a magic bullet either.

Do you not consider that wages can grow in excess of its inflationary impact?

For some lucky people yes, but for most no.

Sorry to disappoint you. I didnt think the concept of equality was exclusive to socialists.

Maybe not, but for socialists it is surely a central tenet?