Is it time for wage increases?

[TheBigShort]

No, I said top 10% of earners, not the top 10% of high earners.
I honestly think you are being deliberately obtuse here but I'll try to explain; A high wage economy is high relative to other economies. Wages in Ireland are generally high relative to the countries we compete with. The data on incomes and income distribution is, as you know, posted in another thread in this section.

Honestly, im just trying to make sense of your position.
You have stated we are high wage economy (logic would deduce that means relative to other economies).
You have stated that we are heavily tax reliant on the top 10% of earners in this high wage economy. This would imply that the other 90% of earners (who are also high earners relative to other economies, otherwise its not a high wage economy) do not contribute their fair share.
But then you stated that we undertax low and middle income earners. Is it fair to deduce that you mean low and middle incomes relative to other economies? If you are being consistent then that would be correct. But then what applies from that is that we actually live in a low to mid income economy. And you think they should pay more tax.
Alternatively, our low and middle income earners (relative to other economies) make up only a tiny portion of our income earning population. This means the vast bulk, or majority of workers are high earners (relative to other economies), but that we are heavily reliant on only the top 10% of those high earners and that the rest of the high earners (relative to other economies) are undertaxed.
So, according to you, we are a high wage, low tax economy and you want a low wage, high tax economy.

 

[Firefly]

Of course we shouldn't borrow to pay wages per se, but budget deficits are less than fiscal pact limits of 3% of GDP.

Could you please answer the question I put to you:

The government is still borrowing to consume so do you think it should raise wages in the public sector?

Ideally wage increases would be forthcoming in the private sector, followed by public sector.

This sounds like benchmarking to me! We all know what happened the last time this was tried!

I disagree in any case. Previously posters here were asking why the public and private sectors were being treated separately and I agree. Regarding wage increases I think it should depend on whether the organisation in question has the ability to pay and also it should depend on the person in question - how the market would pay their rates elsewhere.

But unfortunately, despite your intentions to demand higher rates, the concept of organised labour in the private sector has been severely diminished.
Nothing funny about being on strike.

I won't be demanding anything! I will be seeking a higher rate. I may or may not be successful, however I won't be striking for this.

 

[Purple]

Honestly, im just trying to make sense of your position.
You have stated we are high wage economy (logic would deduce that means relative to other economies).
You have stated that we are heavily tax reliant on the top 10% of earners in this high wage economy. This would imply that the other 90% of earners (who are also high earners relative to other economies, otherwise its not a high wage economy) do not contribute their fair share.
But then you stated that we undertax low and middle income earners. Is it fair to deduce that you mean low and middle incomes relative to other economies? If you are being consistent then that would be correct. But then what applies from that is that we actually live in a low to mid income economy. And you think they should pay more tax.
Alternatively, our low and middle income earners (relative to other economies) make up only a tiny portion of our income earning population. This means the vast bulk, or majority of workers are high earners (relative to other economies), but that we are heavily reliant on only the top 10% of those high earners and that the rest of the high earners (relative to other economies) are undertaxed.
So, according to you, we are a high wage, low tax economy and you want a low wage, high tax economy.

OK, you are being obtuse.
We are a high wage economy relative to other economies.
The top 10% of earners in this economy are the top 10% relative to other people in this economy.
The other 90% of earners in this economy are the other 90% in this economy. They are the other 90% which, added to the 10% already discussed, make up the 100% of earners in this economy.

 

[TheBigShort]

The government is still borrowing to consume so do you think it should raise wages in the public sector?

No of course not, not in the flat terms that you have presented it here.
But the topic is not about public v private sector workers.
What the government should do, and other European governments, is borrow at near 0% for capital stimulus programs. This will create employment (public and private) create real wages increases (public and private), including advancing that increase you are looking for.
Instead what the EU has chosen to do is to limit the ability of governments to manage the growth of their own economies and instead hand it over to unelected bankers at the ECB. They have chosen to adopt an asset purchasing program which is doing nothing but create bubbles in property, stocks and bonds, and only a tiny portion of the population will benefit.

This sounds like benchmarking to me! We all know what happened the last time this was tried!

The last benchmarking exercise was 2007 and awarded 0% increases.
Again, the topic is not about pitting public v private sector workers against each other. It is about increasing wages in the round for reasons mentioned above.

 

[TheBigShort]

OK, you are being obtuse.
We are a high wage economy relative to other economies.
The top 10% of earners in this economy are the top 10% relative to other people in this economy.
The other 90% of earners in this economy are the other 90% in this economy. They are the other 90% which, added to the 10% already discussed, make up the 100% of earners in this economy.

Are the 90% earners, relative to other economies, high earners or not?

 

[Purple]

Are the 90% earners, relative to other economies, high earners or not?

What's that got to do with anything?

Relative to the same jobs in other economies they are highly paid.

 

[T McGibney]

Correct, and my point is, of all the people who borrowed large sums, is it really feasible that any of them would have a true picture, assumptions and speculation aside, of the amount of borrowing going on around them?
Each of the borrowers are 50/50 responsible with the bank for their own individual loans.

They all knew. It was their friends and buddies who were prompting them to go in to the bank ahead of every field or site auction. The country was awash with borrowed money.

The banks are 100% responsible for the full extent and scale of lending.

That is your view. Not all of us subscribe to it. I've given you reasons why I don't.

 

[Firefly]

No of course not, not in the flat terms that you have presented it here.

Thanks for clarifying that

What the government should do, and other European governments, is borrow at near 0% for capital stimulus programs. This will create employment (public and private) create real wages increases (public and private)

Similar question if I may: The government is still borrowing to consume so do you think it should borrow more money for capital programs?

The last benchmarking exercise was 2007 and awarded 0% increases.

I am referring to benchmarking during the 2000s and I'm guessing you know that!

Again, the topic is not about pitting public v private sector workers against each other.

It's not my intention by any means. For what it's worth, Mrs. Firefly has now returned to the HSE, so any increases will be enjoyed at our house.

 

[TheBigShort]

What's that got to do with anything?

Relative to the same jobs in other economies they are highly paid.

We are reliant in high wage earners because we under tax low and middle wage earners (by international and EU standards).

So who are the undertaxed, low to mid income earners that you also refer to?
Can I take it that these are also high earners relative to other economies, but are low and middle income earners relative to the high earners in this economy?
And you want to shift the tax burden more onto these low and middle income earners, and simultaneously to keep their wages down?

 

[Purple]

So who are the undertaxed, low to mid income earners that you also refer to?
Can I take it that these are also high earners relative to other economies, but are low and middle income earners relative to the high earners in this economy?
Yes and yes. And you want to shift the tax burden more onto these low and middle income earners, and simultaneously to keep their wages down?

I'd like the tax burden spread more evenly by European standards. Low to middle income earners are under-taxed in Ireland relative to our neighbours. This is one of the major factors contributing to our very narrow tax base. Unfortunately the water tax seems to be gone so the policy of a more even and balanced tax base has taken a blow. I'm not necessarily advocating big cuts to taxes for high earners, just a medium to long term re-balancing. What we had in the early 90's was much better.
I went onto the highest tax band as a 3rd year apprentice in 1993 (I did a lot of overtime) and paid tax on the first pound I earned as a first year apprentice. It didn't stop me from working. Everyone should pay some income tax, even if it's only 5% of their income.

 

[TheBigShort]

Similar question if I may: The government is still borrowing to consume so do you think it should borrow more money for capital programs?

Yes. The money is already being borrowed, not by governments, but by private interests. This is fueling property bubbles in London, Dublin and other selected areas, whereas property prices in Limerick and Sheffield stagnate. It is fueling bond markets as banks borrow government debt driving yield and interest rates to zero and less. It is fuelling stock market bubbles as corporations engage in share buy back schemes. None of this is productive. Governments need to take back control of our currency for the overall good of society. Instead control has been handed to unelected bankers in the ECB.

I am referring to benchmarking during the 2000s and I'm guessing you know that!

I did suspect that, but it was you that referenced "the last time".
Funny how the 0% benchmarking ever gets little attention.

 

[Purple]

Yes. The money is already being borrowed, not by governments, but by private interests. This is fueling property bubbles in London, Dublin and other selected areas, whereas property prices in Limerick and Sheffield stagnate. It is fueling bond markets as banks borrow government debt driving yield and interest rates to zero and less. It is fuelling stock market bubbles as corporations engage in share buy back schemes. None of this is productive. Governments need to take back control of our currency for the overall good of society. Instead control has been handed to unelected bankers in the ECB.

I agree that there is far too much governmental and extra-governmental interference in the market.
We are getting closer and closer to a command economy.

 

[TheBigShort]

I'd like the tax burden spread more evenly by European standards.

Perhaps we can agree that a fair taxation system is the goal here.
What a fair tax system would look like is where we start to differ.

Low to middle income earners are under-taxed in Ireland relative to our neighbours.

I would disagree.

Everyone should pay some income tax, even if it's only 5% of their income.

Thats fine, but its all relative to what the highest percentage rate of tax is applied. For instance if there is an effective 50% rate on the highest earners, will a 5% tax rate on the lowest earner provide a re-balancing?
On the other hand, from another perspective, while a minimum wage worker may not contibute income tax by virtue of personal tax credits applied to the first €20,000 of their income, it is notable that the same personal tax credits are applicable to a high earner on the first €20,000 of their income also. In other words, any tax advantage for low earners over high earners is merely a perceived advantage.

 

[Firefly]

Funny how the 0% benchmarking ever gets little attention.

Would it have anything to do with it be widely reported at the time that salaries in the public sector were higher than those in the private sector?

 

[Firefly]

Yes.

Thanks for clarifying. I disagree. To me it's akin to a family paying for their groceries on the credit card and only meeting the interest repayments and then going to the credit union for a loan to put on a sun-room.

In any case you have clarified that we should not borrow to raise wages but instead borrow to fund capital projects. The result of this would surely be more employment rather than increasing the wages of those already working?

The money is already being borrowed, not by governments, but by private interests. This is fueling property bubbles in London, Dublin and other selected areas, whereas property prices in Limerick and Sheffield stagnate. It is fueling bond markets as banks borrow government debt driving yield and interest rates to zero and less. It is fuelling stock market bubbles as corporations engage in share buy back schemes. None of this is productive. Governments need to take back control of our currency for the overall good of society. Instead control has been handed to unelected bankers in the ECB.

Yes, you've made that point before and it does have merit, but at least it does not involve government adding to their national debts.

 

[TheBigShort]

Would it have anything to do with it be widely reported at the time that salaries in the public sector were higher than those in the private sector?

Yes, so in this instance the benchmarking exercise was somewhat effective? In other words, benchmarking is not necessarily a bad thing, it can achieve good results. I would agree that benchmarking increases in 2000 was wrong, not because of the pay increases but because the pay increases for higher paid public servants were way out of kilter. The increases for lower paid public sector workers were more modest (I think 8% over 3yrs compared to 14% for higher paid salaries)

The result of this would surely be more employment rather than increasing the wages of those already working?

More employment yes, and higher wages too. As you said yourself, you will be seeking an increase for your services. The question for the contract provider will be whether its worth giving you that increase, or part of, or seeking another contractor at a cheaper rate. But then risking losing your talent and knowledge to a potential rival.

but at least it does not involve government adding to their national debts.

The currency is being debased. The only thing stopping it from losing value against peer currencies is that the US, UK, Japan and China are all at the same thing. And secondly the money is being centred and controlled in too narrow, effectively abstract sectors - bond, stock and property prices.
When these markets burst, we will be back to 2008 again and worse.
No doubt, some will blame low paid workers and public sectors workers once more.

 

[Sarenco]

The currency is being debased.

Really? We have basically had zero inflation in the Eurozone for some time now so how is the currency being debased?

Also, Eurozone equities are actually in negative territory YTD.

 

[TheBigShort]

Really? We have basically had zero inflation in the Eurozone for some time now so how is the currency being debased?

Also, Eurozone equities are actually in negative territory YTD.

A €60bn a month expansion of the money supply or €1.1trn QE asset purchasing program should help in that regard.

The whole policy is bogus. It is supposed to create a 'wealth effect' inducing people to start spending more, increasing demand over supply, achieving the ECB target of 2% inflation, allowing interest rates to rise.

Instead, bond yields have gone into negative territory, indicating a recession. Stock markets have recovered to levels last seen during boom times pre- 2008*. Property prices are rising fast in capital cities but remain relatively stagnant elsewhere. Traditional economic indicators are being turned on their head.

*You are correct about European stocks in negative territory YTD. But Duetsche banks share price collapse, dragging prices down, is indicative of the woes ahead. In the US, a 0.25% rise in interest rates last Jan knocked 8% of market values. A growing economy should put interest rates on an upward trajectory but instead they are headed into negative territory. This is because all this apparent growth is based on more and more debt. Debt which is being used to create bubble markets instead of real productivity.
Stock markets are facing into another heavy crash and with it property prices too.

 

[TheBigShort]

To me it's akin to a family paying for their groceries on the credit card and only meeting the interest repayments and then going to the credit union for a loan to put on a sun-room.

Kind of, if not managed right. But if managed right it could be akin to a family investing in their childrens education, carrying out necessary home repairs adding value, and buying a more fuel efficient car.
But you are right, using it to pay off the interest on the credit card and building a sun room does sound wasteful. It all depends on how and what it is used for.

 

[TheBigShort]

They all knew. It was their friends and buddies who were prompting them to go in to the bank ahead of every field or site auction. The country was awash with borrowed money.

Sitting on the upperdeck of a Dublin Bus, looking out at all the apartments being built, even I could tell that it was going to end badly.
But very few knew the extent of the crash to come in 2008. Anybody who did stick their heads out and predict a crash were derided publicly and told to go "commit suicide".
The only ones who could have know in anyway the true extent of the borrowing, would have been the banks themselves.
But like I said, we could argue around the houses on this.
In the meantime,another bank, the ECB, is engaged in the biggest gamble of all time.