Minium wage to be increased to €9.15 from €8.65

[Purple]

newtothis, I seem to be knocking down your arguments one at a time with you moving the discussion on by finding new questions in my answers.
The key points:

• An increase in the minimum wage will lead to relative pay increases for most people over time and so little or no net benefit to those on the minimum wage from a purchasing power perspective.
• If the value of a persons labour is less than the minimum wage then they are unemployable and so will never acquire, through employment, the skills the need to make their labour more valuable and so earn more.
• We are a small open economy which exports a large proportion of what we produce so increasing wages makes imports relatively cheaper and exports more expensive, thus damaging the economy.
• Giving everyone a pay increase does not produce a competitive advantage for businesses within what is a confined labour market (lots of French people work in Germany and Switzerland but go home every evening, we are an Island so that option is limited).
• I'll add; the problem isn't what the minimum wage is or even how many people are on it. The problem is the amount of time people spend on that wage. What are their opportunities to improve themselves and earn a better wage?

 

[newtothis]

newtothis, I seem to be knocking down your arguments one at a time with you moving the discussion on by finding new questions in my answers.

Not quite how I see it, as you may imagine.

From my perspective, you keep making sweeping statements, with no evidence to back them up. All I'm doing is calling you out on them. For example "we have to have lower wages just to compete [with Germany]". Is there any evidence to back this up? If lower wages are our only advantage I'd say we're doomed: there will always be a country out there with lower wages (that race to the bottom again). We clearly have different opinions on this, but I'm not the one making the claim. Why do we have to have lower wage costs just to compete? Firstly cost is not the only factor in a purchasing decision (if it were, Apple would not be the most valuable company on the planet), and secondly wages are simply one element of costs. So why make the statement?

As it happens, in the first company I started some years ago, we sold product into Germany, displacing a local German supplier. I can assure you our wage bill had nothing to do with it. I know you can't argue a general case from a particular example, but I struggle to see where trying to compete based on having a lower labour cost is going to work for us in a globalised economy.

You are right from a certain perspective - that of the Economics 101 you keep quoting - but we've long since passed the point of competing internationally based on the cost of low paid labour.

I'll ask my original question again, as you have yet to answer it: is there any empirical evidence to show a correlation, positive or negative, between a country's minimum wage level and any economic indicator that would substantiate your opposition to it?

 

[Sophrosyne]

If anything it is you that is shifting positions rather than Newtothis.

The primary purpose of the minimum wage was and is to create a minimum standard of living in order to protect the health and well-being of employees.

If I am reading your posts correctly, your position is that this is not the responsibility of employers. Employers should pay what they feel is an appropriate wage and that the taxpaying public should pick up the slack.

Therefore, the minimum pay of unskilled workers would be at the discretion of each and every employer and that taxpayers, including other employers, should unquestionably pay up to bridge the gap.

 

[Purple]

Not quite how I see it, as you may imagine.

From my perspective, you keep making sweeping statements, with no evidence to back them up. All I'm doing is calling you out on them. For example "we have to have lower wages just to compete [with Germany]". Is there any evidence to back this up? If lower wages are our only advantage I'd say we're doomed: there will always be a country out there with lower wages (that race to the bottom again). We clearly have different opinions on this, but I'm not the one making the claim. Why do we have to have lower wage costs just to compete? Firstly cost is not the only factor in a purchasing decision (if it were, Apple would not be the most valuable company on the planet), and secondly wages are simply one element of costs. So why make the statement?

As it happens, in the first company I started some years ago, we sold product into Germany, displacing a local German supplier. I can assure you our wage bill had nothing to do with it. I know you can't argue a general case from a particular example, but I struggle to see where trying to compete based on having a lower labour cost is going to work for us in a globalised economy.

You are right from a certain perspective - that of the Economics 101 you keep quoting - but we've long since passed the point of competing internationally based on the cost of low paid labour.

I'll ask my original question again, as you have yet to answer it: is there any empirical evidence to show a correlation, positive or negative, between a country's minimum wage level and any economic indicator that would substantiate your opposition to it?

Ok, so you are not addressing any of the points I am making and you are completely misrepresenting or misunderstanding my point on wages as a factor in relation to competitiveness. Where did I ever say that wages were the only factor?
Rather than me just keep making the same points in different ways I suggest you read back through my posts.

Here's a question for you; do you think competitiveness is important economically and if so do you think labour is a factor in the equation? If the answers to those questions is yes then do you accept that if increases in labour costs are the only factor that changes then that will reduce out competitiveness?
One more question; do you think that an increase in the minimum wage will have no knock-on effect in the rest of the labour market?
This is really simple. No empirical evidence is required.

 

[Gerry Canning]

Having been educated by the thread ,it appears.

1. Ire is not high wage ,high taxed society.
2. Ire seems fairly competitive.
3. Ire has little of the (old industrialisation)so does not compete on bulk type stuff.
4. Ire has done well on the (new industrialisation) eg Apple that requires knowledge ,a safe stable country , and adequate infrastructure.
5. Germany (as an example) has plenty of Mittelstand companies ,so Germany ain,t focussed on new industry .Ire had to source non bulky/high value businesses.
6. Ire appears to have stolen 1st mover European advantage on low bulk /high value items .eg Pharma and IT.

Considering our location and small size , maybe we are doing ok ?

 

[newtothis]

Ok, so you are not addressing any of the points I am making and you are completely misrepresenting or misunderstanding my point on wages as a factor in relation to competitiveness. Where did I ever say that wages were the only factor?
Rather than me just keep making the same points in different ways I suggest you read back through my posts.

Here's a question for you; do you think competitiveness is important economically and if so do you think labour is a factor in the equation? If the answers to those questions is yes then do you accept that if increases in labour costs are the only factor that changes then that will reduce out competitiveness?
One more question; do you think that an increase in the minimum wage will have no knock-on effect in the rest of the labour market?
This is really simple. No empirical evidence is required.

My position is as follows: my own experience in business is that whilst important in the general sense of trying to keep a lid on costs, wage levels are far from the determining factor in profitability and success. In fact, my experience is that if anything the correlation is the other way: pay people more and you get better results. I also quoted an extreme case of this from the distant past.

I’ve experience both in the local market in an industry dominated by workers at or close to the minimum wage (retail/catering), and in the export market (in technology). In neither case have I seen or experienced anything that would lead me to think that wage costs are a major factor in success in a competitive market. Every company I’ve worked in, my own and others, has worked to avoid competing in commodity markets where cost of production is the determining factor. If you don’t avoid these, you get locked into a downward spiral which you will probably loose (colloquially: “the race to the bottom”).

I’m not an economist and I don’t know if my experience holds good for the economy as a whole. I’d be surprised if it didn't, as the economy is just an aggregation of everyone’s economic activity. This is why I asked the question on whether there is any evidence to back the claim that having minimum wages are damaging to an economy. I don’t know if there is, or what it suggests if it does exist; I’m still waiting to see if there is any evidence you can quote.

All I’ve heard from you are claims and assertions about the effects of having a minimum wage, with nothing but quotes from the Ladybird book of economics to back them up. You present these as if they were self-evidently true ("This is really simple. No empirical evidence is required" - it's laughable). Well, they’re not true in the real world from my direct experience, and I’m sceptical about the claimed benefits to the economy as a whole. Sceptical not least because the argument is typically trotted out by those with a vested interest in keeping wages low. Call me cynical, but the argument is never used by people about their own salaries: magically, the logic is reversed, and they have to be incentivised with higher salaries.

Interestingly, the penny about minimum wages seems to be dropping even in the most unlikely of places. See http://www.bbc.com/news/uk-politics-33437115 for example.

It’s been an interesting discussion, especially when the problems of rural Ireland were raised. On that, I’d point to the recent news story about Avoca being sold for a reported €60m. Avoca is company rooted in the country, with most of their outlets still there. I doubt they complained too much about the minimum wage holding them back as they grew over the years: they just got on and delivered what people wanted; success and profits followed. I’d much rather follow their example than spend my days moaning at the government for introducing measures that in reality have little impact on business but offer a small measure of protection to those that need it.

 

[newtothis]

Having been educated by the thread ,it appears.

1. Ire is not high wage ,high taxed society.
2. Ire seems fairly competitive.
3. Ire has little of the (old industrialisation)so does not compete on bulk type stuff.
4. Ire has done well on the (new industrialisation) eg Apple that requires knowledge ,a safe stable country , and adequate infrastructure.
5. Germany (as an example) has plenty of Mittelstand companies ,so Germany ain,t focussed on new industry .Ire had to source non bulky/high value businesses.
6. Ire appears to have stolen 1st mover European advantage on low bulk /high value items .eg Pharma and IT.

Considering our location and small size , maybe we are doing ok ?

Sounds about right to me! We've plenty of problems, and the lack of recovery outside the major urban areas would be one of them, but I've yet to see any evidence that the minimum wage level would have any impact whatsoever on that.

 

[Purple]

The primary purpose of the minimum wage was and is to create aminimumstandard of living in order to protect the health and well-being of employees.


If I am reading your posts correctly, your position is that this is not the responsibility of employers.

Yes, that’s my position. If the state wants employers to pay people more than the value of their labour on the open market then they should do it by taxing the employers more.

Employers should pay whattheyfeel is an appropriate wage and that the taxpaying public should pick up the slack.

No, an employer won’t get anyone to work for less than the market rate. Given that social welfare is what it is we are already in a position where many people would be far worse off working. That in itself creates a floor in the labour market.

Therefore, the minimum pay of unskilled workers would be at the discretion of each and every employer and that taxpayers, including other employers, should unquestionably pay up to bridge the gap.

We already have this; family income supplement, medical cards, back to school allowance etc. These are all measures which provide an income for working people which is not derived from the value of their labour or the amount of work they do. I have no problem with that. I have no problem with the idea of a minimum income or a living income. I have no problem with the state providing that. I have no problem with employers funding that. I do have a problem with forcing employers to fund it through pay rates rather than taxation.

If you have a problem with the idea of every employer and that taxpayers, including other employers, unquestionably paying to prop up incomes then do you also have a problem with welfare and universal benefits like children’s allowance? I know I have a problem with rich people getting welfare (child benefit).

 

[Purple]

1. Ire is not high wage ,high taxed society.

We have very high taxes on income for medium to high earners and on things like inheritance and capital gains but low rates of labour taxes, corporation tax and service charges (water, property etc).

2. Ire seems fairly competitive.

It is but that figure is distorted by capital intensive Multinational companies who have located here for taxation reasons.

3. Ire has little of the (old industrialisation)so does not compete on bulk type stuff.

True.

4. Ire has done well on the (new industrialisation) eg Apple that requires knowledge ,a safe stable country , and adequate infrastructure.

They are here for the taxes and for the taxes alone.

5. Germany (as an example) has plenty of Mittelstand companies ,so Germany ain,t focussed on new industry .Ire had to source non bulky/high value businesses.

Incorrect; Germany is a very innovative country. Places like Taiwan and Korea are much more innovative; there the state spends billions developing technologies which it then just gives to industry to commercialise.

6. Ire appears to have stolen 1st mover European advantage on low bulk /high value items .eg Pharma and IT.

Pharma companies are here because of our tax treatment of profits and patents. IT companies are here for the same reasons but local factors are also attractive.

Considering our location and small size , maybe we are doing ok ?

We are but we should be doing better. OK is not good enough.

 

[T McGibney]

Obviously were societies have more wealth from business they are financially better off.
But,
From what I have read on studies of societies,it is accepted that were the wealth is spread more widely/ fairly that these societies are more cohesive/happier.
Too much income disparity would seem to me to create a disaffected underclass.
Too little income for the hard -workers creates dis incentives for workers.

I think the only people who have the levers to control that balance is Government.

Again I can only point you back to my example of Ballyconnell & Derrylin pre- and post- the Quinn collapse, and my later observation that the abject failure of the "income disparity destroys social cohesion" theory in that micro case augurs poorly for its more general application on a macro basis.

I'm generally unconvinced by the theory that income disparity creates a disaffected underclass. Does the existence of the Duke of Westminster and Queen Elizabeth cause the existence of the British underclass, or are there other factors at play? Are Michael O'Leary's riches or Richie Boucher's salary similarly responsible for the plight of the Irish underclass? If Michael or Richie lost everything as Quinn did, how would that improve the fortunes of the underclass?

I suspect the causes of poverty and social problems in general are far more complex and multi-faceted than this particular theory admits.

 

[Purple]

I suspect the causes of poverty and social problems in general are far more complex and multi-faceted than this particular theory admits.

I don't think anyone is suggesting it is the only factor.

 

[T McGibney]

I don't think anyone is suggesting it is the only factor.

Indeed, but it's certainly, in this thread, being cited as a major factor, and an excuse for minimum wage inflation.

 

[Gerry Canning]

I don,t think income disparity is a major factor in any place where most have an acceptable (whatever that is) standard of living.

I do not see income disparity as an (excuse) for minimum wage inflation.
Income disparity may be used as an example of poor allocation of wages and I believe it is a far too simplistic view to strongly link both.