Wages: The real competitiveness problem.

[PaddyW]

Don't know where you get your info from but talk to retailers in Dundrum shopping centre and in St Stephens Green SC and on Grafton St to name some and ask them about rent reductions.

Getting the information from my own company. They have a long term lease which is upward only. Also, no reductions, though they have asked for them.

 

[missdaisy]

PaddyW I think Sunny was agreeing with you and asking me where I got my information!

 

[Shawady]

The big problem IMO is if the ECB rate goes back up to around the 4% mark in a couple of years.
I've no doubt the drop in mortgage payments is greatly helping many people that have had pay cuts.
If there is not enough spending now, it will be worse if many households are spending thousands extra a year on their mortgage.

 

[PaddyW]

PaddyW I think Sunny was agreeing with you and asking me where I got my information!

Sorry, totally misread that!

 

[onq]

Cost of commercial premises is way too high here, as is the cost of renting them.

This follows on from maintaining asset value for pensions funds, such as they are.

ONQ.

 

[Towger]

Cost of commercial premises is way too high here, as is the cost of renting them.

This follows on from maintaining asset value for pensions funds, such as they are.

ONQ.

True, but they must take some reasonability for signing such high leases.

Take Korkys, the owner says he is losing about 5k a week on their Grafton St. shop and will pay 100's of K to anyone who takes over the lease. In the last week or two he has put a huge sign over the top 3 floors of the shop stating high rents are killing our jobs.

But he is an experienced shop owner who should know how much it costs to run a shop and the profit margin from his product. So, how did he end up signing a upward only lease, which appears to have no break clauses on rent reviews in the first place?

 

[T McGibney]

But he is an experienced shop owner who should know how much it costs to run a shop and the profit margin from his product. So, how did he end up signing a upward only lease, which appears to have no break clauses on rent reviews in the first place?

Because presumably at the time of doing so, he believed that 'the fundamentals were sound' and that the market patterns at the time would pertain for the foreseeable future. If so, he was not the only person in the country to have that optimistic viewpoint.

 

[DB74]

But he is an experienced shop owner who should know how much it costs to run a shop and the profit margin from his product. So, how did he end up signing a upward only lease, which appears to have no break clauses on rent reviews in the first place?

Probably didn't have much of a choice at the time. I'm sure there was a queue of people willing to sign a lease on Grafton St. Sign the lease or no presence on Grafton St.

 

[Purple]

The OP's proposition fails because it looks at the problem from the wrong end.
If costs are cut then people can begin to live on less, but cutting wages and/or social welfare and expecting people to be able to cope with existing overpriced goods, services and utilities, is utter nonsense.

The main indices of utilities, education and communication all rose according to the consumer price index for 2010.
[broken link removed]

All areas where the state controls the costs - what does this tell us about the potential to survive this recession?
The only places necessary to cut now are the costs of these essentials, with the social welfare trailing this by a year to allow some benefits to accrue.

But the cutting the cost of an over qualified and over staffed and underworked civil service can start tomorrow.
Whether its a three day week or redundencies, we seriously need to get these costs down ASAP.

And confidentiality be damned - we seriously need a survey or our debt on a household by household basis so that we can see the actual problem not be waffled at by poor mouths with income shortfalls that have two or three foreign properties and a yacth they can can sell off to mitigate their borrowings.

Let's get real on this people and not just focus on cutting the social welfare or berating the costs of working in Ireland without doing a bit of homework and realising that it costs a lot to live here.
This is the main problem facing our return to competitiveness, not the social welfare bill - introduce competition to drive down costs and properl assess the cost of government and administration.

When this cost has been driven down, and this includes the cost of our civil service, then you can look at reducing the social welfare.
Doing it the other way is a typical Capital vs Labour strategy that will end up beggaring the weakest sections of our society.

ONQ.

I agree with you but all you are really saying is that we can’t cut wages because debt levels are so high. That’s true but, from the perspective of international customers looking to buy goods or services, nobody cares.
We will only get out of our current dilemma if we reduce our costs. In this context the reasons why our costs are so high is irrelevant.

I agree with Sunny that “If a shop is charging more here than in the UK, it is because the costs here are higher.” Even if rents drop wages, always a major cost, will still be way out of kilter with the UK. The reasons why that is so doesn’t change that fact.

During the boom wage costs were inflated across the economy (mainly) by the rises in the building industry (which was in a boom and so demand for labour outstripped supply). That was sustainable only as long as the bubble lasted and demand for the end product, houses and apartments) also outstripped supply. When selling internationally there is no such shortage of supply so selling prices have to be market driven and costs, including wages, have to be set to reflect that market price.

 

[DB74]

Reducing wages is only going to serve to ensure that people can't pay their debts, including their mortgage.

This will result in further mortgage defaults which in turn will mean that the government will have to bail out those banks even more

At the moment I'm servicing ALL of my debt, the good mortgage one and the bad stupid personal spending one.

When the day comes that I can't pay them all, I'll stop servicing the bad one. If it gets worse I'll stop servicing the mortgage too. When that day comes, it won't even be worth the bank's time to take the property off me because they won't have anyone else to take it off them.

Multiply me by 1,000,000 and that is the reason why we can't reduce wages

 

[Purple]

Reducing wages is only going to serve to ensure that people can't pay their debts, including their mortgage.

This will result in further mortgage defaults which in turn will mean that the government will have to bail out those banks even more

At the moment I'm servicing ALL of my debt, the good mortgage one and the bad stupid personal spending one.

When the day comes that I can't pay them all, I'll stop servicing the bad one. If it gets worse I'll stop servicing the mortgage too. When that day comes, it won't even be worth the bank's time to take the property off me because they won't have anyone else to take it off them.

Multiply me by 1,000,000 and that is the reason why we can't reduce wages

As I have said before, I agree with you. But that still won't help us improve our competitiveness!

 

[DB74]

Employer's PRSI could be scrapped - that would save each business 10% of their wage bill straight off without reducing anyone's take-home pay.

 

[onq]

I agree with you but all you are really saying is that we can’t cut wages because debt levels are so high. (snip)

My argument is fundamentally different.

There are people still screwing people in this recession.

There are others who are actively resisting helping the least well off.

We need to ensure that essential goods [food] and services [heating, lighting] and accommodation [downward rent reviews, free up NAMA'd housing for sale] are all made available to reduce basic living costs.

We need a price ombudsman to ensure that outrageous profiteering is not taking place in all sectors in a recession.

We need to ensure that critical business services [phones, high speed broadband] are provided at reasonable rates, not left to a series of state sponsored monopoly players screwing us all.

We need to invest in our so-called smart economy now or it won't be very smart in ten yers time when every other country will be way ahead of us.

We need to learn from the transport sector where prices were driven down in air travel through competition yet rose in rail travel, a supposedly "Public" form of transport.

Public transport in general is an unco-ordinated joke.

For example, it came to my attention over the summer that someone visiting here for two weeks could STILL not get an integrated bus and rail card for getting around Dublin.

I don't know about you, but I'm getting back on my bike.

ONQ.

 

[Chris]

There is lots of talk about increasing competitiveness etc at the moment. The government is still spinning the same nonsense about “The Knowledge Economy” as if it is a magic wand that can sort out all of our problems. We need to get the stuff inside the box right before we can start thinking outside it. The bottom line is that as a nation we all get paid too much. The public sector get paid more than the state can afford to pay them and the private sector get paid more than it sustainable to make them competitive in an open international market.

We aren’t just way out of kilter with Poland and China, we are way out of kilter with the UK and Germany. As an example I got an email from a recruitment company today offering candidates for jobs here and in Northern Ireland. Accountancy Technicians here are looking for €26k-€28k a year. The same sort of people are looking for £12k-£14k per year in the North.

Forget about everything else when it comes to competitiveness; we need to cut wages significantly right across the country. There are, of course, exceptions, but on a macro level it is our biggest problem.

I've been looking at wages paid in other European countries and in many cases Ireland is very expensive to do business. My dad told me the other day of a business he deals with in former East Germany. Their workers are unskilled and earn between €4 and €5 the hour.

I also agree with you on the "knowledge economy". Now I am all for education and improvement of it. But merely educating people to a higher standard does not result in a better economy. The Soviet Union had an extremely high rate of scientists and engineers per capita (by some opinions higher than the western world), but this did not save its economy.

The OP's proposition fails because it looks at the problem from the wrong end.
If costs are cut then people can begin to live on less, but cutting wages and/or social welfare and expecting people to be able to cope with existing overpriced goods, services and utilities, is utter nonsense.

I don't agree. Prices are a result of supply and demand, and when more money chases a limited supply then prices rise, which is what happened here. Wages went up much faster than actual productivity. The only way you can achieve lower prices is for more competition and production to be attracted. And that will only happen if wages come down.

The main indices of utilities, education and communication all rose according to the consumer price index for 2010.
[broken link removed]

All areas where the state controls the costs - what does this tell us about the potential to survive this recession?
The only places necessary to cut now are the costs of these essentials, with the social welfare trailing this by a year to allow some benefits to accrue.

But the cutting the cost of an over qualified and over staffed and underworked civil service can start tomorrow.
Whether its a three day week or redundencies, we seriously need to get these costs down ASAP.

Yes indeed, cost of state services are ever increasing, while at the same time so many other non-state services are actually coming down in price. I also agree that the public sector wage bill has to be tackled ASAP, but I think that it would be better to achieve through a reduction in services, quangos and hence employees.

And confidentiality be damned - we seriously need a survey or our debt on a household by household basis so that we can see the actual problem not be waffled at by poor mouths with income shortfalls that have two or three foreign properties and a yacth they can can sell off to mitigate their borrowings.

Let's get real on this people and not just focus on cutting the social welfare or berating the costs of working in Ireland without doing a bit of homework and realising that it costs a lot to live here.
This is the main problem facing our return to competitiveness, not the social welfare bill - introduce competition to drive down costs and properl assess the cost of government and administration.

I don't think there is any chance of Ireland by-passing privacy laws.

When this cost has been driven down, and this includes the cost of our civil service, then you can look at reducing the social welfare.
Doing it the other way is a typical Capital vs Labour strategy that will end up beggaring the weakest sections of our society.

ONQ.

Well, it is capital that is lacking most in this country and without capital you cannot increase production, which means you cannot create jobs.

This thing about shops charging too much or screwing us over is rubbish at this stage. There is little doubt that there was profiteering during the boom but I would love to meet any retail shop that can make vast profits through overpricing during the biggest economic collapse in the Western World. If a shop is charging more here than in the UK, it is because the costs here are higher. We still have upward only rent reviews for God sake. Look at the minimum wage and cost of employing young people and the cost of employing people at weekends compared to the UK.

Look at restaurant prices. Am amazed that these places make any money.

Too many businesses are operating with too high capital costs as well as operating costs, which is indeed why prices have only come down so much. I think that a lot more businesses will have to fold before capital costs are driven down enough. As for operating costs, a lot of these are controlled by government.

Because presumably at the time of doing so, he believed that 'the fundamentals were sound' and that the market patterns at the time would pertain for the foreseeable future. If so, he was not the only person in the country to have that optimistic viewpoint.

Yes, this is the big problem. People only saw good times and took no account for a possible downturn.

 

[Purple]

There are people still screwing people in this recession.

I agree. The protected sectors of the economy; public sector, doctors, semi-state monopolies etc need to be looked at. All government agencies should reduce charges to the public for whatever they provide by 15-20%. They should then to told to cut what they need to cut in order to do what they do within budget. Any sector of the economy where there is a restriction on supply (GP's etc) needs to be looked at. Any sector where there are large barriers to entry needs to be looked at.

 

[Chris]

As I have said before, I agree with you. But that still won't help us improve our competitiveness!

Default, public and private, will be the only option in the long term.

My argument is fundamentally different.

There are people still screwing people in this recession.

There are others who are actively resisting helping the least well off.

We need to ensure that essential goods [food] and services [heating, lighting] and accommodation [downward rent reviews, free up NAMA'd housing for sale] are all made available to reduce basic living costs.

Yes indeed, as long as it is driven through an improvement in the competitive private economy.

We need a price ombudsman to ensure that outrageous profiteering is not taking place in all sectors in a recession.

Under no circumstances should government try to interfere with price levels. This always ends up in scarcity. What government should do is make it easier for new competition to enter all parts of the market.

We need to ensure that critical business services [phones, high speed broadband] are provided at reasonable rates, not left to a series of state sponsored monopoly players screwing us all.

We need to invest in our so-called smart economy now or it won't be very smart in ten yers time when every other country will be way ahead of us.

Yes indeed, some of the state and semi-state organisations are screwing us because of their government protected monopolies.
If by "investment" you mean make it easier for companies to do business here and employing highly educated people then I agree. I also believe that there needs to be investment in education at al levels. But merely investing in education does not create an economy, you need to attract new and existing companies through a low cost base.

We need to learn from the transport sector where prices were driven down in air travel through competition yet rose in rail travel, a supposedly "Public" form of transport.

Public transport in general is an unco-ordinated joke.

For example, it came to my attention over the summer that someone visiting here for two weeks could STILL not get an integrated bus and rail card for getting around Dublin.

I don't know about you, but I'm getting back on my bike.

ONQ.

Very good points!

 

[Deiseblue]

A headlne in the business section of the Examiner today reads- " Nearly half of Irish-based employers to offer workers a pay hike in 2011" according to a report carried outby Mercer HR Consultants.

Bit of positivity about thankfully.

 

[Sunny]

A headlne in the business section of the Examiner today reads- " Nearly half of Irish-based employers to offer workers a pay hike in 2011" according to a report carried outby Mercer HR Consultants.

Bit of positivity about thankfully.

Seriously? Do you think mercer asked the local newsagent, restaurant or any SME? I have not seen the survey but willing to bet that it focused on larger export companies rather than companies exposed to the domestic economy.

 

[Deiseblue]

Seriously? Do you think mercer asked the local newsagent, restaurant or any SME? I have not seen the survey but willing to bet that it focused on larger export companies rather than companies exposed to the domestic economy.

116 firms surveyed including larger Irish organisations , multinationals and smaller Irish Companies.

Less positivity indeed among the latter with only 1 in 5 expecting to be able to issue pay rises next year.

Good news nevertheless I would have thought , particulary as our current wage levels do not seem to be a problem for multinationals.

 

[T McGibney]

A headlne in the business section of the Examiner today reads- " Nearly half of Irish-based employers to offer workers a pay hike in 2011" according to a report carried outby Mercer HR Consultants.

And " Nearly half of Irish people expect the value of their house to rise in 2011" according to a report carried out by Joe Bloggs Auctioneers.