"Harney refuses to rule out cuts in minimum wage"

the_syco

http://news.eircom.net/breakingnews/16117366/
http://www.fingal-independent.ie/breaking-news/national-news/politics/minister-refuses-to-rule-out-cuts-in-minimum-wage-1831696.html

The Minister for Health has refused to rule out a reduction in the minimum wage. Mary Harney said that that for Ireland to remain competitive in spite of current economic difficulties, every option must remain on the table.
The minister was speaking following comments by economist Peter Bacon, who said downward adjustments of the minimum wage could not be avoided.

What sort of la-la land does she live in? If the minimum wage goes down, everything else stays the same price, and the poor will become homeless, as they won't be able to afford houses.

Pride Fighter

Who cares what she thinks, her party is dead and she is not the minister for finance.

She is a political nobody.

The_Minister

Firstly, no minister will rule anything out until the government has made its plan public, so I wouldn't read into this too much.

the_syco wrote: »

http://news.eircom.net/breakingnews/16117366/
http://www.fingal-independent.ie/breaking-news/national-news/politics/minister-refuses-to-rule-out-cuts-in-minimum-wage-1831696.html

What sort of la-la land does she live in? If the minimum wage goes down, everything else stays the same price, and the poor will become homeless, as they won't be able to afford houses.

The minimum wage reduces the number of jobs in the economy and raises prices.
This isn't really disputed by anyone with economic knowledge (as in professionals).

The trick is to balance those two concerns with the need for people to have a certain standard of living.
In the boom times, when there were more jobs than people to fill them, it didn't really matter if we had a high minimum wage - we didn't need more jobs.
In the recession, when we need more people working, we need more jobs.
Lowering the minimum wage is one way to create more jobs and preserve existing ones.

Pride Fighter wrote: »

Who cares what she thinks, her party is dead and she is not the minister for finance.

She is a political nobody.

She is one of the most senior ministers in the country, and one of the longest serving deputies.
She is not a political nobody.

Biggins

She doesn't give a crap. She's out of here at the next election by her own choice I'm lead to believe.
She isn't going for re-election. I wonder why! :rolleyes:

She is one of the most senior ministers in the country, and one of the longest serving deputies.
She is not a political nobody.

Aye, at at one minister pension for every four years served, once again like she sits in the Dail bar, she's sitting comfortable.
She's not a political nobody, she's a political disgrace!

Permabear

This post has been deleted.

Fulton Crown

donegalfella wrote: »

This post has been deleted.

Spot on poster,,as previously said this was not an issue in a time of full employment.

I see Bacon is also advocating a review of the minimum wage.

I see no reason why this should not happen given the recent substantial drop in the cost of living.

rcecil

It's easier to target victims than those with political power and connections. Ireland has done nothing to gangsters and banksters who ruined the economy through crass speculation.

Minimum wage earners pour all of their income back into the local economy.

Start cutting wages for the pigs at the trough and I might listen to an argument about cuts at the bottom.

gurramok

Fulton Crown wrote: »

I see no reason why this should not happen given the recent substantial drop in the cost of living.

That drop in the cost of living was mostly from mortgage rates. There are no mortgage holders on minimum wage.

Soldie

The government needs to strip at least a couple of euro off of the minimum wage, but the dole would need to be reduced simultaneously. They should reduce VAT to 15% while they're at it, too.

Fratton Fred

half the country has had their wages hit, why should those on minimum wage get away with it?

It is fine to knock Tesco and Debenhams for charging more in Ireland than they do in the UK, but no one is able to point out that the minimum wage in Ireland is 50% higher than the UK.

Lockstep

donegalfella wrote: »

This post has been deleted.

€8.65 is the minimum for experienced employees over the age of 18. To earn this you need to be over 18 and have at least 2 years employment experience.
If you're young and inexperienced then you earn less than €8.65.

What we have in Ireland is a "phasing in" of the minimum wage.

If you are under 18 then are entitled to €6.06 an hour.
If you are over 18 and in your first year of employment, then it's to €6.92 an hour.
If you are over 18 and in your second year of employment you can get €7.79.
I'm 20 and have worked in enough crappy jobs that I'm now entitled to the minimum wage for experienced adults. I'm not saying you in particular but I find it annoying when it is claimed that inexperienced youngsters are able to demand €8.65 an hour; they're not. Those who can claim it have put in work in order to be at that level of experience.

The_Minister wrote: »

The minimum wage reduces the number of jobs in the economy and raises prices.
This isn't really disputed by anyone with economic knowledge (as in professionals).

http://press.princeton.edu/titles/5632.html

Would you say that the above writers have no economic knowledge/aren't professionals?

Economists are just like historians/scientists etc. They will disagree on things, taking the opposing viewpoint does not mean a total lack of knowledge in the subject.

gerry28

There are no mortgage holders on minimum wage.

You would be surprised at the number of mortgage holders on min wage, particularly in the west of ireland and more rural areas.

irish_bob

thier is no point in reducing minimum wage unless social wellfare is reduced significantly and thier is no appetite among the majority for cutting social wellfare , its by far the most sensitive and contensous area in an bord snip

instead public sector salarys should be cut across the board , starting with politicians , this will be much more palatable with the general public

Soldie

kickoutthejams wrote: »

€8.65 is the minimum for experienced employees over the age of 18. To earn this you need to be over 18 and have at least 2 years employment experience.
If you're young and inexperienced then you earn less than €8.65.

What we have in Ireland is a "phasing in" of the minimum wage.

If you are under 18 then are entitled to €6.06 an hour.
If you are over 18 and in your first year of employment, then it's to €6.92 an hour.
If you are over 18 and in your second year of employment you can get €7.79.
I'm 20 and have worked in enough crappy jobs that I'm now entitled to the minimum wage for experienced adults. I'm not saying you in particular but I find it annoying when it is claimed that inexperienced youngsters are able to demand €8.65 an hour; they're not. Those who can claim it have put in work in order to be at that level of experience.

The current minimum wage is an entirely arbitrary figure. The government pumped up the dole and minimum wage during the boom years, both at rates exceeding that of inflation. This was nothing more than a vote-buying exercise, and was hopelessly naive on behalf of the government. I'm convinced that we'd still hear the 'targeting the most vulnerable' pleas even if the minimum wage was 10 euro. The problem is that we're 20 billion euro in the hole, and the lavish increases in government expenditure over the past 10 years simply need to be reversed. We're borrowing 400 million euro per week, and we have almost 500,000 people on the live register. Despite this, the government has not lowered the minimum wage, the dole, or VAT - it's shocking!

Fulton Crown

gurramok wrote: »

That drop in the cost of living was mostly from mortgage rates. There are no mortgage holders on minimum wage.

Cost of living has dropped substantially even excluding mortgage rates.

Although I would hve no confidence that a reduction in the minimum wage would see a further price drop.

I would bet on our noble band of "entrepeneurs" and self employed pocketing the difference ..as they have always done.

Lockstep

Soldie wrote: »

The current minimum wage is an entirely arbitrary figure.

THe government didn't just go "Ah sure we'll stick it at this sum"
http://www.irishstatutebook.ie/2000/en/act/pub/0005/sec0011.html
As incompetent as this government is, they do take outside factors into account.

Soldie wrote: »

The government pumped up the dole and minimum wage during the boom years, both at rates exceeding that of inflation. This was nothing more than a vote-buying exercise, and was hopelessly naive on behalf of the government.

Not really as those relying on the dole/ minimum wage are the least likely to vote.
If you're going for vote buying the middle class is the best bet.

Soldie wrote: »

I'm convinced that we'd still hear the 'targeting the most vulnerable' pleas even if the minimum wage was 10 euro. The problem is that we're 20 billion euro in the hole, and the lavish increases in government expenditure over the past 10 years simply need to be reversed. We're borrowing 400 million euro per week, and we have almost 500,000 people on the live register. Despite this, the government has not lowered the minimum wage, the dole, or VAT - it's shocking!

Those on the minimum wage are also consumers, and when you're earning sub€9 an hour, the majority of your wages are going to be spent as you'll be paying for necessities (which is what we need these days as people are spending less)
I'd agree with the need for cutting VAT to stimulate spending.

Lockstep

Fulton Crown wrote: »

Cost of living has dropped substantially even excluding mortgage rates.

Although I would hve no confidence that a reduction in the minimum wage would see a further price drop.

I would bet on our noble band of "entrepeneurs" and self employed pocketing the difference ..as they have always done.

I've heard that the COL has dropped.
Do you know by how much?

Biggins

Fulton Crown wrote: »

I see no reason why this should not happen given the recent substantial drop in the cost of living.

http://www.independent.ie/business/irish/we-pay-up-to-27pc-more-for-food-than-rest-of-eu-1826424.html

*sigh*

the_syco

Fulton Crown wrote: »

I see no reason why this should not happen given the recent substantial drop in the cost of living.

What recent drop? Food prices are the same.

Fratton Fred wrote: »

but no one is able to point out that the minimum wage in Ireland is 50% higher than the UK.

Pretty sure that's only a recent thing. IIRC 3 years ago, when the english pound was stronger, our minimum wage and their minimum wage was pretty similair...

gerry28 wrote: »

You would be surprised at the number of mortgage holders on min wage, particularly in the west of ireland and more rural areas.

There are also a few in the east, no doubt, who got 100% mortgages from sub-prime lenders (I think that's the phrase).

=-=

If you want to lower the minimum wage, you'd have to cut €100 off everyones dole money, or you run the rick of people being be better off on the dole than working minimum wage. And if you cut €100 off everyone on the dole, there'll be a lot of people unable to afford the basics.

=-=

To be honest, if you lower the minimum wage to 1998 levels, you'd have to lower the cost of everything else as well, including drink. 4 pints and a packet of tayto for a tenner? Ah sure :pac:

spank_inferno

Fulton Crown wrote: »

Cost of living has dropped substantially even excluding mortgage rates..

Has it?
If its dropped I dont think its dropped by much.

The CPI may show drops in the price of mortgage costs, Clothing, travel, or luxury items like eating out & entertainment.

Such things arent exactly the staple purchases of those on the lowest rung.

Housing, food, the costs of heating your home, getting your kid ready for school in september, putting a couple of euro aside for xmas.... etc
These are the things minimum wage earners spend money on.

And very importantly almost all of it goes back into the local economy.

Shopping trips in New York, 3 weeks in Thailand, purchasing that nice german car, There are plenty of people in Ireland who this is their continued spending intention this year.

And I wager their numbers are much higher than those who actualy are on Min wage.

And besides... how much money would be saved anyway?
What difference would it make considering we allowed the government to give BOI/AIB/ Anglo-Irish almost 10 billion between them

Lets keep it in perspective people!

Fratton Fred

the_syco wrote: »

WPretty sure that's only a recent thing. IIRC 3 years ago, when the english pound was stronger, our minimum wage and their minimum wage was pretty similair...

£5.80 as opposed to €8.65 like for like. Based on an exchange rate of €1.40 to the £ the irish MW is still slightly higher.

Soldie

kickoutthejams wrote: »

THe government didn't just go "Ah sure we'll stick it at this sum"
http://www.irishstatutebook.ie/2000/en/act/pub/0005/sec0011.html
As incompetent as this government is, they do take outside factors into account.

I'm not quite sure how the link proves your statement.

Not really as those relying on the dole/ minimum wage are the least likely to vote.
If you're going for vote buying the middle class is the best bet.

The dole and minimum wage rose by most in election years, so I think it's safe to say that it was a vote-buying exercise.

Lockstep

Soldie wrote: »

I'm not quite sure how the link proves your statement.

11.—(1) The Minister shall, by order, after taking into account the impact the proposed rate may have on employment, the overall economic conditions in the State and national competitiveness, declare a national minimum hourly rate of pay for the purposes of this Act.

Soldie wrote: »

The dole and minimum wage rose by most in election years, so I think it's safe to say that it was a vote-buying exercise.

So any leglislation that is introduced around election time can only be a vote buying exercise?
The minimum wage was brought in April 2000. The next election wasn't for another 2 years.
The act was brought in by the PDs, they are party with the most overwhelmingly middle class support base.
It really doesn't smack of vote buying to me.

Darragh29

I think we need to start looking at the concept of a MAXIMUM wage, particularly in the public sector...

oppenheimer1

irish_bob wrote: »

thier is no point in reducing minimum wage unless social wellfare is reduced significantly and thier is no appetite among the majority for cutting social wellfare , its by far the most sensitive and contensous area in an bord snip

instead public sector salarys should be cut across the board , starting with politicians , this will be much more palatable with the general public

I'd actually disagree with that, public sector pay is far more contentious than social welfare payments. Its not as if unemployed people can go on strike!

Soldie

kickoutthejams wrote: »

11.—(1) The Minister shall, by order, after taking into account the impact the proposed rate may have on employment, the overall economic conditions in the State and national competitiveness, declare a national minimum hourly rate of pay for the purposes of this Act.

The current situation shows that the minister didn't take into account any of those things. Also, it's not as if they'll admit that it's adjusted to an arbitrary figure.

So any leglislation that is introduced around election time can only be a vote buying exercise?

I didn't say that.

The minimum wage was brought in April 2000. The next election wasn't for another 2 years.
The act was brought in by the PDs, they are party with the most overwhelmingly middle class support base.
It really doesn't smack of vote buying to me.

It was increased every year, but the biggest increases were in election years.

severely

Dropping the minimum wage and the Dole is a necessary evil. FF geared the country up to an unsustainable level, and the only solution to our woe's is to down-gear it just as fast. We have to become competitive on an international level. Take a look at the link below for a world comparison of where we are. Spain has a minimum wage of €600 per month. Our Dole is €800. It just doesn't add up. We aren't more talented,beautiful or hard working as FF like to tell us. Cheap credit caused a crazy boom and now its time to get back to reality.

http://en.wikipedia.org/wiki/List_of_minimum_wages_by_country

Lockstep

Soldie wrote: »

The current situation shows that the minister didn't take into account any of those things.

This recession didn't occur because of the minimum wage.

Soldie wrote: »

Also, it's not as if they'll admit that it's adjusted to an arbitrary figure.

The Act provides guidelines as to what the minimum wage is built around. If it goes strongly against this, then it can be struck down as unstatutory.

Soldie wrote: »

I didn't say that.

Grand so, I as asking for clarification.

Soldie wrote: »

It was increased every year, but the biggest increases were in election years.

I can see why it would be increased every year (rising costs of living)
Source for "increased most during election time" please.

jmcc

Someone should put that useless eater on the minimum wage and see how she likes it.

Regards...jmcc

Lockstep

To be fair to her, she did introduce the minimum wage in the first place.

mike65

CPI fell 5.4%, the reduction sans mortages - the "harmonised" index, is reckoned to fall 1.5% for 2009.

If you want a better idea of sector inflation or rather deflation, then clicky this PDF link

For the lazy, the below are year on year changes to end June.

Consumer Price Commodity Group Indices, June 2009
01 Food and Non-Alcoholic Beverages - 3.3
02 Alcoholic Beverages and Tobacco + 7.6
03 Clothing and Footwear - 12.2
04 Housing, Water, Electricity, Gas and Other Fuels - 25.6
05 Furnishings, Household Equipment and Routine Household Maintenance - 3.2
06 Health + 3.4
07 Transport - 6.1
08 Communications + 0.9
09 Recreation and Culture - 0.4
10 Education + 4.5
11 Restaurants and Hotels - 0.3
12 Miscellaneous Goods and Services + 8.5

Permabear

This post has been deleted.

ScouseMouse

irish_bob wrote: »

thier is no point in reducing minimum wage unless social wellfare is reduced significantly and thier is no appetite among the majority for cutting social wellfare , its by far the most sensitive and contensous area in an bord snip

instead public sector salarys should be cut across the board , starting with politicians , this will be much more palatable with the general public

Correct. There is no appetite for cutting social welfare but it has to and will happen. When you have people better off on the dole than getting off their arses to work, you have to use a size nine boot. A BIG ONE.

Thomas_S_Hunterson

Darragh29 wrote: »

I think we need to start looking at the concept of a MAXIMUM wage, particularly in the public sector...

THe idea of a maximum wage is immature and ridiculous.

The top 5% or so of earners pay about 50% of the tax-bill.

These are exactly the people who will piss right off and live somewhere else if the government starts trying to **** them over. Then we'll know what being in the **** really means.

Time Magazine

kickoutthejams wrote: »

http://press.princeton.edu/titles/5632.html

Would you say that the above writers have no economic knowledge/aren't professionals?

No. I would say however that you have just linked to perhaps the single most debunked piece of econometric analysis ever.

People need to get this idea that pay should be directly linked to inflation out of their heads. Here's a hint: if minimum wages fall, so too will costs and so too will demand and so too will price. I hear very few people complaining when pay increases above inflationary levels, as the minimum wage did over the past ten years or so.

And here's another thing: the largest declines in employment are for young people. There are no jobs going, and plenty of people looking for work. It's quite possible that places like Xtra-vision will hire two people at €6.50 an hour or one at €8.65 an hour. If this is true, people arguing for maintaining the minimum wage are condemning quite a few kids to pocket money alone.

Even the work in the area that has thrown up "sympathetic" results to minimum wages has warned that it causes unemployment when it prevents "a necessary fall" (hello Ireland!) in wages and particularly affects young people (hello Ireland!)

Minister Harney refused to rule out cuts in the minimum wage, not called for cuts in it. This "it's not even on the table" approach, especially when it the issue lead to more jobs, is one of main problems with the union movement in this country. Shower of self-interested bastards.

Lockstep

The Economist wrote: »

No. I would say however that you have just linked to perhaps the single most debunked piece of econometric analysis ever.

Former Chief Economist to the US deparment of Labour, professor of Economics at Princeton.
Professor of Economics at University of California, Berkely, former professor of Economics at Princeton.

Pretty good credentials considering they've written perhaps the most debunked piece of econometric analysis ever.

For something to be "debunked" it must be proven, beyond a shadow of a doubt to be false. Despite this, Stiglitz still feels it stands up to criticism.
http://www2.gsb.columbia.edu/faculty/jstiglitz/download/2002_Emploi_justice_sociale.pdf
(page 13)

deadhead13

The Economist wrote: »

And here's another thing: the largest declines in employment are for young people. There are no jobs going, and plenty of people looking for work. It's quite possible that places like Xtra-vision will hire two people at €6.50 an hour or one at €8.65 an hour. If this is true, people arguing for maintaining the minimum wage are condemning quite a few kids to pocket money alone.

Wouldn't a reduction in employers PRSI contibutions, currently between 8.75% and 10.75% of eployees salaries, have a similar affect?

irish_bob

superscouse wrote: »

Correct. There is no appetite for cutting social welfare but it has to and will happen. When you have people better off on the dole than getting off their arses to work, you have to use a size nine boot. A BIG ONE.

i myself think the dole is too high but because so many people who now find themselves unemployed now yet still have to pay large mortgages , i think the country could boil over if social wellfare is tackled , i think its more practical to bring down public sector wages , politicans rely on voters to keep them in a job and i do honestly think thier is very strong opposition to cutting dole , its nonsensical but its a fact

techdiver

Darragh29 wrote: »

I think we need to start looking at the concept of a MAXIMUM wage, particularly in the public sector...

Terrible idea. There is no need for a maximum wage as long as the pay structures in the Public Sector match that of the private sector in so much as you don't just get paid based on seniority or a defined annual increment, you are paid based on performance and ability and worth to the business. A maximum wage would stifle any ambition in the public sector just as bad as benchmarking did.

lmtduffy

The Economist wrote: »

People need to get this idea that pay should be directly linked to inflation out of their heads. Here's a hint: if minimum wages fall, so too will costs and so too will demand and so too will price. I hear very few people complaining when pay increases above inflationary levels, as the minimum wage did over the past ten years or so.

If minimum wage falls, only the markets that cater to minimum wage earners will follow them. Every one above minimum wage will keep there wage as is, and will continue to consume as they are.
This will not bring down inflation, you just have minimum wage earners having less purchase power, while those on higher wages will maintain theirs if not increase them due to the minimum wage markets dropping there prices.

And here's another thing: the largest declines in employment are for young people. There are no jobs going, and plenty of people looking for work. It's quite possible that places like Xtra-vision will hire two people at €6.50 an hour or one at €8.65 an hour. If this is true, people arguing for maintaining the minimum wage are condemning quite a few kids to pocket money alone.

Or the government can ease cost for business that are truly struggling,
or stimulate the economy by developing and building thing the country needs, schools, roads, hospitals, communications infrastructure, the knowledge economy jazz etc.

we can as you propose cut back now and attempt to save money to cover our debt or we can invest now so when the economy begins to grow again we can use the benefits of our investments to pay our debts.

Even the work in the area that has thrown up "sympathetic" results to minimum wages has warned that it causes unemployment when it prevents "a necessary fall" (hello Ireland!) in wages and particularly affects young people (hello Ireland!)

Yes and the unemployment and the unemployment of the young should be eased directly rather than indirectly.

Minister Harney refused to rule out cuts in the minimum wage, not called for cuts in it. This "it's not even on the table" approach, especially when it the issue lead to more jobs, is one of main problems with the union movement in this country. Shower of self-interested bastards.

yes because the employers are in it for the social benefits employment provides,
shower of self interested bastards: self is a big part of market economics, its a two way street.

Time Magazine

kickoutthejams wrote: »

Former Chief Economist to the US deparment of Labour, professor of Economics at Princeton.
Professor of Economics at University of California, Berkely, former professor of Economics at Princeton.

Pretty good credentials considering they've written perhaps the most debunked piece of econometric analysis ever.

Indeed. It makes it all the more embarrassing.

For something to be "debunked" it must be proven, beyond a shadow of a doubt to be false.

Ha, no it doesn't! If you show serious methodological flaws in the data-gathering elements of an econometric study, the entire basis for the study falls to pieces. Sure, the econometrics holds, but for the wrong data. People have been awarded Nobel Prizes for pointing out just how serious this is.

If the data-collection process is shown to be skewed, that completely invalidates the finding. It does not have to be proven to be wrong beyond the shadow of a doubt because the onus on factual data-collection is on the original author.

Despite this, yes there is conclusive proof that their data was wrong. Neumann and Wascher showed that Card and Krueger's data was awful, with their standard errors three times the size of more accurate data. It's been a few years since I looked at this in detail, but iirc they called companies during the summer and during the winter and assumed that any changes in employment were non-seasonal, i.e. they "forgot" that fast food places hire people for summer jobs. There were also serious problems with missing values, but that's a technical issue that belongs on the Economics forum.

Despite this, Stiglitz still feels it stands up to criticism.
http://www2.gsb.columbia.edu/faculty/jstiglitz/download/2002_Emploi_justice_sociale.pdf
(page 13)

You're really taking his work out of context. That article is primarily about the role of the international community in ensuring minimum wage practices in developing nations. The article contains the sentence "In Mexico, for instance, the incomes of the poorest 30 per cent have actually declined over the past 16 years." He is not arguing for a minimum wage of €8.65 in 2009 Ireland. You note he references Card and Kreuger on page 13, but overlook that on page 24 he says that even if it was wrong, there wasn't a big impact.

So let's look at how that impact would translate to Ireland. I'll take a quote from the PUP page: "The Card-Krueger work is essentially correct: the minimum wage at levels observed in the United States has had little or no effect on employment." Okay, aside from that having been now seriously debased, what are/were the levels observed? This page shows the 1992 NJ minimum wage was $5.05. This page will show you that's about $7.60 in 2008 money. Which is less than €5.50.

So the Card and Kreuger findings find that at a wage of €5.50 there is little effect in employment. That's essentially what the empirical basis of your argument.

What about mine?

1. The Card and Kreuger data was collected really unprofessionally
2. Payroll data (more reliable than over-the-phone data) find their standard errors were three times too large
3. They assumed away the missing value problems
4. Our minimum wage is not €5.50, it's €8.65
5. I've previously argued (2 years ago) on this forum that high minimum wages are fine when the economy is growing
6. We're not growing anymore. There are 400,000 people on the Live Register
7. This recession has mostly affected younger people, i.e. the people that are most likely to be on minimum wage
8. After construction, most jobs have been lost in the service sector, i.e. the people that are most likely to be on minimum wage
9. All the best evidence on the matter suggests minimum wages are damaging to young people
10. Stiglitz himself argues that minimum wages offer a trade-off between those out of jobs (less jobs) and those in them (higher wages)
11. Right now, with 400,000 on the LR, many of them young, many of them from the service sector, I say f*ck those that already have a job -- share some of the spoils
12. If you disagree with me, that's fine, but I'd like to at least be honest about it and say "I support this because it keeps wages higher for those in jobs, even if it prevents some from getting jobs" and stop being blinded by ideology.

Time Magazine

lmtduffy wrote: »

If minimum wage falls, only the markets that cater to minimum wage earners will follow them. Every one above minimum wage will keep there wage as is, and will continue to consume as they are.
This will not bring down inflation, you just have minimum wage earners having less purchase power, while those on higher wages will maintain theirs if not increase them due to the minimum wage markets dropping there prices.

So essentially your argument is that minimum wages have no impact on inflation. Is that what you're saying?

Or the government can ease cost for business that are truly struggling,
or stimulate the economy by developing and building thing the country needs, schools, roads, hospitals, communications infrastructure, the knowledge economy jazz etc.

That'd be workable if we had money. We have a deficit of 12% -- we're already over-stimulating.

Where do you suggest we get this money from?

we can as you propose cut back now and attempt to save money to cover our debt or we can invest now so when the economy begins to grow again we can use the benefits of our investments to pay our debts.

Where do you suggest we get this money from?

Yes and the unemployment and the unemployment of the young should be eased directly rather than indirectly.

How?

yes because the employers are in it for the social benefits employment provides,
shower of self interested bastards: self is a big part of market economics, its a two way street.

I never said employers are in it for the social benefits. To a large extent they're also money-grabbing bastards, so WTF does this have to do with anything?

Do you think that because RGDATA advocate for anti-competitive barriers to their market that it's okay for unions to blindly support wage structures that cause unemployment?

More generally, are you willing to say that this isn't causing unemployment?

Time Magazine

deadhead13 wrote: »

Wouldn't a reduction in employers PRSI contibutions, currently between 8.75% and 10.75% of eployees salaries, have a similar affect?

Yes, but the government cannot afford that. We need to increases taxes, not decrease them.

The deficit is unbearably huge. In 2008 we took in €13bn in income tax. The deficit is about €21bn. So even if we doubled everyone's tax, we'd still be far, far, far short. And of course if we tried to impose 84% tax rates on the rich, they'd leg it. So we're not going to even cover our arses this year, never mind have any room for expansion.

deadhead13

The Economist wrote: »

Yes, but the government cannot afford that. We need to increases taxes, not decrease them.

Assuming a reduction in labour costs will encourage employers to employ more people. The percentage contributions an employer would have to make per employee would decrease, but he would also be making these contributions for more poeple. So it doesn't necessarily follow that there would be a reduction in the amount of tax the government receives. The reduction in unemployment benefit payments would also be a factor.

Lockstep

The Economist wrote: »

Indeed. It makes it all the more embarrassing.

For me it's the opposite; it means I'm more inclined to believe they know what they are talking about.
No problem with seeing their theories refuted though.

The Economist wrote: »

Ha, no it doesn't! If you show serious methodological flaws in the data-gathering elements of an econometric study, the entire basis for the study falls to pieces. Sure, the econometrics holds, but for the wrong data. People have been awarded Nobel Prizes for pointing out just how serious this is.

I lack the cash to read the article you linked to; however it links to James J Heckman.
Read the intro though; it dates from January 1979, Myth and Measurement dates from 1997.

The Economist wrote: »

Despite this, yes there is conclusive proof that their data was wrong. Neumann and Wascher showed that Card and Krueger's data was awful, with their standard errors three times the size of more accurate data. It's been a few years since I looked at this in detail, but iirc they called companies during the summer and during the winter and assumed that any changes in employment were non-seasonal, i.e. they "forgot" that fast food places hire people for summer jobs. There were also serious problems with missing values, but that's a technical issue that belongs on the Economics forum.

Grand so, disproven.

The Economist wrote: »

You're really taking his work out of context. That article is primarily about the role of the international community in ensuring minimum wage practices in developing nations. The article contains the sentence "In Mexico, for instance, the incomes of the poorest 30 per cent have actually declined over the past 16 years." He is not arguing for a minimum wage of €8.65 in 2009 Ireland. You note he references Card and Kreuger on page 13, but overlook that on page 24 he says that even if it was wrong, there wasn't a big impact.

I don't recall claiming he is arguing for a minimum wage of €8.65.
He does say
"Card and Krueger's work strongly demonstrated that minimum wage leglislation does not have the serious adverse affect on employment predicted by the standard theory and that it may even have a positive effect."
This thread is derailing; I was responding to The_Minister's claim that the minimum wage decreases jobs and increases prices (going so far as to say that everyone with economic knowledge knows this.) Which must rule out Krueger and Card (both professors of economics with Krueger a former chief economist to the US dept of labour)

RE page 24; "their results make a compelling case that if there is an adverse affect, it is not large." I am not making the claim that the minimum wage increases jobs, I am however, sceptical
THe words "compelling case" suggest that despite the apparent debunking, Stiglitz (himself a recipient in the Nobel Memorial Prize of Economic Science), sees some merit in their findings despite writing after Heckman got his Nobel prize and Neumark and Wascher refuted it.

The Economist wrote: »

So let's look at how that impact would translate to Ireland. I'll take a quote from the PUP page: "The Card-Krueger work is essentially correct: the minimum wage at levels observed in the United States has had little or no effect on employment." Okay, aside from that having been now seriously debased, what are/were the levels observed? This page shows the 1992 NJ minimum wage was $5.05. This page will show you that's about $7.60 in 2008 money. Which is less than €5.50.

So the Card and Kreuger findings find that at a wage of €5.50 there is little effect in employment. That's essentially what the empirical basis of your argument.

What about mine?

1. The Card and Kreuger data was collected really unprofessionally
2. Payroll data (more reliable than over-the-phone data) find their standard errors were three times too large
3. They assumed away the missing value problems
4. Our minimum wage is not €5.50, it's €8.65
5. I've previously argued (2 years ago) on this forum that high minimum wages are fine when the economy is growing
6. We're not growing anymore. There are 400,000 people on the Live Register
7. This recession has mostly affected younger people, i.e. the people that are most likely to be on minimum wage
8. After construction, most jobs have been lost in the service sector, i.e. the people that are most likely to be on minimum wage
9. All the best evidence on the matter suggests minimum wages are damaging to young people
10. Stiglitz himself argues that minimum wages offer a trade-off between those out of jobs (less jobs) and those in them (higher wages)
11. Right now, with 400,000 on the LR, many of them young, many of them from the service sector, I say f*ck those that already have a job -- share some of the spoils
12. If you disagree with me, that's fine, but I'd like to at least be honest about it and say "I support this because it keeps wages higher for those in jobs, even if it prevents some from getting jobs" and stop being blinded by ideology.

Slightly off topic; I disagreed with TM claim that anyone with economic knowledge knows that minimum wage=less jobs. I never claimed the above.

Time Magazine

deadhead13 wrote: »

The percentage contributions an employer would have to make per employee would decrease, but he would also be making these contributions for more poeple.

Correct, but it's highly unlikely that e.g. halving employers' PRSI (about 5% off wages) would double the number of employees.

The deficit is about €21bn. By Census 2006 figures, that's €14,500 per household. Basically, just looking at the pure maths of it, tax cuts aren't an option.

Shan75

lmtduffy wrote: »

If minimum wage falls, only the markets that cater to minimum wage earners will follow them. Every one above minimum wage will keep there wage as is, and will continue to consume as they are.
This will not bring down inflation, you just have minimum wage earners having less purchase power, while those on higher wages will maintain theirs if not increase them due to the minimum wage markets dropping there prices.

This isn't true though as a lot of people on higher wages have already had their salaries reduced.It is time for the minimum wage and social welfare to be reduced in line with deflation.Those on social welfare spend most of their benefits on food and essential services such as electricity,gas etc.Food prices have gone down quite significantly in the Supermarkets since the start of the year and even the ESB charges have come down from the ridiculous levels they were at.We need to reduce VAT on essential services and increase it on luxury items.Of course the one area of difficulty is in relation to mortgage repayments and this is something that needs to be looked at to see what is possible.One thing is for sure: It wasn't the free market alone that fueled the property bubble and therefore state assistance in repayments should not be out of the question.We need to ensure the people with the most wealth are taxed appropriately and this can be done through this VAT as well as tax on non-primary residences.

We need to get people spending money but keeping prices high because of an unwillingness to rectify past mistakes when raising social welfare at unprecedented levels and maintaining a minimum wage far in excess of the value of an unskilled employee's output is not the way to go about it.People need to get used to the idea that unskilled workers and the unwaged should not expect a life of luxury.All this does is creates a lack of ambition and hunger for success and self-improvement, and the creation of a sub-class with a highly developed sense of entitlement.

FlutterinBantam

Shan75 wrote: »

This isn't true though as a lot of people on higher wages have already had their salaries reduced.It is time for the minimum wage and social welfare to be reduced in line with deflation.Those on social welfare spend most of their benefits on food and essential services such as electricity,gas etc.Food prices have gone down quite significantly in the Supermarkets since the start of the year and even the ESB charges have come down from the ridiculous levels they were at.We need to reduce VAT on essential services and increase it on luxury items.Of course the one area of difficulty is in relation to mortgage repayments and this is something that needs to be looked at to see what is possible.One thing is for sure: It wasn't the free market alone that fueled the property bubble and therefore state assistance in repayments should not be out of the question.We need to ensure the people with the most wealth are taxed appropriately and this can be done through this VAT as well as tax on non-primary residences.

We need to get people spending money but keeping prices high because of an unwillingness to rectify past mistakes when raising social welfare at unprecedented levels and maintaining a minimum wage far in excess of the value of an unskilled employee's output is not the way to go about it.People need to get used to the idea that unskilled workers and the unwaged should not expect a life of luxury.All this does is creates a lack of ambition and hunger for success and self-improvement, and the creation of a sub-class with a highly developed sense of entitlement.

excellent post .

lmtduffy

The Economist wrote: »

So essentially your argument is that minimum wages have no impact on inflation. Is that what you're saying?

No im saying it widens the gap between the rich and poor, adn that this will cost us more in the long run.

That'd be workable if we had money. We have a deficit of 12% -- we're already over-stimulating.

guaranteeing the banks hardly counts as overstimulating,
the government will have to do these things eventually its best to do them now when its cheapest, and save money in the long run.
We borrow money and get inventive with our cash flow management.

Where do you suggest we get this money from?

we borrow money and get inventive with our cash flow management.

Where do you suggest we get this money from?

we borrow money and get inventive with our cash flow management.

How?

government builds a school, builders live in area and use services, people working in services, uses services etc.

I never said employers are in it for the social benefits. To a large extent they're also money-grabbing bastards, so WTF does this have to do with anything?

if your only going to demonise the unions it might make you appear a tad bias.

Do you think that because RGDATA advocate for anti-competitive barriers to their market that it's okay for unions to blindly support wage structures that cause unemployment?

you do know that no matter how cheap labour is there are other elements in determining the demand for it, such as consumer demand and capital owned by the employer,
the cost of labour isnt the issue its the consumer demand and the lack of capital.

More generally, are you willing to say that this isn't causing unemployment?

Im saying if you want make the economy stronger cutting the minimum wage will be detrimental in the long term, and just having more workers in shops that aren't selling anything anyway is of no real use.
Also if you cut the minimum wage employers are not going to hirer more staff than they need, theyll just have greater profits which is in itself a good thing, but it can also be achieved with out lowering the purchase power of the poorest in society.

lmtduffy

Shan75 wrote: »

This isn't true though as a lot of people on higher wages have already had their salaries reduced.It is time for the minimum wage and social welfare to be reduced in line with deflation.Those on social welfare spend most of their benefits on food and essential services such as electricity,gas etc.Food prices have gone down quite significantly in the Supermarkets since the start of the year and even the ESB charges have come down from the ridiculous levels they were at.

those on high salaries despite reductions in wages still have a much larger disposable incomes that those on minimum never had, lowering the minimum wage might save us a few euro today, but will cost us socially by widening the gap between rich and poor and economically as there will be less money in the economy today.

We need to reduce VAT on essential services and increase it on luxury items.Of course the one area of difficulty is in relation to mortgage repayments and this is something that needs to be looked at to see what is possible.One thing is for sure: It wasn't the free market alone that fueled the property bubble and therefore state assistance in repayments should not be out of the question.We need to ensure the people with the most wealth are taxed appropriately and this can be done through this VAT as well as tax on non-primary residences.

agree with you,

We need to get people spending money but keeping prices high because of an unwillingness to rectify past mistakes when raising social welfare at unprecedented levels and maintaining a minimum wage far in excess of the value of an unskilled employee's output is not the way to go about it.People need to get used to the idea that unskilled workers and the unwaged should not expect a life of luxury.All this does is creates a lack of ambition and hunger for success and self-improvement, and the creation of a sub-class with a highly developed sense of entitlement.

They do not expect a life of luxury and they never got it, they deserve a life like every other person in this state. And lowering the minimum wage will only lower there chances of getting that quality of life they have been deprived of by virtue of there social circumstances.

Lowering the minimum wage or social welfare will not change the nature of our socials supports inability to deal with the "lack of ambition and hunger for success and self-improvement, and the creation of a sub-class with a highly developed sense of entitlement" it has already created.

Shan75

lmtduffy wrote: »

They do not expect a life of luxury and they never got it, they deserve a life like every other person in this state. And lowering the minimum wage will only lower there chances of getting that quality of life they have been deprived of by virtue of there social circumstances.

Lowering the minimum wage or social welfare will not change the nature of our socials supports inability to deal with the "lack of ambition and hunger for success and self-improvement, and the creation of a sub-class with a highly developed sense of entitlement" it has already created.

I think that unskilled workers have got used to a higher standard of living than they probably ever expected to have.This was through skyrocketting wages and reduced direct taxation.I agree though that everybody is entitled to a basic standard of living which is comfortable and free from constant financial worry.However because of out of control wages, partly due to to imposition of a pretty high minimum wage and a generous social welfare rate, demanding that wages are pushed even higher, unskilled workers have been living the high life for years now.I know plenty of people who are invloved in menial tasks but who could afford fancy cars and multiple holidays every year.Fair enough you could say as people are working for the money and are entitled to the benefits but all it does is drive up demand for goods and services and therefore fuels inflation.

All of a sudden we had hundreds of thousands of people purchasing overvalued houses and expensive cars that they could not really afford while thinking they were on the pig's back and living the life of Reilly.People had their expectations raised too high and we became a society where it was OK to work on an assembly line, drawing a salary well in excess of the industrial average while ignoring education and sowing the seeds for your future.There are different grades of employment and I believe one should be renumerated in accordance with how much responsibility you have.In other words a Doctor should get paid much more than a factory worker etc.

This is why I say this has partly helped to create a lack of ambition.I mean why would you bother going to University and then work your way up from the bottom, in some industries taking years to get to a reasonable level of pay, when you could just go and work in a low, or no, skilled job in a factory and draw a yearly income of between 50 and 60k.The same becomes true in leaner times if the social welfare rate is too high as people think "why would I bother getting off my áss to earn the same amount as I'm getting on the dole".It is imperative we encourage people to achieve their potential and to take pride in working for a living.

People on social welfare need to be looked after both in the short term and long term and part of that is seeing they are receiving enough to ensure they have a basic standard of living while not being an unecessary burden on an economy in crisis.Lowering the payments in line with deflation is part of this as is encouraging people to train in new skills, go back to school etc.Once this has been done we need to do the same for the people on minimum wage so as not to allow it to become attractive to do a job that is below your skillset and ability.People need something to strive for and easy money is one way of making sure this will not happen.