The Duffy Walsh Report

later12

pdf available here
http://www.deti.ie/publications/employment/2011/Report_ERO_REA.pdf

The Duffy Walsh report has inspired some intense debate in relation to the current JLC framework.

The main points (imo)

We have concluded that lowering the basic JLC rates to the level of the minimum wage rate is unlikely to have a substantial effect on employment. We have investigated the size of the wage differential in some detail and do not find evidence of substantial wage premiums.

We believe that there are potentially substantial competitive gains that could be realised in some of the affected sectors by reforming the structure of decision making in JLCs so that the system is more flexible and responsive to the needs of particular sectors. Competitiveness can also be enhanced by simplifying the system

The main justification for the JLC system lies in the absence of any other fair system of determining pay and conditions of employment, beyond statutory minima, within the sectors concerned.

In our view, a well designed framework where collective bargaining in its full sense can take place would potentially provide a better, more responsive and fairer means of determining pay and conditions and should be encouraged as an alternative to the present JLC system.

The report then makes 19 clearly laid out recommendations, which, for the ease of reading there is no point in me repeating here.

It now looks as though the fallout from this report could be the first major stumbling block for the new coalition, with Richard Bruton's proposals for JLC reform going further than those of the report itself. Richard Bruton also seems to be of the opinion that his reforms would have a substantial impact on employment, whereas the report expressly says otherwise. That, and the fact that Eurostat data has shown that labour costs in hospitality, for example, are below the EA average, makes me a little sceptical about the government's current position on JLC reform.

Thoughts?

meditraitor

later10 wrote: »

That, and the fact that Eurostat data has shown that labour costs in hospitality, for example, are below the EA average, makes me a little sceptical about the government's current position on JLC reform.

Thoughts?

I would love to see this data?

later12

meditraitor wrote: »

I would love to see this data?

http://www.google.ie/url?sa=t&source=web&cd=1&ved=0CBYQFjAA&url=http%3A%2F%2Fwww.tascnet.ie%2Fupload%2Ffile%2FWageComp140411.pdf&rct=j&q=TASC%20eurostat%20labour%20costs&ei=6yXeTciBPcGy8gOShfmcCg&usg=AFQjCNEFtnPRs0hYMo3sZuHWf7BwhdRAFw&sig2=jFSdNzETrnXbFqUGq4THmA&cad=rja

Source: Eurostat, http://epp.eurostat.ec.europa.eu/portal/page/portal/product_details/dataset?p_product_code=LMLC_Q

19. Based on this Eurostat data for 2008 labour costs and the Eurostat labour cost indices for 2009 and 2010 we can tentatively derive labour costs for 2010. These are shown in Figure 7. If Eurostat’s provisional indices are borne out once data for France, Sweden and Denmark becomes available, hourly labour costs in Ireland in 2010 will have been just 90.7 per cent of the EU-15 average in the hospitality sector and just 91.2 per cent of the EU-15 average in the wholesale/retail sector.

meditraitor

later10 wrote: »

http://www.google.ie/url?sa=t&source=web&cd=1&ved=0CBYQFjAA&url=http%3A%2F%2Fwww.tascnet.ie%2Fupload%2Ffile%2FWageComp140411.pdf&rct=j&q=TASC%20eurostat%20labour%20costs&ei=6yXeTciBPcGy8gOShfmcCg&usg=AFQjCNEFtnPRs0hYMo3sZuHWf7BwhdRAFw&sig2=jFSdNzETrnXbFqUGq4THmA&cad=rja

Thats odd, becaue I was readin an article (although not unbiased) from the IHF
http://www.ihf.ie/press/11-03-07jlc.htm

Payroll costs are the single largest cost for Irish hotels and guesthouses, accounting for 42 per cent of turnover which is substantially higher than other European holiday destinations – they are 30% higher than Britain our nearest competing market. The JLC rates create minimum wages for the hotels sector that place Ireland 2nd highest in Europe**, thereby penalising a sector of the economy that should be supported to secure future growth in employment.

Payroll costs as % of turnover 2009

Austria
39.50%

Belgium
38%

France
39%

Germany
32.60%

Italy
36.90%

Netherlands
34%

Poland
26.30%

Sweden
29.80%

Britain
31.30%

Northern Ireland
32.20%

Republic of Ireland
42%

They must be lying I suppose,

meditraitor

later10 wrote: »

http://www.google.ie/url?sa=t&source=web&cd=1&ved=0CBYQFjAA&url=http%3A%2F%2Fwww.tascnet.ie%2Fupload%2Ffile%2FWageComp140411.pdf&rct=j&q=TASC%20eurostat%20labour%20costs&ei=6yXeTciBPcGy8gOShfmcCg&usg=AFQjCNEFtnPRs0hYMo3sZuHWf7BwhdRAFw&sig2=jFSdNzETrnXbFqUGq4THmA&cad=rja

Another thing that struck me about the report was that basically the irish hospitality workers are less productive?? Would this mean they should be paid less?

21. Felipe and Kumar (2011) identify that it is not labour costs but unit labour costs that impact on competitiveness. The unit labour cost is the ratio of labour cost to labour productivity. A strategy focussed exclusively on reducing labour costs through wage reductions will simply reinforce the decline in domestic aggregate demand. Ireland’s long term growth strategy should be focussed instead on reducing unit labour cost through productivity gains. The long-term growth potential of any economy depends on productivity increases generated through innovation.

So its unit labour costs mmmmm

later12

meditraitor wrote: »

Thats odd, becaue I was readin an article (although not unbiased) from the IHF
http://www.ihf.ie/press/11-03-07jlc.htm

Yes not unbiased, whereas the statistics i quoted are (a) from Eurostat, (b) updated and (c) don't use silly and misleading references like expressing wages in a relationship with overall turnover which is not equivalent nor necessarily proportional to labour productivity. Nobody has said anything about turnover, and it is not at all suprising, with an oversupply of hotel accomodation, that turnover has been falling. You cannot necessarily blame staff pay for that, nor confidently express labour costs in those terms as a valid comparison. It is misleading.

Another thing that struck me about the report was that basically the irish hospitality workers are less productive??

Where are you reading this? Certainly not in the same report that I am reading. Seriously, take your time, read the report, then come back.

meditraitor

later10 wrote: »

Where are you reading this? Certainly not in the same report that I am reading. Seriously, take your time, read the report, then come back.

Another thing, the data set that is quoted by tasc doesnt show the what the report purports it to show?

Are they both lying?

later12

meditraitor wrote: »

Another thing, the data set that is quoted by tasc doesnt show the what the report purports it to show?

Are they both lying?

Can you answer the question? Where are you reading this thing about productivity in what I linked? Simple question, second attempt.

stee.mc79

This might be a silly question in the tascnet report what are "ppp"s?

later12

stee.mc79 wrote: »

This might be a silly question in the tascnet report what are "ppp"s?

It means 'purchasing power parity'. That is to say, a measure of the relative strength of your money in Ireland compared to elsewhere. The Economist, for example, uses the price of a Big Mac in different currencies to compare purchasing power.

http://www.oanda.com/currency/big-mac-index

stee.mc79

Thanks later10 am alittle bit wiser, hungry for big mac aswell!
It was said in the report aswell that the area of utilities and rents needed to be addressed as well why go after the employee first?

later12

Yes I would agree with that. Commercial rates often come in at about 50% of the occupation costs to businesses. Many very average small businesses are paying thousands of euro in commercial rates simply to fund an oversupply of small and independent local authorities, when such funds could otherwise be used in business development or in the hiring of additional staff.

While this doesn't make the proposed reform of JLCs wrong in itself, it appears to be of questionable wisdom to act against this report, against a lot of independent advice, and go after something which nobody is really sure will be of much help to the economy when there is something as glaringly obvious as commercial rates that does require urgent address.

Rubik.

Duffy and Walsh claim lowering the JLC's rates would not create more jobs in those sectors and Richard Burton is claiming it would, but I think the most significant thing was said by Enda Kenny today i.e. this process was agreed with the IMF/EU as part of the bailout deal. If the IMF/EU insists that the JLC rates of pay should be lowered, how much choice would the Government then have in the matter?

Scofflaw

Rubik. wrote: »

Duffy and Walsh claim lowering the JLC's rates would not create more jobs in those sectors and Richard Burton is claiming it would, but I think the most significant thing was said by Enda Kenny today i.e. this process was agreed with the IMF/EU as part of the bailout deal. If the IMF/EU insists that the JLC rates of pay should be lowered, how much choice would the Government then have in the matter?

The general rule is that the IMF (and here the EU as well) only sets targets - how the government reaches them is up to them. In this case, if lowering the JLC rates is part of reaching a particular target, then the government would have to either demonstrate that they don't contribute to meeting that target, or propose another measure of equal effect.

However, that assumes the government doesn't want to lower the JLC rates, whereas the evidence seems to suggest that they do want to.

cordially,
Scofflaw

stee.mc79

Then what's to stop them going into other areas of employment and lowering rates of overtime? They should be entitled that extra for working Sunday's and bank hols. Most of the lower paid staff are on bare min wages. Most Personal work in the establishments are just barley scrapping a living and they're who are going to be most effected by such ledgislation. Theres other areas of the report they should be looking at first.

the groutch

stee.mc79 wrote: »

Then what's to stop them going into other areas of employment and lowering rates of overtime? They should be entitled that extra for working Sunday's and bank hols. Most of the lower paid staff are on bare min wages. Most Personal work in the establishments are just barley scrapping a living and they're who are going to be most effected by such ledgislation. Theres other areas of the report they should be looking at first.

this is one of the ones I'd be most interested in
here's the recommendation relating to it

Recommendation 8

Standardisation of Conditions of Employment

We make recommendations directed at ensuring that, as far as possible,
conditions of employment regarding overtime payments, including the
conditions under which they become payable, and Sunday premium should
be standardised across the various JLCs.

they recommend standardisation of overtime payments & Sunday premiums, so definitely not calling for their abolition, but the point at which they are standardised could be well below what most are currently receiving.
18% of my gross pay comes from a Sunday premium, so any changes as a result of this would have strong reprocussions

I can see why they want to reduce Sunday wage rates, etc. So companies can create more jobs, but these will be low-paid jobs, probably only part-time ones. New workers won't even earn enough to contribute to tax revenues.

I'd more prefer to see dole payments stopped to anyone unemployed pre-recession/2007.

sensibleken

Deleted User wrote: »

I can see why they want to reduce Sunday wage rates, etc. So companies can create more jobs, but these will be low-paid jobs, probably only part-time ones. New workers won't even earn enough to contribute to tax revenues.

I'd more prefer to see dole payments stopped to anyone unemployed pre-recession/2007.

I agree with the report that lowering wages will not create more jobs.

The arguement that it would presupposes that hotels etc are at the moment operating with below the staff level required and lowering the wages would allow them to to create more jobs.

Yet there is nothing to show that they are understaffed. These people are under 10 euro an hour so you would have to cut several peoples pay to create one job.

Also the report points out that the abolition of the wage councils in England actually reduced employment in the affected sectors as it was more benificial to be on the dole.

As others have pointed out lowering rates, drink licences or other methods would be of much greater benefits to these sectors.

I cant help but feel that with kenny's rebuke that it was Brutons personal opinion and no decission has been made. That it was Bruton talking out of turn and making a mess of it. old rivalry perhaps?

Tipp Man

Why the hell is the government so deeply involved in the labour market anyway??

Why not let market forces dictate the level of pay? It works in plenty of sectors in this country already

The government should set the minimum wage (at not at its current too high rate) and let everything else work from there

dvpower

the groutch wrote: »

18% of my gross pay comes from a Sunday premium, so any changes as a result of this would have strong reprocussions

It would, but I'd be inclined to think that if a full 18% of pay comes from the premium payment for working on one day, theres something askew.

Tipp Man

Deleted User wrote: »

I can see why they want to reduce Sunday wage rates, etc. So companies can create more jobs, but these will be low-paid jobs, probably only part-time ones. New workers won't even earn enough to contribute to tax revenues.

I'd more prefer to see dole payments stopped to anyone unemployed pre-recession/2007.

Even if the jobs didn't create 1 cent in direct tax revenue the savings in dole payments and associated welfare alone make the cuts more than worthwhile

We seriously need to reduce the level of wages in this country (by quite a lot) - across all sectors and make this country someway competitive again

sensibleken

Tipp Man wrote: »

Even if the jobs didn't create 1 cent in direct tax revenue the savings in dole payments and associated welfare alone make the cuts more than worthwhile

We seriously need to reduce the level of wages in this country (by quite a lot) - across all sectors and make this country someway competitive again

cutting wages to improve competitiveness is useless unless cost of living is brought down signifficantly first. It also needs to be done from the top down not from the bottom up which is what Bruton is suggesting

Tipp Man

sensibleken wrote: »

cutting wages to improve competitiveness is useless unless cost of living is brought down signifficantly first. It also needs to be done from the top down not from the bottom up which is what Bruton is suggesting

The cost of living will fall if people have less money to spend - you can't cut cost of living while wages remain high - wages determine the cost of living as businesses can't/won't cut their sales price until their costs i.e. wages have reduced.

sensibleken

Tipp Man wrote: »

The cost of living will fall if people have less money to spend - you can't cut cost of living while wages remain high - wages determine the cost of living as businesses can't/won't cut their sales price until their costs i.e. wages have reduced.

cutting wages does not lead to a reduction in costs full stop. there are many many other costs involved and in the sectors being targetted there are greater concerns. businesses will keep prices up as long as they are making a profit. Making people poor so they cant afford certain goods is a harsh way of bringing down prices and no garuntee that they will be proportional.

For example, do you ever see petrol prices fall in line with the prices of oil?

Tipp Man

sensibleken wrote: »

cutting wages does not lead to a reduction in costs full stop. there are many many other costs involved and in the sectors being targetted there are greater concerns. businesses will keep prices up as long as they are making a profit. Making people poor so they cant afford certain goods is a harsh way of bringing down prices and no garuntee that they will be proportional.

For example, do you ever see petrol prices fall in line with the prices of oil?

What?? Of course cutting wages leads to a reduction in costs - especially in some of the industries mentioned.

There are many other business costs and we need an across the board reduction in wages to reduce all business costs

sensibleken

Tipp Man wrote: »

What?? Of course cutting wages leads to a reduction in costs - especially in some of the industries mentioned.

There are many other business costs and we need an across the board reduction in wages to reduce all business costs

no what im saying is, a reduction in pay, especially for such low paid workers will not have a large effect on costs as other costs such as rent, utilities, rates, tax, licences etc are much greater expense and it would be of greater benifit to the sectors to tackle them than the wages of someone who barely earns €300 a week.

Tipp Man

sensibleken wrote: »

no what im saying is, a reduction in pay, especially for such low paid workers will not have a large effect on costs as other costs such as rent, utilities, rates, tax, licences etc are much greater expense and it would be of greater benifit to the sectors to tackle them than the wages of someone who barely earns €300 a week.

If your a small business paying 4 people 300 quid a week -being able to hire 5 people for the same 1200 can lead to a massive increase in productivity and really help the business expand. Don't forget the employers PRSI as well - a tax on employing somebody that's a great incenetive to employ

I certainly don't disagree with you that there are a lot of other expenses that need to be dramatically reduced. The whole system needs radicaly reform. From the costs you mentioned it is clear that these high cost are originated from government or government based organisations - like i said early the less that government has to do with business the better for the whole country

sensibleken

Tipp Man wrote: »

If your a small business paying 4 people 300 quid a week -being able to hire 5 people for the same 1200 can lead to a massive increase in productivity and really help the business expand. Don't forget the employers PRSI as well - a tax on employing somebody that's a great incenetive to employ

I certainly don't disagree with you that there are a lot of other expenses that need to be dramatically reduced. The whole system needs radicaly reform. From the costs you mentioned it is clear that these high cost are originated from government or government based organisations - like i said early the less that government has to do with business the better for the whole country

Well more staff does not neccesarily mean more productivity.

One of the arguements made against the hotelliers claiming that they could create 20,000 jobs by scrapping the JLC (a frankly ludicrous suggestion) is that it means that they either are currently understaffed or would voluntarily overstaff when they could have the same staff levels for less. neither makes any sense.

few people are of the opinion that everything needs to stay as is. Wages are coming down massively and have been since 2008.

I would not agree that the less government involvement the better. laws have to be there to protect vunerable workers, their rights and also anti-competitive measures such as price fixing.

Light touch or no regulation is dangerous as we have seen from the bank crisis. But yes, vast reform is needed and it is no small job. But the report in question recomended reform and Bruton is going for abolition. someting which is absurd

randylonghorn

meditraitor wrote: »

Thats odd, becaue I was readin an article (although not unbiased) from the IHF
http://www.ihf.ie/press/11-03-07jlc.htm


They must be lying I suppose,

Stats can be made to say anything, unless you watch carefully.

In this case they're probably not twisting them much ... but note that they're expressing labour costs as a percentage of *turnover* ... and turnover in Ireland at the moment is a lot lower than most of the countries being compared with it.

Hence not exactly lying ... simply emphasising the statistic that suits their argument.

There are a lot of near-empty hotels out there, being kept open for convoluted reasons to do with NAMA and tax-breaks and what have you, employing staff but with feck all turnover skewing the figures as well.

later12

sensibleken wrote: »

I cant help but feel that with kenny's rebuke that it was Brutons personal opinion and no decission has been made. That it was Bruton talking out of turn and making a mess of it. old rivalry perhaps?

Perhaps, but I would say what is far more relevant in Kenny's disengagement was the idea of antagonising the Labour ministers in cabinet, after all the cabinet had (have?) not yet discussed the findings of the report, and some Labour members have therefore described this as a 'solo run' by Richard Bruton.

later12

Deleted User wrote: »

I can see why they want to reduce Sunday wage rates, etc. So companies can create more jobs, but these will be low-paid jobs, probably only part-time ones. New workers won't even earn enough to contribute to tax revenues.

Of course new workers would contribute taxes, even the low paid staff, particularly PRSI and the USC. They would also be costing the state less in terms of welfare payments.

There is the argument that abolition of some of these rates causes welfare traps to arise, and these are valid criticisms, but there is no valid suggestion that new full or part time workers would not lessen the burden on the current taxpaying population.

the groutch

There is an assumption that businesses will automatically hire extra staff
most of them won't so the government will probably have a reduced tax take.
It will also put more people back into a position of being better off on the dole than working, and will lengthen the dole queue.

Tipp Man

the groutch wrote: »

There is an assumption that businesses will automatically hire extra staff
most of them won't so the government will probably have a reduced tax take.
It will also put more people back into a position of being better off on the dole than working, and will lengthen the dole queue.

Not if the necessary social welfare reform (reductions) is implemented as well

the groutch

dvpower wrote: »

It would, but I'd be inclined to think that if a full 18% of pay comes from the premium payment for working on one day, theres something askew.

my longest shift of the week, and double time

later12

the groutch wrote: »

There is an assumption that businesses will automatically hire extra staff
most of them won't so the government will probably have a reduced tax take.

I'm not really in a position to agree or disagree with you specifically on that assumption, but it is only an assumption and I don't think you can really be sure of this.

A business may not necessarily hire staff, but that is not to say that the measure of the benefit to firms of reforming the JLCs will be negligible to tax revenues, particularly whereby firms cut labour costs and inefficiencies and thereby survive where they might otherwise have failed, or where healthier firms expand or pass on benefits to consumers, stimulating the consumer economy.

Sand

I wonder does anyone still believe Labour is committed to getting the deficit under control when an entirely sensible proposal is attacked with such hysteria by the various vested interests.

later12

Sand wrote: »

I wonder does anyone still believe Labour is committed to getting the deficit under control when an entirely sensible proposal is attacked with such hysteria by the various vested interests.

Who are the vested interests, Labour or the report author?

Or people who think this is an unwise path given that Labour will not allow a serious tackling of the welfare bill?

brannid3

the groutch wrote: »

There is an assumption that businesses will automatically hire extra staff
most of them won't so the government will probably have a reduced tax take.
It will also put more people back into a position of being better off on the dole than working, and will lengthen the dole queue.

Completely agree with this comment, my employer would not hire anyone else and the business is already running on a skeletal staff like many other businesses in this country.

Good loser

Is it not against basic economic theory and commonsense to think that reducing the cost of a service (labour) will not increase the demand for it?

If the costs of a business are reduced that will increase the profits which will enable the business to survive or expand -potentially hiring more staff.

If these principles are not applicable (and commensense is a scarce commodity in Irish economic/political debate) increasing JLC wages and premiums should have no economic consequences for firms or employers.

Logically then these increases should also have no economic consequences for workers/employees!

Okay so the government might save a few bob on dole payments -IF businesses actually employ new workers. Most places are over-staffed at present, well in retail anyway.

The likes of Dunnes, Tesco, Penny's, etc. don't recruit full-time workers, most new employees will be on flexible contracts -probably 15-20 hours a week. So employees will still be able to claim certain benefits and possibly even dole if they only get less than 3 days a week.

What about the wage reduction for employees? This will lower their spending -depressing consumer spending further and subsequently VAT returns.

I was very disappointed when nothing ever came of the IMF's supposed cull of the public service. It really hasn't happened. Yearly increments ,etc. are still being paid.