In theory ...

Nasty_Girl · 30-09-2010 12:14PM #1

Hi everyone,

I have a question for you all.

First off let me say I am awful at economics, I tried studying it in school but that's as far as I got.

I have worked in both private and public sector in my short career and seen the good and bad in both so I am not biased either way.

My question is as follows,
If public sector wages were to be reduced (again) wouldn't private sector companies jump at the chance to knock down their employee's salaries too?
Surely if every working persons wage was reduced the banks couldn't repossess everyone's houses and would have to renegotiate the mortgages?
Wouldn't the price of living just have to come down?

Or would everyone just throw the keys back in the door and emigrate?

Is it because we really too heavily on imports and our national debt is too high?

I do realise that I am wanting to live in a dream world

Welease · 30-09-2010 12:20PM

Nasty_Girl wrote: »

Hi everyone,

I have a question for you all.

First off let me say I am awful at economics, I tried studying it in school but that's as far as I got.

I have worked in both private and public sector in my short career and seen the good and bad in both so I am not biased either way.

My question is as follows,
If public sector wages were to be reduced (again) wouldn't private sector companies jump at the chance to knock down their employee's salaries too?

They may they may not.. Some may use it as a chance to try and regain competitiveness, some don't have that issue and may choose to keep their current wages.. the essential difference is they have the free choice to do whatever, and most will do whatever is needed to stay in business.. the current PS funding model (i.e. the large defecit) isn't a situation that could be sustained in a private business long term.

Nasty_Girl wrote: »

Surely if every working persons wage was reduced the banks couldn't repossess everyone's houses and would have to renegotiate the mortgages?
Wouldn't the price of living just have to come down?

Or would everyone just throw the keys back in the door and emigrate?

Given the amount we have dumped into the banks, we could and should be able to lean quiet heavily on the banks and enforce a change on closure processes.. We have already extended a moratorium on closure, but I would like to see the banks be told to offer customers different options.. Mortgage extensions for example.. Germany (iirc) has 100 year mortgages, we could allow people to convert 29 year mortgages to 50 year mortagages (family mortgages), which would considerably lower their current monthly outgoings.

Nasty_Girl wrote: »

Is it because we really too heavily on imports and our national debt is too high?

I do realise that I am wanting to live in a dream world

Many factors are at play.. a lot of them being bad decisions and vested interests being compounded by further bad decisions and vested interests

jimmycrackcorm · 30-09-2010 12:32PM

Nasty_Girl wrote: »

Hi everyone,

I have a question for you all.

First off let me say I am awful at economics, I tried studying it in school but that's as far as I got.

I have worked in both private and public sector in my short career and seen the good and bad in both so I am not biased either way.

My question is as follows,
If public sector wages were to be reduced (again) wouldn't private sector companies jump at the chance to knock down their employee's salaries too?

Not likely because
a) It's very difficult to make comparisons between many Public sector jobs and private Sector unless there is a directly comparable job such as public vs private nurse.
b) Even with a reduced public sector wage, that would only bring it into line with private sector wages so private employers can't win the argument that their employees earn more
c) Everyone knows that the public sector hasn't had any pay cuts - They have been forced to pay for their own pension which people in the private sector also have to do (and still not as beneficial).

Surely if every working persons wage was reduced the banks couldn't repossess everyone's houses and would have to renegotiate the mortgages?
Wouldn't the price of living just have to come down?

That's too broad a questino to be relevant - you might as well ask why not tax everyone at 90% instead and see what effect it would have

Or would everyone just throw the keys back in the door and emigrate?

When times were really tough in Ireland - many emigrated but not everyone - most suffered and got on with it. My mother walked 5 miles to school every day in all weathers without shoes.

Is it because we really too heavily on imports and our national debt is too high?

We'd certainly be better off if we didn't have such an open economy but it's more a simpler matter of balancing the books just as companies or individuals do.

I do realise that I am wanting to live in a dream world

We had enough of the dream world during the boom - waking up after is the problem.

Hotblack Desiato · 30-09-2010 10:47PM

jimmycrackcorm wrote: »

c) Everyone knows that the public sector hasn't had any pay cuts - They have been forced to pay for their own pension which people in the private sector also have to do (and still not as beneficial).

This is completely wrong. Public sector wages were cut from 1st Jan 2010 as a result of the budget last year. The pension levy was the year earlier, and remains in effect.

When times were really tough in Ireland - many emigrated but not everyone - most suffered and got on with it. My mother walked 5 miles to school every day in all weathers without shoes.

Did she then write a schmaltzy book about it and make a fortune?

A lot of the problem now is (IMHO) there is a whole generation too young to remember the last bad times in the 80s, who rode the boom as hard as they could and thought the party would never end, or have to be paid for. So not only are they the hardest hit, they have no frame of reference of past experience of what living in a recession is like.

We'd certainly be better off if we didn't have such an open economy but it's more a simpler matter of balancing the books just as companies or individuals do.

Huh? We've done very well out of having an open economy and will do so again. The only sector that's doing well are our exporters, and as a nation we will rely on exports to recover. Selling overpriced houses to each other generated no net wealth, as we're now finding out.

The side effect of being a small open economy is that we are very exposed to global trends and currency movements (but as a small country, that is inevitable anyway unless we want to isolate ourselves to the extent of Albania or North Korea.) The euro has helped with the currency volatility but it's still a factor because we do so much business with the UK and US. Historically we tend to be hit harder in a downturn but do better in an upturn precisely because we are an open economy.

In theory ...

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