This field of study addresses issues such as the factors militating against the adoption of growth-enhancing policies, even when politicians themselves might favour them, and the various sources of political cover that might be available to help resist such pressures. (Some of the bigger questions can be intuited from the way I’ve phrased these particular ones). A former student of mine emailed me recently to say that she found these topics “ridiculously interesting; it’s almost like reading gossip”. (Thank you, N!) I haven’t yet begun to model these processes (spent the semester boning up on game theory with the intention of doing so) but some of my musings on the topic (in the context of the last 50 years of Irish economic history) are available in this recent paper. I have discussed other examples of available political cover, such as the “golden straightjacket” of EU and WTO rules (to use Thomas Friedman’s phrase from The Lexus and The Olive Tree) , in other recent writings.
Month: December 2009
he Irish Times has a story reminding us of the runaway success of Dublin Bikes, the bike rental scheme in Dublin city. The question is why is this so popular? It strikes me that Dublin is small enough to cycle but too big too walk, while motorised public transport is inconvenient and taxis too expensive.
Dublin Bikes copies Velo’v in Lyons, which was introduced in May 2005. There is no academic literature on who uses these bikes and why (but there is work on the trips taken). Bike rental is typically presented as a complement to other forms of public transport. A look at the station map suggests that Dublin Bikes are used to get around the city, rather than get into the city. Bike rides would thus replace bus rides and walks. Assuming that Dublin Bus did not respond by changing routes or frequencies, that means that Dublin Bikes does not reduce emissions and increases congestion by putting more bikes on the road.
Morgan has an op-ed in the Irish Times describing the jobs and debt crises in Ireland: you can read it here.
This FT editorial outlines the challenges facing the euro area.
On budget day, the Minister for Finance announced that civil servants earning between €165,000 and €200,000 would take pay cuts of 12% while those earning over €200,000 would take pay cuts of 15%. Yesterday, with the public focusing on their pre-Christmas preparations, the government announced that this would not be happening after all.
These pay cuts have been rolled back for two reasons. First, the government announced that it was going to take into account the elimination of “performance-related awards” which had averaged ten percent of their salary. As a result it reduced the new pay cuts for some civil service grades to reflect the loss of this ten percent.
Second, it was decided that the differential rates of adjustment, with higher cuts for those over €200,000 would introduce anomalies in which there would be overlaps such that those on higher points in lower scales would have better salaries than those on lower points of a higher scale.
The statement points out the implications of the decisions taken:
The resulting adjustments including the effect of the termination of the scheme of performance-related awards produce reductions in remuneration of 14% in the case of the grade of Deputy Secretary and 11.8% in the case of the grade of Assistant Secretary.
Or, in other words, given that the bonuses were gone already, these measure will imply a cut of only 3% for Assistant Secretaries and only 5.4% for Deputy Secretaries (based on 0.882*1.1= 0.97 and 0.86*1.1= 0.946).
The Irish Times reports that a government statement said that it would have “been unfair” to these grades not to make these adjustments.
A couple of comments about this.
First, these performance-related awards were, as their name suggests, not guaranteed but (at least in theory) related to performance. This move appears to be an effective admission from the government that these payments were not in fact performance-related bonuses but part of the core pay of these civil servants. For a government that claims to be keen to introduce reform into the civil service (something that should include bonuses as incentives for good performance) this is a very unfortunate precedent.
Second, these bonuses were not pensionable. Because civil servants’ pension obligations are still based on the full pre-pension-levy salaries, this means that the pensionable salary of an Assistant Secretary has only fallen 1.8% this year. Senior civil servants close to retirement have been almost completely protected from the consequences of the fiscal crisis.
Third, the Review Body on Higher Remuneration, whose recommendations the Minister had claimed to be implementing, explicitly made its recommended cuts in terms of regular salary. This is not because they were unaware of bonuses. They stated:
the continuation of performance-related awards cannot be justified in the current climate. Having said that, it remains our view that such awards will have an important role to play in the future when economic stability has been restored.
In other words, their recommended cuts were in addition to the suspension of bonuses, which they recommended re-introducing at some point.
Fourth, it appears that senior civil servants are the only group in Irish society that get to count earlier cuts as part of their current cuts. For instance, the cuts to social welfare payments announced in the budget are in addition to the 2% cut related to the elimination of the Christmas bonus. Would the government consider changing its cuts in social welfare rates to take account of this?
Finally, perhaps it is cynical to suggest that this information was released just prior to Christmas in the hope that the public would not notice. If this was indeed the intention, somehow I don’t think it’s going to work.