The question of achieving an ‘internal devaluation’ has been raised in a late contribution to the previous thread. It deserves more attention than it tends to receive on this site.
The phrase refers to improving competitiveness in the absence of a national exchange rate by reducing costs and prices relative to those of competitor countries.
Labour costs are a major component of domestic costs and one over which we retain ‘sovereignty’.
In March Eurostat published some relevant data on hourly wage costs. (Today’s Irish Independent carries a summary of the report.)
In 2011 Irish hourly labour costs were €27.4, which was 99.3 per cent of the Eurozone (EZ) average of €27.6. In 2008 (the peak year) Irish labour costs were 105.7 of the EZ average, so there has been some improvement in this measure of our competitiveness.
However, Irish costs remain much higher than those in several EZ countries. Here are some relevant comparisons: Spain €20.6, Slovenia €14.4, Portugal €12.1 and Estonia €8.1. Outside the EZ the UK figure is €20.1, while the US Bureau of Labor Statistics gives a figure of $34.2 for hourly labour costs in US manufacturing in 2010 compared with $36.3 for Ireland.
Obviously all EZ countries cannot gain competitiveness relative to each other by reducing labour costs, although the EZ as a whole could become more cost-competitive relative to the rest of world by this strategy. However, I think it is clear that we would have to wait a long time to see any dramatic results from this source either in Ireland or in the EZ as a whole.
84 replies on “Labour Costs”
How credible is the statistic of €27.4 per hour for Ireland in 2011. For a 39 hour week this equates to an annual ‘salary’ of €55567. It seems far too high to me.
[However I do work in the traded goods sector where labour rates tend to be much lower than in other areas of the economy.]
If Ireland adopts a strategy to compete on labour costs with Estonia to improve overall national competitiveness then we really are stuck in a black hole. Ireland’s unit labour costs relative to other small open economies in Nordic and Alpine Europe are below average. When it is broken down by sector and hourly costs, it is lower again.
It is these countries we have to measure ourselves against. See the Eu Klems database:
But there is a broader point to using unit labour costs as a measure of competitiveness. It ignores the distributional implications. Few would doubt that unit labour costs at firm level are important for competitiveness. But it is quite another thing to generalize from the firm to the whole economy. The implication of doing the latter is that it is assumed that a lower level of labour as a share of national income increases national competitiveness.
There is not a shred of empirical evidence to suggest this is the case. In fact, the most competitive economies in the world have a significantly higher share of national income going to labour. In the current economic climate whereby there has been a collapse in domestic aggregate demand we should be talking about how to adjust on unit capital costs, not unit labour costs.
It is important to remember that social security contributions (as well some training costs and other less important components) are included in ‘labour costs’.
Brendan, are there similar tables to compare the cost of living in those countries? I bought into the ideological argument of the necessity of internal devaluation some years ago, but so far I’m not seeing the cost of living decrease much.
Some of that is beyond our control e.g. fuel (assuming talk of reducing the tax element is futile). Issues like GPs fees are being addressed now via the Competition Authority. Food prices appear to have come down (but that’s based on my own zealously thrifty approach to shopping so not sure if it applies across the board) and of course house prices too. Low interest rates will flatten loan repayments. I’m not sure what’s happening with rents.
But as far as I can see, professional fees, insurances, utility bills etc, are all increasing. What effect do they have on the devaluation project/policy?
“Ireland’s unit labour costs relative to other small open economies in Nordic and Alpine Europe are below average.”
What about other English-speaking countries like the UK and US?
I wonder how much of the EUR 27.4 per hour can be attributed to gouging in Paul Hunt’s sheltered sectors TM.
If the legal and medical and other professional gougers were brought back down to EU 15 average what would be the impact? It could be more beneficial than a PD style tax cut, would slash bottlenecks and be a winner all round.
If it was good enough for taxi drivers why not spread the love?
When will the government tackle the commercial property cartel who have imposed our ruinous commercial lease law i.e upward-only rent reviews tied to long leases, on all commercial tenants.
Surely this is economic treason.
Are most EU members subsidizing multinational corporations who are tax-based in tax havens like ireland, pay no almost no profit tax there, but have their relatively low-paid staff supported by UK, German, Italian, etc taxpayers’ money which goes on tax credits (and possibly in some cases housing benefits/rent supplements/mortgage supplement etc to these staff?
“If Ireland adopts a strategy to compete on labour costs with Estonia to improve overall national competitiveness then we really are stuck in a black hole. Ireland’s unit labour costs relative to other small open economies in Nordic and Alpine Europe are below average. When it is broken down by sector and hourly costs, it is lower again.
It is these countries we have to measure ourselves against……”
IMHO apart from comparing labour costs with the UK (which fluctuates subject to exchange rates, higher corporation tax and other non wage related costs) you are being very selective in your comparisons by selecting to make comparisons with Spain, Slovenia, Porugal and Estonia instead of countries like Germany, Denmark, Holland and Luxembourg.
The latter (along with Ireland) have been in the EU/EEC much longer than four of the countries you mentioned which have very serious inherent economic and political and historical problems.
It would also be wise to understand Estonia,IMHO, a bit more and what is happening within that country .Events there reflect some of the extreme developments which are happening throughout Europe thus making Sacandinavian states very concerned compounding their serious concerns about Finland`s new parliamentary composition.
IMHO statistical comparisons between Ireland and a country such as Estonia which has no domestic banking system, a huge emigration challenge and has just experienced the most serious wave of stikes since WW2 initiated by middle class/professional groups (in addition to other extremely serious politcal problems some of which are legacies of another Union) do not contribute anything to our general knowledge.
Slovenia was lucky to escape the atrocities of Former Yugoslavia in the last 15 years, Spain has 1in4 workers unemployed (over 50 % among under 30`s) and was a military dictatorship when Enda Kenny was first elected to the Dail while Portugal was still a military dictaorship when Ireland joined the EU/EEC and is currently a “bailout” state with massive stuctural challenges.
I have no doubt you will demonstrate more respect/appreciation for your readers understanding of commerce and socio/economics as well European Public affairs in your future postings on this excellent site 🙂
We do need our own national exchange rate with our own CB to manage it. The financial sector has become too costly. Legal fees, upward only rent reviews, cost of banks born by taxpayers, Croke Park, deflation and minus GNP, vat rates, business is becoming unviable in Ireland. No wonder unions are voting ‘No’. We cannot afford the high cost of the euro measured in deflationary austerity and no tax increases where tax increases are masked as hidden charges. We’ve also to bear the high cost of senior officials in DoF
who’ve made mistakes in the past, or same in banks, unsanctioned and still in situ, as they lead this country to further bailouts and more austerity. Outside the euro, this country can regain competitiveness. Within the euro its more protracted lawsuits feeding the legal profession, dissipation of fortunes, locked in the euro asset bubble, more Bleak House cassandra’s calling for the mess to end 🙂
No future here in a low-skill low-wage economy … class and education system, and a certain minister for enterprise who thinks that dumbing down 40% of the labour force represents progress!
Would like to see a similar analysis on:
[ii] Unit Capital Costs
[iii] Skill levels of labour
[iv] Technological sophistication
… spread the love.’ Love to see it …
oops drop the ‘e’
bit of a stickler for precision an all dat!
Good paper – I’ve refs it on the site previously. Unit Capital Costs are too often ignored ….
‘ In fact, the most competitive economies in the world have a significantly higher share of national income going to labour. In the current economic climate whereby there has been a collapse in domestic aggregate demand we should be talking about how to adjust on unit capital costs, not unit labour costs.
Well worth reading – admittedly the dual nature of Irish economy has to taken into account on the graphics …. [h/t Marx on the capital-relation relation (wonder does anyone teach this anymore in UCD?)]
“The phrase refers to improving competitiveness in the absence of a national exchange rate by reducing costs and prices relative to those of competitor countries.
Labour costs are a major component of domestic costs …”
For the non-economists amongst us, could you tell us what the other (non-labour) ‘costs and prices’ are. I wonder if any of those have come down – other than property, and regardless of what any statistics may say otherwise, prices never seem to be doing anything other than going up in Ireland it would seem to me?
All the household and business bills pass through my hands at some stage and insurances, health care, office rent, utilities, TV licence, car tax, petrol, phones, accountant’s fees, etc. etc. (not to forget soon to be property and water taxes) only seem to be going one way. I would dread to think what a larger company (I am only a very small one) would be seeing by way of increases in rents, professional fees, transport, communications, insurance, utilities, equipment maintenance, logistics, etc. In short, I would be mighty surprised if – disregarding labour costs – Ireland is anywhere near ‘a cheap place to do business.’
With regard to the labour cost figure, my guess is that if you took out a small percentage of very high earners, who probably skew the average of €27.4, you would get a different picture.
Also, is it reasonable to compare the cost of (I presume a fairly highly skilled) Irish worker with (I presume a less highly skilled) Estonian or Portugese worker? If we are currently below EU average and we’re pumping out high tech goodies and drugs, surely that means we are actually punching above our weight? Not that I want to sound to ‘JTO’ about it!!
Out of interest, do you know the 2011 hourly wage cost for Greek workers, who are also being told they need to reduce their wages to become ‘more competitive’? I would be surprised if they were on €27.4 per hour.
If all these ‘competitor countries’ are trying to out-cost/price reduce each other, where will it all end up? Will Chinese and Indian companies start outsourcing to us?
Wouldn’t it just be easier to go back to our own currency? Austerity is so 2011.
“Food prices appear to have come down (but that’s based on my own zealously thrifty approach to shopping so not sure if it applies across the board)”
Mrs PR Guy continues to assure me that she has to adopt a similar thrifty approach as, other than the odd ‘bogoff’ deal, food prices in M&S continue to rise and until things change, my 10-week aged Aberdeen Angus fillet steak, oven chips and bottle of claret on a Friday night are off the menu. If I’m lucky, it is now a 2 for 1 dine in and watch a Rabo Direct league game on RTE 🙁
If I’m unlucky, it’s a spag bol and Graham Norton 🙁 🙁
Perhaps we could have upward-only wage reviews on thirty five year contracts
.Wages to be reviewed every five years to the highest in europe and the fifth highest in the world.
Like the commercial property cartel.
Re Estonia and Ireland.
In Estonia minimum wage (and labour cost) are 20 % of the “average” labour cost.
In Ireland minimum wage and labour costs are 30% of the average labour cost.
Anecdotal evidence also suggests that skills cost/productivity comparison across the private sector(Estonia has a huge skill shortage because of emigration) between Ireland and Estonia the difference between Ireland and Estonia can be as little as two to one without taking into account other “business environment” factors.
Brendan — Regarding your concluding remark
” I think it is clear that we would have to wait a long time to see any dramatic results from this source either in Ireland or in the EZ as a whole. ”
In the case of Ireland the drop in 3 years from 105.7 % of EU average labour costs to 99.3% seems fairly big drop for this economy-wide average?
Brendan, do you know of any economist who could defend the social scientific validity and reliability, in economic terms, and based on sound empirical evidence, of the three main constraints within the so called ‘Fiscal Compact’ – 0.05%, 60.00%, 1/20?
Could you defend it? Publish it in a reasonable or even 5* economics journal? Or would you chuck it in the bin were you to review the Fiscal Compact if presented for your evaluation as an Emiritus of Standing?
Personally, I suspect you would chuck it in the BIN.
Intergalactic text from Seven_of_9
Hi Gregory. As you have not taken up the challenge, I Know that you have met “Q”. Could you ask “Q” if he can figure out the Fiscal Compact please. Refer to DO’D here at 10.46 old earthling time.
Meanwhile, the EU is proposing a 6.8% rise in its budget. I wonder what the average hourly cost of a worker is in there?
It would be an interesting one to find out.
Aidan r: i think you are confused and wrong on a couple of things. If a firm’s unit labour costs are high then this reduces its competitiveness. That does indeed generalize to the economy since the economy is just the sum of employers.
I wonder when you say “there is not a shred of evidence…” how far have you looked? There is overwhelming evidence that the labour demand curve slopes down at the firm and aggregate level. Would it not be remarkable if we could all just pay ourselves more but with no threat to our international competitiveness?
Its unhelpful to talk about labour shares since they are not really relevant. Competitiveness is essentially about prices (w/P), the price of hiring a worker for an hour say, whereas factor shares are say w*L/P*Y – allowing for the additional costs that Brendan mentions like PRSI.
The discussion of ‘labour costs’ seems stuck in a Time warp that existed some decades ago. You all do realise that Chindia has joined in, so all previous comparisons have to be chucked away.
What you have to do is to consider Ireland as an isolated case – in the context of non-exportable employments. If you are discussing exportable employments (and their respective employers), then you start at the current Chindia bottom line. And that is a very unfunny place indeed. I hear that they are exporting their grads, who are prepared to work for the equivalent of their own national rates. That’s competition for ya! That’s even more unfunny for the indigenous locals.
By my reckoning, I would have to earn (nett of all charges, taxes and other deductions), not less than E 8.50, per hour, for a continuous 40 hr week. That is, I actually get E 340 into my hand; (17,680) per annum. This represents the lower level of subsistence in Ireland – I cannot save anything. So, think about this folks.
I cannot raise a family on that income. I cannot purchase my own home. I rent a one room apartment – with low-level amenities. I cannot purchase health or life insurance. I cannot purchase and maintain a car. I cannot go on holiday. I buy my cloths second-hand. In effect I am a marginal, lone consumer. How’s that for being competitive? How’s that for being able to ‘grow’ our economy? You want to go there? No. I thought not. But a lot of our compatriots have incomes below this level. I think some folk need to get real real PDQ. In two/three years our increasing food and energy costs will impact hard.
Hungry folk have very short tempers.
Must look at value added – what goods/services produced – real productivity and competitiveness beyond simplistic labour costs [an abstraction without a context] profits and marketing – there is simply no future for low skill low paid manufacturing or service production – class and education system is producing too much human capital at this level and we can no longer afford [or compete in] a context at this level …. it is as unsustainable as our vichy_financial system debts. We have never really been ‘industrial’ so how to get to the next level? Big Problemo … our thinking, ambition, and [take your choice] are not yet good enough – in pockets yes – in general NO. It demands a revolution but the ‘having’ as distinct from the ‘doing’ class are still in control …
@Brian Woods Snr
“Hungry folk have very short tempers”
And hungry folk with hungry children even shorter tempers.
Re. your point about Chindia grads going abroad for the same rate of pay as at home.
In a previous incarnation, many years ago, I had a team of Indian guys (professionals/graduates) working for me in Cardiff. They were indeed being paid the same as they received at home. Their generous employer did though hire two 3-bed houses for them to live in for the duration of the contract….. all 27 of them. Fortunately, the canteen at work was free and I managed to persuade the wonderful lady who ran it to put on a vegan option every day (it was all they would/could eat) so that they were at least getting one square meal a day.
I can’t say I know any home-grown Chinese graduates who work over here but I have met plenty of Chinese females studying at third level over here. I can’t think of even one whose parents aren’t in some group of ‘elites’, they don’t work very hard (it all seems to be a bit of a swan/right of passage for them to study abroad and party), and after a year they are dying to get back home to lead their more privileged lifestyles as more than a few months of mucking in with others seems to get a bit tiresome for them after a while.
Since 1922 Irish people in Ireland have held on like grim death to whatever advantages they had. The professional silos of today are but a small part of it. Behind high tariff walls and non tariff impediments to imports we built privileged protected sectors where a significant number of people had a reasonable standard of living by Irish standards. Our lack of competitiveness in overseas markets meant that our main export was people. For decades the only two countries that lost population was East Germany (GDR) and Ireland. The East Germans built a wall to curb emigration while in Ireland a majority heaved a sigh of relief that the emigration safety valve work so well.
I cannot see the protected sectors in Ireland making concessions that would improve the lot of the population as a whole. People in export oriented industries have already made concessions and will continue to improve productivity or take more pay cuts. The Gov’t of course is an innocent bystander.
Our low corporate tax rate is being threatened by the outcome of elections in Europe. The best we can hope for will be closer to 20% than 12.5%.
We should applaud the Gov’t on its consistency, minimum wages cannot be touched and neither can the professional silos. Our well paid TDs’ sit in the Dail but their main function is to tinker with irrelevancies on the edges such as water meters. We are easily distracted and mollified.
Of course the TDs’ main function is to collect contributions for the cause and get our passports renewed within five days. The contributors determine the cause and it is not the cause of the common people. Sometimes even I am distracted.
Very interesting transport 2009 / 10 Omnibus published this morning.
The only public transport system recovering to near 2007 levels is the Luas red line & Limerick buses it seems.
Y2007 R.L. passenger numbers :15.825 million
Y2009 :13.633 Million
Y2010 :15.606 Million
The Green line is recovering a bit But Dublin & Cork busses have collpased.
Dublin bus passenger numbers :Y2007 : 147.532 million
Y2010 : 118.976 million
Cork city : Y2007 :12.6 Million
Y2010 : 9.4 Million wow !!
Limerick Bus travel is improving for some reason perhaps because many of the poor bastards can’t afford cars now.
Limerick city : Y2007 : 3.5 million
Y2010 : 3.4 million
I have never seen Transport data such as this……… it is clear people simply do not have enough tokens in their pocket.
Its amazing we did not have a devaluation already , simply amazing.
The euros role is a misallocation of resourses is clear to see in the final chapter….Prices from 2000 to 2010
The prices of new & second hand cars have decreased by 3.5%
The price of bus fares have increased by 59 %
The price of taxis have increased by 58.9%
rail fares by 54.5 %
This is the primary reason why we are exporting our money supply to oil & BMW merchants.
We are operating withen a absurd & extremely non optimal monetary system where the poor are not provided with enough tokens to simply move around.
The Euro is a manifestation of pure evil.
@brendan Walsh / @others
re ‘Social Security’ costs included in average hourlry wage.
Do we take it that Employers PRSI and Employer contributions to pension scheme form part of the €27.40?
We know that ER PRSI is 10.75% and let say ER contributios to pensin average 5%, that still leaves a net wage of €23.04 per hour or €46812 annualised wage based on a 39 hour week.
We are told that the average ‘industrial’ wage is ~34,000.
The only conclusion is that there are very significant number of above average ‘non-industrial’ earners who are driving up the ‘labour’ rate to ~47000.
It seems odd that in a country where the focus is on industrial exports and competitiveness, that it is the ‘non-industrial’ sector that drive up the cost of the economy.
“If it was good enough for taxi drivers why not spread the love?”
The Flower Power has clearly wilted on our green island.
the “average industrial wage” is somewhat meaningless for an economy which is more and more services (which is typically higher value) based, i would’ve thought? Think about where jobs are typically being created and where they are typically being lost.
Car traffic is also down Dork. Cycling is up. Dublin bike journeys growing massively….Perhaps the rise of social media means teenagers, students and other groups are doing their hanging out virtually instead.
“However, I think it is clear that we would have to wait a long time to see any dramatic results from this source either in Ireland or in the EZ as a whole. ”
Er, yes, quite.
How much experimental evidence will it take to allow an at least interim conclusion that in the absence of actual cash shortages, internal devaluation is not going to happen in Ireland to the sort of extent necessary to give a notable boost to activity via competitiveness gains?
How many years will it take for that to be accepted as the political reality which economists, at least macro-economists (aka scholars of Political Economy) should recognise?
General costs would have to come down, not just labour costs. This is chicken and egg stuff. What is the plan for compressing the timescale of cost reductions it labour costs are to lead?
Google doesn’t require lower labour costs. Small, non-unionised private sector businesses have reduced costs or headcount quite a lot. Many professional sectors are sheltered not least by government contracts. The public sector is allowing its some of its most effective people to choose to retire or volunteer for redundancy.
The government is jumping through hoops to try to reduce PS labour costs through “allowances” because it thinks these are not covered by Croke Park. The unions are claiming these are part of peoples “packages” and cannot be touched.
Lets stop pussy-footing around here – the whole thing is a sham, and a sham that speaks volumes about the power structure within the Irish Economy and the timidity and weakness of political leadership in the state.
I had meant to get round to mentioning this before, but the Croke Park Agreement has a self-destruct clause in it. Unless you are prepared to argue with a straight face, that the budgetary outlook as foreseen in March 2010 (half a year before the IMF were called in) did not ” deteriorate” then you have to accept that the government has NO OBLICATION TO IMPLEMENT the Agreement.
With specific acknowledgement of the effects of paragraph 1.28 as follows.
” Q Is there a ‘get out’ clause that would let the Government introduce more pay cuts even if we co-operate with change?
A No. Clause 1.28 of the agreement says: “the implementation of the agreement is subject to NO CURRENTLY UNFORESEEN budgetary deterioration.” There were similar clauses in all previous national agreements. The Croke Park clause reflects the reality that an unforeseen shock to the economy – like the collapse of the banks around the world in 2008 – would create a new economic and budgetary situation.
The clarifications IMPACT got from the Labour Relations Commission confirm that the implementation of paragraph 1.28 “will be applied in a bona fide manner by the Government side” and that “it is not envisaged that, on the basis of any currently known facts, that the clause would be utilised.” The clarifications also confirm that, if such a situation were to arise “the parties would meet at central level (i.e. Government/ICTU) to discuss the circumstances that had arisen and the implications for the Draft Agreement prior to any decision being taken that would adversely affect the pay provisions of this Agreement.”
What does it say about Ireland that only anonymous analysis picks this up?
What does it say about the country that its economists with public profile either a)haven’t noticed this or b) think it such a trivial question that it is not worth bringing to public or journalistic attention or c) are unwilling to mention it in public fora?
If you want to compare Chindia with Ireland you have to use Purchasing Power Parity of Esteem
1000 Euro in India will buy you so much more than the same in Ireland .
@Bond. Eoin Bond.
“average industrial wage”
I am not clear now this is defined or arrived at but assume that all ‘industrial’ companies would be included. (i.e Software companies etc). Clearly you think that may not be the case.
Perhaps somebosy from the CSO may comment on what wages make up the ‘average industrial wage’.
Don’t you find that sad ?
The hanging out virtually bit (not the cycling)
We are dealing with a monetary anomaly.
People don’t seem to realise they have crossed a monetary event horizon with the Euro.
Labour is being crushed into a infinitesimal point now.
It (the Euro) is a great destroyer of physical & human resourses by cheapening the price of imported capital goods at the expense of domestic labour which as become expensive in old Punt values.
It has changed society in ways people cannot even imagine.
Destatis has a table here of non-wage costs:
According to the OECD, the French employer social security tax is an average of 30% of pay; Germany’s is 16% but workers pay more than a French counterpart.
Denmark funds social security from its tax system.
Ireland and the UK have low social security costs of 10% of pay but for Irish workers this comes at a cost of pensioner poverty while counterparts and politicians, in the public sector have a generous system.
Last year, research published by the German Macroeconomic Policy Institute (IMK) showed that in 2010, the average hourly labour costs (including social security costs paid by private sector employers) were €28 for the Irish private sector and €34 for the Irish public sector.
The rates for Germany were €29 per hour in both sectors; Finland’s rate was also €29 in both sectors and the UK was €20 per hour in the private sector and €21 per hour in the public sector.
So the Irish public sector had a premium of 21% before accounting for the benefits of the special pension scheme.
@ John Corcoran
This thread is about labour costs: so just briefly, you appear to have agreed a lease at a time when so many had believed that the free lunch had been invented and the small minority including myself were dismissed as cribbers on the sidelines.
The government parties have reversed manifesto commitments because of legal advice that landlords would have to be bailed-out.
Short of a state of emergency, how can your foolishness be ameliorated without tapping the taxpayer again?
Irish labour costs do not need to fall to levels in PT or EST. There is widespread evidence of workplace change and flexibility, alluded to by Kieran Mulvey, LRC, at a recent ESRI seminar. Most firms have not cut basic, core pay, nor do they seem to want to.
Irish lab costs have already fallen to just below the EA average. What need to fall are legal, accountancy, medical and property costs, not wages.
An IMF official, living in Bruss, mentioned the high rates charged by GPs in Irl
With so many unemployed sol, why aren’t legal costs falling more?
Health reforms like UHI must include reducing medical inflation.
Electricity and telecoms costs are still too high.
If you take the PS (which has had its pay cut by 15% on average) out of the equation, what do average hourly Irish labour costs look like? I’d say there’s been no reduction at all.
@ Stephen McNena
We do have a template of an economy that introduced reforms in response to an economic collapse; its net debt as a ratio of GDP is now a negative of more than 50%; it has no private schools and no league tables where playing rugby can give a lift for a job, as there is little variation in the standards of schools; it has no private universities and no tuition fees; teachers are required to have a minimum of a master’s degree and competition for university places are highest for teaching-related degrees not medicine and law; the equivalent of the Leaving Certificate is the only standardised exam; teachers have a lot of autonomy and the level of homework required is low; in the past decade it has been among the countries with the highest achievements in maths, science and literacy.
Finland radically reformed its educational system following the collapse of its economy in the aftermath of the disintegration of the Soviet Union in 1991.
It pays its teachers well as they are comparable with earnings of medics and doctors – – but still lower than levels in Ireland.
In 2009, the rate for a primary teacher after 15 years was €50k in Finland and €68k in Ireland according to the OECD. It was €61k at upper secondary level and €68k in Ireland.
In Finland in 2009, a Finnish GP’s pay was 1.8 times the average wage and 3.5 times in Ireland; a salaried specialist earned 2.6 times the average wage in Finland and 4.5 times in Ireland.
According to the OECD’s Education at a Glance 2011, Finland spent 5.8% of GDP on education in 2008; Ireland spent 5.6% (Ireland’s GDP is inflated by the profits of foreign multinationals and GNP is about 20% lower. So effectively Ireland spends more on education than Finland). The United States spent 7.2%; South Korea 7.6% and Norway 7.3%.
Oil-rich Norway compares poorly compared with Finland and it has teamed up with Statoil, the state oil company, to recruit maths and science teachers.
Teachers pay in Norway is low compared with that of other graduates.
I don’t think that PS people/earnings are included in the equation as they are not considered to be ‘workers’ or to do any ‘labour’ (God, I’m going to get panned for that one – but I’m just feeling mischievous today).
On a more serious note, if you took PS figures out, surely that would lowere the average not increase it?
31st May choice of referrendum date, up to the usual standards. Hoocudanowd.
Not sure if its sad or not, there are benefits, less road deaths etc… It’s a world wide phenomem, driving licenses to young people in the US are down significantly http://climatecrocks.com/2012/04/09/for-millenials-a-car-can-be-drag-city/ from peak for instance. In addition to social media, I think a generation of Americans are growing up fed up with the suburbs and heading for the cities.
The same kids grew or are growing up with Ale Gore documentaries and the general green agenda which may be having an affect. Of course their fuel prices going from 1/4 our rate to a 1/2 ours, ie doubling, is hardly an incentive, but there have been car efficiency gains which offset some of the price increases.
I can’t imagine why we’d be much different, for instance those Irish coming of age now or in the future, brought up in the back of a car on the M50 would hardly be aspiring to settle in the same commuter ‘towns’ (read soul/service/community/publictransport less super estates) their parents brought them up in. Theses places are the unfortunate hate child of our planning ‘system’ and ‘boom’. Normalizing property prices mean future generations (in mortgage worthy employment) won’t have to put up with it. Which of course isn’t good news for some of these ‘towns’.
As for the euro, I’m pro punt but I’m nervous about how it’d be implemented, unknown unknowns and all that, could the gombeems pull it off without setting us back yet another 20 years, or would we get a trophy for the worst currency botch up of all time to put beside our most expensive bailout of all time one?
@grumpy on Hollande’s insistence that the Fiscal Compact be renegotiated if he is elected – “But the treaty [as is] will not be ratified by France”.
The Irish establishment has managed craven and inept yet again.
I wonder will a FG/Lab spokes-qusiling come out in support of Merkozy and the many merits of the suicide pact as stands, al la the UK’s New Labour supporting Bush for re-election in order to avoid not to lose face over Iraq.
The only way to retain credibility is to never admit making a mistake. Strong determination, difficult choices, etc, etc…
Mobility does not necessarily mean car based transport.
The collapse of public transport does not make any sense from a resourse / national economy perspective….and makes a mockery of “austerity” and indeed explains why it is failing.
The Euro has created perhaps the greatest misallocation of resourses in Human history as its creation has had global effects, especially on the so called BRICS via a capital / slave arbitrage regeime of epic waste ever since about 1987.
We are dealing with the greatest monetary failure in human history.
Almost every human activity since about the mid 80s has been destructive of the core capital base.
Hollande will not change the structure of the existing FC. What he will seek to do is have a Growth Compact implemented side by side, specifically using EIB and unused structural funds for investment in new technologies. He may also seek “investment” to be stripped out of deficit figures. But i am fairly sure the FC will be ratified by France more or less in its current format.
i certainly dont think “software” would be “industry”. Pharma would be, but then is pharma R&D considered “industrial”? I would suggest software and R&D would be services regardless of the company. I believe within the public sector, the ESB and similar get counted as industrial, fwiw.
One hesitates to criticise another’s spouse, but if she’s still shopping in M&S I must question her commitment to reducing domestic expenditure 😉
I can be contacted privately for a masterclass in slashing domestic budgets.
Here’s one for free: cut the dishwasher tablets in half.
My thinking was that most of the reduction in the average wage from 2008 until now would have taken place in the public sector: in other words, that such reduction as there is in the statistics would be accounted for by the two wage cuts in the PS.
But if the PS isn’t counted, then I guess that can’t be correct.
In case it’s any use the data used in today’s article came from this Eurostat press release dated April 24.
@Bond. Eoin Bond
The FT piece suggests that what Hollande is looking for is, shall we say, at odds with the spirit of the Fiscal Compact and that the Fiscal Compact will have its intent thoroughly subverted, either by direct amendment, or a sister agreement ratified at the same time. The fewer fools have ratified it the more completely it is likely to be gutted.
Hollande sets out growth pact proposals
It is still questionable whether Hollande can win, as the French right gets desperate there will be a coalescing of the forces of finance, authoritarianism and bigotry which will try to keep Sarkozy in, by hook or by crook. Even if this does come to pass Sarkozy has not ruled out having a referendum on the compact, if the rising tide of loathing for the apostles of austerity in Europe makes it more politic for him to have the French public reject it that is exactly what he will do. “Will of the people” he will sadly tell Angela.
The Axis of Austerity is visibly reeling, and in the end there may only be Germany left.
Whatever the outcome of the French election and the negotiations to defang the Fiscal Compact I think we can all agree that the prudent thing would be to wait and see and not have the referendum in Ireland until absolutely necessary – December 28th. Technical or legal difficulties Mr Gilmore – they might save your seat.
The Germans think that anyway: http://www.euractiv.com/euro-finance/mp-bundestag-ready-accept-cosmetic-changes-fiscal-pact-news-512349
cant they have the referendum, but wait to actually sign the legislation into law?
@Michael Hennigan forgot to mention that there is no audit culture for Finnish teachers, no yammering for “accountability,” no KPIs, no system-wide testing of teachers, no incentives or disincentives, no firing of teachers. What there is are high levels of autonomy and respect for teachers.
There are no virulent anti-PS campaigns in Finland of the sort that Michael Hennigan is embarked upon. Why not? Because they have confidence in their public sector. And because they have confidence in their public sector, the workers in that sector are not over-administered and audited (indeed, the teachers aren’t audited at all). And because they are not over-administered, they do not have a bloated bureaucratic auditing top layer wasting money. And because they don’t have a bloated bureaucratic top layer, their PS is very efficient. And because their PS is very efficient, the public have confidence in the PS. And because the public have confidence and lets the teachers get on with their jobs, the teachers are willing to work for less money than they might get elsewhere. It’s a virtuous circle.
In short, Michael: your campaign (inspired by the Independent newspapers) is one reason why Ireland can’t be Finland.
@seafoid…. If you want to compare Chindia with Ireland you have to use Purchasing Power Parity of Esteem
No you dont…. Im based in Ireland and working with a team of ‘developers’ in India… I’ve spent most of the last decade working with teams all over Asia, Eastern Europe and the middle east …
Just as well 99%+ of them are shit…Long may they stay shit… because if they ever get vaugely competent … Im screwed 🙂
If they did that it would enable the ‘Yes’ campaign to say it is right for many of those opposed to the Treaty as is, to vote for it, because in practice they are really being asked to vote on something not yet known but which will probably be slightly different – and possibly more acceptable to some of the potential ‘No’ voters.
That sounds a bit of a bonkers way of doing things to me – or am I missing something?
Understand where you’re coming from but my thinking was simply I read so much about ‘equivalent’ jobs being paid more in the PS (even after the cuts). But then of course there are PS jobs where there probably isn’t an equivalent in the private sector and they may well be low paid jobs.
The short answer is I doubt that anyone really knows who’s had what wage cuts across the board. It’s not something the private sector really talk about – bad HR practice or something. Can’t have all my financial services employee colleagues fessing up to not receiving a bonus or prp this year…. bad for the masculinity and all that.
The Finns also shut down all the small rural schools and made a virtue of increasing school sizes where they could achieve a centre of excellence style culture. I think in total they closed almost one third of the primary schools. They have a distributed rural settlement not unlike ours, but look at the shrieking going on over closing a handful.
This is seriously off topic on the labour costs question, so my apologies. I am with @Aidan R on this one.
@Bond. Eoin Bond
I do not know how it would stand legally but it would make it politically more fraught, in an international context, to reject the compact. Far easier to wait until October, check if Germany is isolated and then get the country to reject it. Also, is there even any draft legislation that the referendum will enable to let us know what exactly we are saying yes to?
On that front the referendum itself is a bit dodgy, do yo not think, with its commitment that no legislation required by the Fiscal Compact can be challenged constitutionally?
A bit of a movable feast where we do not select the menu or the saint. I half wonder whether the plan is to use the compact as a fig leaf for when the real orgy of austerity and privatization begins with the government parties telling a shell shocked public “We asked you whether we could beat you and you said yes.”
Similarly off-topic – but since I haven’t noticed the ‘No’ campaign making much of it…
“On that front the referendum itself is a bit dodgy, do yo not think, with its commitment that no legislation required by the Fiscal Compact can be challenged constitutionally?”
It is even more strange than that:
“There seem to be 2 parts to this:
1. “No provision of this Constitution invalidates laws enacted, acts done or measures adopted by the State that are necessitated by the obligations of the State under that Treaty”
The question would likely be resolved by asking the question of the state’s act or proposed act “Is it necessitated by the state’s obligations under the treaty”. If the state argues that the act may not be the only way of achieving something, but is the most sensible, it will not conflict with the constitution – unless you can demonstrate otherwise.
2. “No provision of this Constitution…prevents laws enacted, acts done or measures adopted by bodies competent under that Treaty from having the force of law in the State.”
This seems quite interesting in that it would appear impossible for the constitution to interfere with anything that “bodies competent under that Treaty” do (laws, acts, measures) – theoretically no matter how bizarre, even if they are not “necessitated” by the Treaty as such.”
Discussed previously here:
No counter-argument to the weirdness pointed out above was forthcoming.
The whole thing seems to have been organised by Fas trainees.
Who could be considered ‘bodies competent under that Treaty’? Could bodies outside the State or not answerable to the State be considered ‘bodies competent’?
I would hate to think, for example, that the proposed amendment gave carte blanche to the ECB or EC or ESM or EFSF or whoever to sequester the assets of the country and that we had allowed such under our constitution.
I cannot think of any reason why “‘bodies competent under that Treaty” would be interpreted in a way other than meaning any and all bodies which are competent under the Treaty and which can either
a) carry out an act (that is about as broad as you can get), or
b) adopt a measure (ditto), or
c) enact a law (what future-proofing is this, why include this?)
The constitution will be disallowed from preventing the above measures, acts and laws all “having the force of law in the State”
How could it only apply to “Irish” bodies, given what it says?
Even if they were ‘Irish’ (whatever that means in the context of a body which gets its competence from the international treaty), they cannot be interfered with by the constitution.
Quite apart from economic and political economy reasons for being deeply unconvinced by the ‘Yes’ campaign, I don’t see how the ‘Yes’ side can proceed without either a) demonstrating definitively that I am wrong about this, or b) ensuring the public are full aware or this aspect and actively vote for it.
Where is this being discussed?
Appols re the off-topicness.
“25% of public servants are paid, in total (this applies to part timers who have also part time jobs in the private sector) €20,000 or less. Nearly three quarters (74%) earn €50,000 or less. And, by the way, this includes allowances and increments.”
Quote taken from politico.ie
Not exactly ‘high’ wages.
“Nearly three quarters (74%) earn €50,000 or less.”
It is doubtful if this 74% includes the 200 ‘Old Indispensables’, who were taken back into the fold recently.
On a more serious note, why do people in the ‘protected sectors’ believe that they should be exempted from the worst ravages of the depression at the expense of others who are unprotected?
Is it is a case might not morality?
Thanks for that explanation. I confess that I had not read the wording until I say your comment.
I was going to vote yes on the basis of a ‘gun to the head’ but after reading your comments, I will have to reconsider.
It is one thing to sign a document because there is a gun to your head. It makes it altogether different when the document gives “bodies competent under that Treaty” full permission to fire the gun.
Here’s reducing labour costs for you – Greek style (imagine if this happened here)
Those Greek income falls of 25% in 2011 are shocking.
Even more shocking is the fact that GDP fell by over 5% in 2011.
I thought that the effect of a massive internal devaluation like 25% was supposed to have a big positive effect on growth!
So if Ireland proceeds to internally devalue, based on the Greek evidence, does it mean that GDP will fall further?
Its all a little confusing for a non economist like me.
What the figures show is that ordinary staff in the public sector are not paid large wages and that in this expensive country 50K is not a hugh wage to pay all your bills on especially if you have a family to feed, cloth educate.
Irish inflastion went negative in the early part of this mess because of interest rate cuts and has been back positive since September 2010. The media kicked up a storm over public sector wages because their real master IBEC wanted them to. If they, I mean the government and business want to cut wages the first thing that needs to happen is a real reduction in the cost of living in Ireland. It seems that many still think its 2005 when it comes to what is charged for goods and services and the profit that they make.
The euro in the pocket is shrinking yet the demands on it are increasing.
I work in the private sector and am one of those that as each month goes by try harder and harder to cut spending just to stay afloat. Wage cutting just means more depression. Sad that the so called great minds in Europe and Ireland can only come up with austerity upon more austerity to fix the problems. 🙁
Just wondering if there is a difference between “per unit cost” and “per unit labour cost”, I seem to remember reading last year that our unit costs were not high because of low employer PRSI and corpo. tax compared to other Euro countries.
“What we see is that even in Ireland, which has made the most progress, wages have fallen only slightly. Since wages have risen in the rest of the euro area (that’s the bar labeled EA17), the actual internal devaluation is bigger — about 5 1/2 percent in Ireland’s case — but still only a fraction of what’s needed.
Oh, and Germany — which should be experiencing substantial internal revaluation, a rise in its relative costs — hasn’t.
You can argue that adjustment is happening here, but it’s painfully slow — and not remotely fast enough to avert catastrophe on the current course.”
@ Ernie Ball
Apart from the health-related meanings, Merriam-Webster defines virulent as: extremely poisonous or venomous; full of malice : malignant, virulent racists; objectionably harsh or strong, virulent criticism.
Facts are stubborn things a US president once said. It’s easier to quote conventional wisdom than checking facts from credible sources but here, EB follows the US Republican Party playbook to a T.
Do not argue about the facts but shout class warfare to chime with the popular notion of an American exceptionalism that anyone from a small town named Hope has an equal chance to make it to the top. However, the facts show that family background is more important a determinant of American income levels than in most comparable countries.
There should be no area of Irish economic activity haraam from examination whether it is dodgy production and export data; the public pay and pension bill (ex local authorities, which has risen from €10bn in 2001 to €17bn in 2011); social protection (up from €8bn in 2001 to €21bn in 2011); corporate/public welfare called the smart economy; public welfare for sheltered professions and welfare for farmers.
I respect the work of the gardai but I do not think it fair to allow full pensions at 50 with the choice of the best 3 earning years; I respect the work of the health service but allowing public sector consultants set up rosters to maximise their private earnings, I do not support.
It was a public servant who reported that sick leave in Irish civil service had by 2007 almost doubled since 1980s. The average number of sick days taken by each Clerical Officer was 16 days in 2007 – – more than 3 working weeks in addition to holiday entitlements.
I do not apologise for highlighting the plight of the second class of citizen in this Republic who have taken the brunt of a brutal recession: these are the ones who get basic redundancy and typically have no occupational pension and in many parts of rural Ireland, anyone in this position over 45, is unlikely to work again. Meanwhile wonder why the remnants of 2 defunct banks that are closed for business, is still one of Ireland’s biggest indigenous firms?
In a country where fairytales have greater appeal than bitter truths, subjects such as the Crimean War era state guarantee of public service employment, remain taboo.
So we have this farcical situation that people are induced to leave but then rehired by their cronies. Do not doubt that there are desperate but intelligent unemployed people with a track record of achievement who could do some of this work.
What is so striking is how self-professed socialists have made common cause with the rentier class, in this recession.
Finally, I run no campaign (inspired by the Independent newspapers). Being independent in Crony Ireland must seem weird to you, in your sheltered cocoon.
@ JR: “Its all a little confusing for a non economist like me.”
Not to worry Joe, the real economists are a tad worse confused than yourself. They have a totaly unrealistic ‘model’.
@ Paulr: “Wage cutting just means more depression.”
Yep! But just look at some of the bulls**t, baloney and PR pap enamating from so-called ‘informed sources’ about competitiveness, growth, etc. etc. These individuals are either colmpletely clueless about the real situation, or are mendacious knaves. I incline to the former. You have to be very intelligent to be a successful latter.
As I mentioned above. Its their daft economic model. Its their endowment and they sure as hell are not going to part with it – even if it impoverishes a significant cohort of their compatriots.
You can, by divers methods, create the Marginal Non-engaged Consumer who contributes solely to the maintenance of the status quo economic activity. If aggregate economic activity is trending downward, then the Marginal Non-engaged Consumer cannot arrest the trend. And if your economic Model-in-Use mandates ‘growth’ … … Your banjaxed! 😎
re “I do not apologise for highlighting the plight of the second class of citizen in this Republic who have taken the brunt of a brutal recession: these are the ones who get basic redundancy and typically have no occupational pension and in many parts of rural Ireland, anyone in this position over 45, is unlikely to work again. Meanwhile wonder why the remnants of 2 defunct banks that are closed for business, is still one of Ireland’s biggest indigenous firms?”
“What is so striking is how self-professed socialists have made common cause with the rentier class, in this recession. ”
You are a very fortunate man who appears to know everything. Let me try to explain ,IMHO the Irish commercial property market is an organised cartel, with ruinous lease law, a systemically corrupt arbitration system, corrupt valuations and all authorised by corrupt politicans as a payback to their cronies and bagmen. Remember what Judge Moriarity alleged against Ben Dunne –the tip of the iceberg. Mr Haughey used organise the same corruption for his bagmen.
The exact crew who ran this cartel now run NAMA.
Back on topic – I’m not sure what use these labour costs stats are – or at least – their use is very limited.
Wages vary widely from industry to industry. For example, right now software is booming and one recruiter told me that wages are back to dot.com bubble era levels and companies despite their personal wishes, are recruiting from abroad because there is such a shortage of Irish experienced developers. Of course, in other areas, the unit cost is irrelevant because there simply are no jobs.
Big pharma and medical devices are also doing well, but if architects or engineers are scratching around doing deals to get the odd extension job, what does that tell us about average labour costs?
Sarah, parts of the tech industry are definitely in bubble territory. Some of the valuations and indeed sale prices are just ridiculous.
I think the tech bubble is partly a result of the ongoing scams/fraud/uncertainty in the finance industry, the finance boys really know how to put lipstick on pigs. and the tech industry for now is seen as safer.. (memories of just a decade ago have faded, though when the tech bubble will burst is anyones guess..)
One thing is sure, when tech companies fail, there will be no rush to set up a NAMA for them, buying shite at long term economic value etc etc etc….
2 interesting bits from the IT today
“As for the annual (PS)sick pay bill of € 500 million, Mr Howlin declared it to be unsustainable”
How can Ireland afford half a billion Euro in absenteeism in the PS ? It’s something like 9 days per employee and segues nicely into this letter …
• A chara, – Fintan O’Toole is on safe ground upbraiding Labour’s austerity enforcement policies as enslaving public interest to private benefit (through the “nationalisation of private banking debt”). His piece (Opinion, April 24th) might have had more bite had he not chosen to ignore the other private interests protected by Labour.
Large swathes of the public sector are oblivious to the fact that the Irish economy is in recession, with little or no change in the pay, terms and conditions and generous allowances by which Fianna Fáil kept them in check. The Irish public sector simply isn’t feeling the recession. The reason this is allowed to continue, is because Labour is unable to challenge the union interests. For all their talk of social solidarity, the unions are looking after the narrow self- interest of their members. If it is immoral to pay back private banking debts, it is also immoral to continue to claim pay and conditions that the country currently can’t afford, at the expense of the poor. – Is mise,
Community Worker and Siptu member,
“How can Ireland afford half a billion Euro in absenteeism in the PS ? It’s something like 9 days per employee ”
What amazes me is that some of them even know in advance when they are going to be sick (I’ve seen some real examples of it). Is the ability to tell the future a pre-req for joining the PS?
7 Days uncertified sick leave per year , which was used by some staff (not all in fairness ) , as 7 days extra annual leave.
As a private sector employee can I say I find the focus on public sector absenteeism a little heavy on the Stockholm Syndrome? It seems to hail from the same backwater of perception that has PAYE workers foaming at the mouth about welfare fraud while there is a industry devoted to tax avoidance which loses the states hundreds of millions more and MNC’s extract billions to tax havens though tax loop holes.
If Ireland was to stand out it would be in terms of how little leave we get, not how much we take:
We stand six days behind oh so virtuous and productive Germany in terms of the average number of days paid annual leave, over the last few years now I can only imagine that the amount of sick leave taken in Ireland has rise across the country as the stress of the being the punching bag for Europe has taken its toll.
The rather obvious thing to note is that when labour costs are under any reviews seeking reductions, the position is typically one of seeking a reduction in the average national wage rate by concentrating attention on those on the lower end of the scale.
An additional thing to note, for which it might prove difficult to get decent detailed figures, is the large pay-cuts that have taken place in many industries.
There are very many workers in retail & catering who now have no guaranteed working hours – sent home or told in advance not to turn up when it looks like a quiet day. There is also saturday work for no pay in some companies, and numerous other cases where companies are through desperation or connivance flouting former contracts (actual or the legal minimum). This has moved way beyond black-market labour and into mainstream employment
”Quite apart from economic and political economy reasons for being deeply unconvinced by the ‘Yes’ campaign, I don’t see how the ‘Yes’ side can proceed without either a) demonstrating definitively that I am wrong about this, or b) ensuring the public are full aware or this aspect and actively vote for it.
Where is this being discussed?”
– Perhaps your observations & questions can be answered and tied back into the larger topic of the thread (and go some way in explaining the situation of excessive public service pay and abuses of privilege – where they exist; many workers in the ps earn very modest wages, and work very hard in difficult areas).
Today the largest PS Union in the country gave as their reason for supporting the govt.’s position on the treaty precisely the grounds that you have shown to be spurious.
And SIPTU still haven’t explained why 30,000,000 € should have been channeled to them through the HSE….
+1 mark, in certain sectors (hotel for one) people are being taken on and let go after a few months…. its happening to people i know far too often for it to be just unfortunate……….. its part of the business model now… hire people as ‘permanent’ and let them go before any long term responsibility or liability is incurred…
My observation is that many financial companies are hiring contractors on permanent salary rates but still on temp. contracts (which makes the contractor worse off than the equivalent permanent employee – but they have little choice other than choosing to starve given they don’t qualify for the dole being ‘company directors’ and all that). It’s all getting to be just like Japan!