what exactly does a 10% cut in standard of living mean?

Akrasia

Taoiseach Brian Cowen gave a press conference over the weekend where he said we should all expect to have our standard of living reduced by at least 10% in the coming years as we need to 'step backwards so we can move forwards'

What exactly does this mean?

Can people here describe what sacrifices people would need to accept to reduce their standard of living by 10%?

For wealthy people, is it one fewer 'weekend break' in a year? or buying the new bmw, but not getting the optional sports package?

For ordinary people, is it not going out at weekends as often, or eating at cheaper restaurants?

For poor people what is a 10% cut in standard of living? Getting rid of the broadband/cable/sky? selling the car? second hand clothes?

gman2k

Going by the previous predictions by Cowen and Co over the last year or so means that a predicted 10% drop in LS over the next year will actually be a 20% drop over the next 6 months.
Sorry that doesn't answer your direct question, but I presume it will mean that everyone will have less cash in their pockets for spending.

Hagar

Akrasia wrote: »

For poor people what is a 10% cut in standard of living? Getting rid of the broadband/cable/sky? selling the car? second hand clothes?

We lets say three meals a day, seven days a week makes 21 meals, it could mean going without 2 meals, or smaller meals or less nutritious meals. It could mean worse if you have kids. Yes, in Ireland, poverty.

mukki

i always assumed that when the celtic overdraft ended house prices and spending money on showing off will have to fall back to 1980's rates, i.e. 30k to 60k for houses and e0 per person on showing off, so 10% drop a year for 5 years should do just that

Darsad

Well for the trio at the top Cowen , Coughlan & Lenihan and I suppose the rest of the Dail it simply means their standard of living wont change they will just have 10% less to add to their savings but for the rest of us it means real sacrafices.

ixoy

Is it not more simply just having 10% less to spend? So if you spend 40% of your money on a mortgate, 20% on utilities, 20% on food and 20% on going out, you'll now only have 10% to go out on and thus go out half as often?

Gumbo

mukki wrote: »

i always assumed that when the celtic overdraft ended house prices and spending money on showing off will have to fall back to 1980's rates, i.e. 30k to 60k for houses and e0 per person on showing off, so 10% drop a year for 5 years should do just that

if that happens, i will have no choice but to smehow hand back the keys of my house to bank of scotland!

saying prayers in my head this doesnt happen

P. Breathnach

The 10% is a very crude indicator.

Some people will see their incomes fall by much more than that, losing well-paid jobs and going on the dole. Other may see their incomes rise (not many, of course, but there will probably be a few).

If a person's post-tax income fell by exactly 10%, the impact will be linked to that person's circumstances. Happily for me, I could take it without much pain. There are others for whom it would feel like a major disaster.

I don't want to seem insensitive, but I said "feel like" a disaster. For some people who feel that way, such a drop in income might be coped with by some lifestyle changes: take a couple of pints less on a night out, change the car less often, buy stewing beef instead of fillet steak.

Let's be honest: most of us could cope with a 10% drop in disposable income. There are some who would be put in great difficulty.

Fighting Irish

Damn it, i need a new plasma. Looks like i'll have to go for the 40" instead of the 50". Hopefully the bank will give me another loan.

ntlbell

Fighting Irish wrote: »

Damn it, i need a new plasma. Looks like i'll have to go for the 40" instead of the 50". Hopefully the bank will give me another loan.

45" should be ok..

stakey

It means the government are probably looking to roll back spending in certain departments, health, social services, transport and what not to 2003 levels, ie. drop 10% off the current cost of those departments.

It will also be taken as a wink and a nod for companies to look at bringing down their costs with regards to wages and gives a nice rounded percentage to use too.

Of course, nothing will be done to bring consumer deflation inline with 10% cut in the standard of living.

Offalycool

Perhaps a cut of 10% in social welfare payments?

ejmaztec

Negotiate a 10% discount on every payment made for anything to compensate.

Akrasia

ixoy wrote: »

Is it not more simply just having 10% less to spend? So if you spend 40% of your money on a mortgate, 20% on utilities, 20% on food and 20% on going out, you'll now only have 10% to go out on and thus go out half as often?

This, and the previous responses were about a 10% drop in income, but thats not what the taoiseach said, he specifically said standard of living.

Standard of living is more than just about money in our pocket.

Does he mean we'll have 10% more crime to worry about,
10% later bus services?

10% worse weather
10% worse television popular music and cinema (would be hard)
10% longer wait for basic healthcare?
10% more bullying at school?
10% fewer holidays?.....


What exactly are we being expected to sacrifice here other than money?

brianthebard

Clearly the taoiseach only believes money affects increases or decreases in his standard of living.

is_that_so

It's just a response to the question of "How much pain?" and the usual attempt to add health warnings to a severe budget. People understand "standard of living" more than "structural deficit". For me it means 10% less in disposable income which translates as others have commented into less nights out, less European/US city breaks, hopefully less stupid spending and naturally a contraction of the economy as a result. At times like these people , who have a job and can, will save more, clear off more debts, which means an overall lower level of personal debt. The downside, of course, is higher unemployment for a (good?) few years, and lower salaries.

cavedave

brianthebard Clearly the taoiseach only believes money affects increases or decreases in his standard of living.

He would be wrong if he thought that. standard of living is measured by

Per Capita (GDP) - Urban population - % of Labor force in Agriculture - Life expectancy (female & male) - # of people per physician -Infant Mortality Rate - Literacy Rate - Motor Vehicles (passenger & commercial) - Railroad Mileage - telephones per 1,000 people - televisions per 1,000 people

and quality of life figures (where number of friends is more important then income (once your income is above national average)

However it must be remembered that real income per capita on its own is both an inaccurate and insufficient indicator of true living standards both within and between countries.

Hagar

Hagar wrote: »

We lets say three meals a day, seven days a week makes 21 meals, it could mean going without 2 meals, or smaller meals or less nutritious meals. It could mean worse if you have kids. Yes, in Ireland, poverty.

No it means going back to the lifestyle from the income we had in 2002 which was hardly poverty.
Effectively if we want public services at todays prices,thats what we will be doing because 10% of our incomes will be going in extra taxes to pay for it.
The affect will vary depending on peoples circumstances.

It's also already becoming a trend in the private sector for wages and salaries to trend downwards which in a lot of cases is down 10% or more to as said already maybe 50 to 80% or more if you lose your job.

Sometimes I wonder about threads like this.
Sensationalism much.

ntlbell

do does this mean we will have public sector pay cut by 10% across the board?

wes

Oh well, I guess 10% isn't so bad, assuming that he is correct and its not much worse.

kippy

ntlbell wrote: »

do does this mean we will have public sector pay cut by 10% across the board?

If you look at whats already been thrown at those still working in all sectors already (1% tax levy, increase VAT levy, increase in fuel tax) then add in the one that was specific to Public servants (pension levy) you'll see that the government prefer not to "CUT PAY" in straightforward terms.
The dont want to hit the tax bands at this stage of the year either , although could announce changes to these for eoy. Most likely will hit the 1% and 2% levies and increase them. That'll reduce the take home of most public servants (together with what is already there) by almost 10%, as well as whatever other "stealth" taxes are introduced.

In reality it means people will have less take home pay and as such will need to cut their expenditure somewhere. Most of us, when we think about it, could cut unnecessary expenses from our lives.

ixoy

ntlbell wrote: »

do does this mean we will have public sector pay cut by 10% across the board?

Standard response: "We've already had the pension levy". What should happen though is that, on top of that, there's no increments for a while - anyone who has jonined in the last decade or so will still be able to get increments (seperate to the NWA).

Also of coure some cutting of the many services that aren't all that important and the deadwood - something that many of the harder-working civil and public servants that post here are also in favour of.

cavedave

Black Briar

Sometimes I wonder about threads like this.
Sensationalism much.

It seems reasonable to see what the generally agreed meaning of a term is to understand what someone says.

a 10% cut in standard of living could also mean (according to here) changes in
Probability at birth of not surviving to age 60
People lacking functional literacy skills
Proportion of the population living on less than 50% of median income

kippy

ixoy wrote: »

Standard response: "We've already had the pension levy". What should happen though is that, on top of that, there's no increments for a while - anyone who has jonined in the last decade or so will still be able to get increments (seperate to the NWA).

Also of coure some cutting of the many services that aren't all that important and the deadwood - something that many of the harder-working civil and public servants that post here are also in favour of.

Id agree with that.

There are already a shed load of the older staff taking early retirements or retiring now in order to reduce the amount of levy they pay and also avoid the possible taxing of the lump sum.
This, in my opinion, is a good thing for the country.

I dont really understand why Cowen said this, as standard of living AND take home pay are two totally separate things. Our living standards SHOULDnt go down, we'll still have running water, decent sanitation, a comparitivily good infant mortality rate and life expectancy, even more roofs than normal over our heads. Costs of various items should decrease in line with wages.....
With a bit of luck reviews of health services and public services in general may mean better ones, despite people being paid less.

Its obvious that every working person will end up with a lot less take home, but is that SUCH a bad thing as to decrease our "Standard of living"?

ixoy

oopps..

Akrasia

Deleted User wrote: »

No it means going back to the lifestyle from the income we had in 2002 which was hardly poverty.
Effectively if we want public services at todays prices,thats what we will be doing because 10% of our incomes will be going in extra taxes to pay for it.
The affect will vary depending on peoples circumstances.

It's also already becoming a trend in the private sector for wages and salaries to trend downwards which in a lot of cases is down 10% or more to as said already maybe 50 to 80% or more if you lose your job.

Sometimes I wonder about threads like this.
Sensationalism much.

Don't blame me, Cowen is the one who made the statement.

He wants us to go back in time to 2002?

If he has one single measure in the forthcoming budget designed to prop up house prices or 'help people access mortgages' then he is a complete disgrace.

If we are expected to live on 2002 wages, we need to have 2002 prices for everything including rent, energy, food, drink etc etc, anything other than that and it's just another transfer of wealth from the poorest to the greediest.

The implications of what Cowen are calling for demand radical action, not just empty words calling for solidarity.

If we are going to have to reduce our income, we need to force costs down. We can't devalue the currency, so it would have to be done through price controlls, and this would mean there would have to be a national amnesty on contracts for 2008 prices.
High property prices and rents should be the immediate targets of such radical action. Declare all lease agreements void and allow people to re-negotiate their rents with no penalty if they decide to move.
The market will eventually find a lower level, but we are in an emergency at the moment and we can't afford to wait for the landowners realise that they can't just wait out the recession and need to drop their prices.

edited to add: I currently have a very low rent (500pm for 3 bed semi )and this is not just me shouting for something that would benefit me specifically, and my primary concern are commercial rents which are still unbelievably expensive and these costs are stifling business and keeping prices for everything higher than they should be. 6000 a month for a pub/restaurant in a regional town........

Lu Tze

Akrasia wrote: »

If we are going to have to reduce our income, we need to force costs down. We can't devalue the currency, so it would have to be done through price controlls, and this would mean there would have to be a national amnesty on contracts for 2008 prices.
High property prices and rents should be the immediate targets of such radical action. Declare all lease agreements void and allow people to re-negotiate their rents with no penalty if they decide to move.

Wages need to be cut first. You can not force down the cost of services and products unless they force down their cost base. Otherwise they will be selling at a loss until they are in a position to lower the wage costs of the staff

jimmmy

what exactly does a 10% cut in standard of living mean?

As well as pay, do not forget holidays ....they contribute to standard of living. A 10% cut for a public servant I know will mean he gets 28 days instead of 31 days....for the equivalent private sector worker I know ( same age + qualifications etc ) working in a multinational company in Ireland it means getting 19 instead of 21 days ? lol

bobbbb

jimmmy wrote: »

what exactly does a 10% cut in standard of living mean?

As well as pay, do not forget holidays ....they contribute to standard of living. A 10% cut for a public servant I know will mean he gets 28 days instead of 31 days....for the equivalent private sector worker I know ( same age + qualifications etc ) working in a multinational company in Ireland it means getting 19 instead of 21 days ? lol

And i'll get 30 days holidays instead of 33.
Dammit. I'll just have to pass it on to my underlings

P. Breathnach

If the moderators tolerate jimmmy trying to hijack other discussions in order to pursue his vendetta against the public service, will they also tolerate my declaring a vendetta on jimmmy?

oscarBravo

If you have a problem with a post, report it.

jimmmy, stop hijacking discussions in order to pursue your vendetta against the public service.