Cutting the minimum wage to get competitive

InFront

Should the Government bite the bullet and cut the minimum wage in order to make this country more attractive to employers seeking to take on new staff? It seems to me that the current minimum wage is not helping the state of the economy because its anti-competitive nature is stagnating growth.

We have the second highest minimum wage in the EU. Can we afford this at a time when the cost of living is falling and our economy is in serious trouble?

The current rate is €8.65/ hr. That is not protecting anybody, it is dragging enterprise down at a time when we need enterprise more than ever. Along with offering tax incentives and lower PRSI contributions by employers, I really feel that minimum wage needs to come down too.

In the last budget, Minister Lenihan brought those on minimum wage back into the tax net. Surely a smarter move would have been to cut the minimum wage by a similiar or slightly higher rate perhaps on a spiralling scale over a number of years?

mikemac

Maybe........but you'll need to cut Job seekers rate at the same time.

There are already cases where with job seekers and other benefits many prefer to stay on welfare then work some minimum wage job in Centra, McDonalds or wherever.

If you cut minimum wage but at best freeze job seekers this will only get more widespread.

And you know the second some minister does this they're be trouble and people screaming about hitting the vulnerable, etc.
Maybe it will be done, I wouldn't like to be the Minister to do it but then that's why they get paid the big money I suppose. Take the hard decisions

zootroid

If it's true that it's the second highest in the EU, then it should be cut to improve competitiveness. Completely agree with what mikemac said about the need to cut jobseekers allowance should the minimum wage be cut also. There's no point having a welfare system that incentivises being on the dole rather than working. Other welfare payments could be adjusted to lessen the hardship on those with families and mortgages for example.

But I think it is preferable to have a lower minimum wage that might lead to additional jobs, than having a comparatively higher minimum wage with less jobs.

StopNotWorking

I would rather a cut in industrial taxes then a cut in wages. Work more on the countries infrastructure, do the things they were supposed to do, and the companies will come back.

Bottle_of_Smoke

mikemac wrote: »

Maybe........but you'll need to cut Job seekers rate at the same time.

There are already cases where with job seekers and other benefits many prefer to stay on welfare then work some minimum wage job in Centra, McDonalds or wherever.

If you cut minimum wage but at best freeze job seekers this will only get more widespread.

And you know the second some minister does this they're be trouble and people screaming about hitting the vulnerable, etc.
Maybe it will be done, I wouldn't like to be the Minister to do it but then that's why they get paid the big money I suppose. Take the hard decisions

Wroked out before that if you cut min wage to €8 a full time worker would lose around €21, the proportionate cut in jobseekers would be around €15. I say go for it.

zootroid

StopNotWorking wrote: »

I would rather a cut in industrial taxes then a cut in wages. Work more on the countries infrastructure, do the things they were supposed to do, and the companies will come back.

The only problem with improving the countries infrastructure (which I agree is needed) is that it takes so long to get projects off the ground. Just look at the interurban motorways. They are still not finished, even though when the government annouced the plans initially, they were supposed to be completed by 2006.

Adjusting the minimum wage and job seekers allowance can happen pretty much straight away (in theory anyway, I highly doubt we will see another budget before October/November).

spank_inferno

This thread has been done to death already and its merit hasnt increased in time.

Yes we have a high minimum wage, but there are reasons for that.

Only a couple of hundred thousand people are on the minimum wage to begin with. What would reducing it achieve only to push more people onto social welfare.

How do you lower the minimum wage, when we have one of the highest cost of living in the EU?

Food, accomodation, transport & energy all cost far more here than in neighbouing countries. If the minimum wage was cut, surely the costs of living would have to decrease also?
And considering that most people dont earn the minimum wage and those that are on it have such limited buying power, whoe's to say that costs will even drop at all anyway?

Irelands lack of competitiveness isnt caused by people at the bottom scraping by, its caused by those at the top taking us all for chumps.

If employers are having a hard time retaining min wage staff then I implore the government to support the employer by providing assistance regarding reducing employer PRSI contributions and other taxes on labour
Thats the progressive way to deal with it.

Taking a swipe at the lowest of society wont help Ireland one bit

Sleazus

Irelands lack of competitiveness isnt caused by people at the bottom scraping by, its caused by those at the top taking us all for chumps.

I'd argue that there are problems at both ends and we need to start accepting that. Taxing those more fortunate into the ground won't pull us out of the recession, like the opposition was suggesting after the budget. They do pay a higher percentage on their income (as a rule - I don't pretend there aren't exceptions), and they do fill a hole in the coffers. But it's also money from these individuals that generates enterprise and economic activity, which creates jobs and creates economic fluidity.

Everybody shoulders the pain. The reality is that we need these what you probably consider to be exploitive employers over here if we want any chance of growth when the worst is over. We need to trim the fat at social welfare, which is a huge drain on public finance. The people "who can take the pain" (in the language typically used by the more diplomatic proponents of social justice) are the people who can up-and-leave at the first sign of trouble, but they're also the people we need if we are to make a recovery. In the same way that we need the banks, as much as some people refuse to believe that.

Tax brackets mean the rich pay more to the state. It might not feel just when they take home more at the end of the day, but they do pay more than those on the lower rungs.

If cutting benefits and minimum wage makes us competitive, it's necessary. No matter how uncomfortable we may be with it.

the_syco

What a load of bo||ox. If those in minimum wage had less money, they'd have to double job. The only way to bring down food prices would be to bring down minimum wage, and rewrite every contract for people working in the shops, so that they'd get less money. Less staff costs may mean less cost of products. Or it may just mean more profit for the companies.

You see, less minimum wage sounds nice, but in reality, it won't bring down prices unless you force everyone to sign new contracts that will pay them less.

InFront

the_syco wrote: »

You see, less minimum wage sounds nice, but in reality, it won't bring down prices unless you force everyone to sign new contracts that will pay them less.

This is happening on a large scale. A lot of people are already taking pay cuts. It's not about forcing everyone else to negotiate a new contract, that would be a natural progression from the next necessary step which is, in fact, to do something about the minimum wage.

Alternatively, there are alternatives to the minimum wage such as the minimum guaranteed wage. I am not saying that abolishing the minimum wage as we know it to be replaced with another form of worker protection is the right thing for definite. However, it is time we started thinking seriously and imaginatively in relation to our competitiveness as a nation of enterprise.

peanuthead

mikemac wrote: »

Maybe........but you'll need to cut Job seekers rate at the same time.

And the cost of living. It will need to go even lower than it is now

moomoothegeek

I cant understand why people want to cut the minimum wage, is it to make us more productive? lower prices? or make bigger profits? and higher dividends for the shareholders.
We need to look at the overall cost of producing a unit of anything which includes energy costs high insurance costs high and also look at the structure and number of our organisations that are stymied by a layer of over paid middle mangers . Its not the minimum wage thats the problem its the structure and cost of doing business
moo moo

partyguinness

In principal I am in favour but its too late now. It should never have been risen in the first place.

It will only affect the people on min wage not the politicians, doctors, lawyers etc.

taram

Madness, the poor will just get poorer and the rich richer. All the places I've worked do 35 hour weeks, that's 303/week. So take in things like childcare, rent, medication, travel and food at work you're about even with social welfare. Take minimum wage away and why would you put yourself into minus money to work apart from pride? Social welfare needs to be tackled well before a minimum wage cut can be assessed.

greendom

If an entrepreneur can't afford to pay someone €8.65 an hour (pretty paltry wage, let's be honest) then his/her business idea isn't good enough. Try harder

InFront

moomoothegeek wrote: »

I cant understand why people want to cut the minimum wage, is it to make us more productive? lower prices? or make bigger profits? and higher dividends for the shareholders.

Yes, it's some of all of these things. Esentially though, we need to be a more attractive country to employers. In the early 1990s when there was a severe recession in many countries, the OECD strongly advised that its constituent members should

Reassess the role of statutory minimum wages as an instrument to achieve redistributive goals and switch to more direct instruments. If it is judged desirable to maintain a legal minimum wage as part of an anti-poverty strategy, consider minimising its adverse employment effects, including:

* Indexing it to prices, rather than average earnings

* Ensuring sufficient differentiation in wage rates by age and region to prevent the minimum wage from harming employment prospects for young people or low- productivity regions

I find the issue of linking minimum age to region a particularly interesting one, and one that could be very relevant to Ireland. Clearly there is a huge disparity between the cost of living between the capital, Dublin, large urban centres like Galway or Limerick, and smaller rural towns and villages.

Isn't this something, at least, which should be considered to encourage investment?

If you don't want to index the MW to the cost of living then I'm sure that most people can agree that we need to base the minimum wage as a percentage of average earnings to keep the country competitive. If average earnings are falling, do we really have any option but to at least decrease the minimum wage in kind?

This is no time to be on our soap boxes demanding workers rights. It's better to be at work than pricing your employer out of his ability to pay you.

If an entrepreneur can't afford to pay someone €8.65 an hour (pretty paltry wage, let's be honest) then his/her business idea isn't good enough. Try harder

This kind of thinking is completely out of date in the current economic climate tbh. At a time when the cost of living is on its way down on a continual basis, that "pretty paltry wage" is the second highest of its kind in the EU.

thebman

taram wrote: »

Madness, the poor will just get poorer and the rich richer. All the places I've worked do 35 hour weeks, that's 303/week. So take in things like childcare, rent, medication, travel and food at work you're about even with social welfare. Take minimum wage away and why would you put yourself into minus money to work apart from pride? Social welfare needs to be tackled well before a minimum wage cut can be assessed.

You can reduce both at the same time. It isn't magical. You just have to do it carefully and evaluate how much each should be reduced by and not reduce it too fast that the cost of living doesn't match and some people end up not being able to get by.

the_syco

InFront wrote: »

Clearly there is a huge disparity between the cost of living between the capital, Dublin, large urban centres like Galway or Limerick, and smaller rural towns and villages.

Have to agree with this point. Lots of stuff is cheap in Dublin, due to competition, but once you get rural, it's more often than not a one shop town who can charge what they like.

creeper1

Each and every time a politician appears on the radio or TV to say that benefits are really generous compated to other European countries the presenter should respond by saying "Yes but so are Irish politicians' wages" I will say it again "Yes but so are Irish politicians wages"

Again "Yes but so are Irish politicians wages"

and again


"Yes but so are Irish politicians wages"

RiverWilde

Cut minimum wage? Why not just bring back slavery and abolish unions? Put the children up the chimney? The effect of cutting the minimum wage would only be to increase the gap between business owners and their employees regarding pay levels and merely allow said business owners to employ people at an even more paltry rate of pay; while at the same time charging the same if not higher prices to the customers. Just look at Irish Ferries as an example of that.

The min. wage is a protection measure designed to help prevent exploitation.

Riv

thebman

RiverWilde wrote: »

Cut minimum wage? Why not just bring back slavery and abolish unions? Put the children up the chimney? The effect of cutting the minimum wage would only be to increase the gap between business owners and their employees regarding pay levels and merely allow said business owners to employ people at an even more paltry rate of pay; while at the same time charging the same if not higher prices to the customers. Just look at Irish Ferries as an example of that.

The min. wage is a protection measure designed to help prevent exploitation.

Riv

It needs to be cut in line with the cost of living though.

So does the dole.

A lot of those employers have seen large falls in profits so it probably won't even put them in as good a position as they were in and in some cases may only make it so the company can stay open to keep the staff hired.

Some small business employers are pulling down less than some of their employee's and doing a hell of a lot more work trying to keep the business afloat.

Not one of them but am aware they exist. Any employer dumb enough to reduce wages when making large profits will see a suitable decline in productivity from their work force due to lack of motivation to work when their hard work is punished.

Ass

Why the hell would anyone want to cut the minimum wage?

InFront

creeper1 wrote: »

Each and every time a politician appears on the radio or TV to say that benefits are really generous compated to other European countries the presenter should respond by saying "Yes but so are Irish politicians' wages

Which do you think would save more money.. a 5% cut in the social welfare bill or a 50% cut in TDs salaries?
We need to stop thinking about the small issues that are going to save us a million here or there just by satisfying the need of some people to see big businesses and national politicians suffer. Worry about that later. Right now there is over a twenty billion shortfall projected in income versus outgoings and we need to examine how we are going to start making up that shortfall.

Cutting politicians salaries, or abolishing them would not even be a drop in the ocean.

On the other hand, if you take minimum wage emplloyees out of the tax net, freeze PRSI contributions and decrease the minimum wage by say 10%, that means an employer can afford to take on one new worker for every ten workers for the same price.
That's the kind of policy that gets people back to work, with more disposable income and proves to investors that we are not a self reighteous, un-competitive nation unwilling to do anything about the mess our economy is in.
(I only use 10% as a round figure to illustrate a point by the way, I'm not saying that's the figure I would choose)

Cut minimum wage? Why not just bring back slavery and abolish unions? Put the children up the chimney?

There's no need to get hysterical about it, it's a simple idea. Minimum wage got out of control in recent years. The principle behind minimum wage is that it prevents exploitation of workers, but there are other models available. We didn't use the increase in minimum wage to protect workers from being exploited, but to feed the huge cash carousel and just add to inflation.

Now that inflation has become deflation, the minimum wage can start to be put right.

Again, this "paltry rate of pay" you talk about is the second highest rate in Europe and many countries such as Sweden have no nationally implemented minimum wage system, which is a model we should look at.

Dub.

InFront wrote: »

Again, this "paltry rate of pay" you talk about is the second highest rate in Europe.

But isn't Ireland one of the most expensive countries in the world to live in,or did i hear that wrong?

greendom

InFront wrote: »

This kind of thinking is completely out of date in the current economic climate tbh. At a time when the cost of living is on its way down on a continual basis, that "pretty paltry wage" is the second highest of its kind in the EU.

Nonsense. I really dislike this attitude that the economy is suffering, so let's attack the poor and impoverished in our society. They need looking after and €8.65 should be a low enough wage for any decent company to be able to cope with.

We really shouldn't go down the road of chasing the lowest common denominator. We'll never come close making the min wage low enough to compete with eastern europe anyway, let alone the far east or 3rd World

So it's the 2nd highest in Europe. Something for Ireland to be proud of for once.

Lowering the minimum wage would also have a negative impact on the local ecomony as people on lower incomes spend a higher proportion of their income in local shops etc.

Let's not go for this knee jerk, short term, ill-thought out and pointless idea

greendom

InFront wrote: »

Again, this "paltry rate of pay" you talk about is the second highest rate in Europe and many countries such as Sweden have no nationally implemented minimum wage system, which is a model we should look at.

I really don't think we can compare ourselves to Sweden which has a wonderful welfare system and really knows how to look after its people. It is among the top 5 in terms of egality of income. Ireland is light years away from this

Sleazus

greendom wrote: »

Lowering the minimum wage would also have a negative impact on the local ecomony as people on lower incomes spend a higher proportion of their income in local shops etc.

It's an oversimplification to say the more money people have the more they spend - we don't just need people spending, we need them spending on Irish goods and services. Those that are priced too highly at the moment because importing stuff is still cheaper than paying for it here.

Labour costs are one of those reasons. Raising tax on these companies or their top earners would be another, no matter how socially just that might seem.

P. Breathnach

Sleazus wrote: »

It's an oversimplification to say the more money people have the more they spend - we don't just need people spending, we need them spending on Irish goods and services. Those that are priced too highly at the moment because importing stuff is still cheaper than paying for it here.

But you're not actually challenging what greendom said. People on lower incomes spend proportionately more of their money (typically all of it) and tend to spend it in their own locality because many of them cannot afford to travel somewhere else to spend it. I suspect that travelling to Newry to do the weekly shop is more the preserve of middle-income people than lower-income people. So the local economy that greendom mentioned does benefit from their spending (the "local economy" being local shops and small businesses). If you buy a packet of biscuits that was produced in Manchester, it is better that for the Irish economy if you buy it on this side of the border; it is better for the local economy if you buy it in your own neighbourhood than if you go to another neighbourhood.

Labour costs are one of those reasons. Raising tax on these companies or their top earners would be another, no matter how socially just that might seem.

We might be able to compete with Poland if we cut wages to about €3.00 per hour.

hobochris

I personally think that the solution is to cut everyone's wage by 40% and at the same time inforce mandatory price cuts on goods and services across all sectors..

The only problem I forsee Is what to do about personal and business debts like mortgages & loans etc...

The jist of what I'm trying to say is we need cuts across the board, But making these cuts may be more difficult the alternative is what's happening now, more and more people are feeling the pain for the widespread greed in our country.

P. Breathnach

greendom wrote: »

I really don't think we can compare ourselves to Sweden which has a wonderful welfare system and really knows how to look after its people.

The Swedes seem to be considerably less tax-resistant than we are.

It is among the top 5 in terms of egality of income. Ireland is light years away from this

And has been moving further away. One result of the Celtic Tomcat phenomenon is increased inequality.

Sleazus

P. Breathnach wrote: »

But you're not actually challenging what greendom said. ... If you buy a packet of biscuits that was produced in Manchester, it is better that for the Irish economy if you buy it on this side of the border; it is better for the local economy if you buy it in your own neighbourhood than if you go to another neighbourhood.

Which helps your local store and the old lady who runs it (along with maybe three or four part-timers). The factory up the road employs a few hundred workers, but can't get local granny to stock their product because the can't reduce the price low enough to sell it. That's a few more on the live register.

I didn't disagree that higher wages might help the local shop - though I'd argue if the granny paid her staff less, she could cut prices and thus those with reduced incomes could continue to buy from her - but I did argue that local means more than the corner shop, and the benefits of the proposal extend far beyond that.

So, higher minimum wage and granny profits, hundreds suffer. Lower minimum wage, granny profits, hundreds suffer less. That's the economy at the moment. We can't make things magically better for everyone, but we can limit the extent of the suffering felt by all.