Austerity isn't really working is it?

dark crystal

Anynama141 wrote: »

Ok, two simple examples:

1. Do your parents have a maid? Why not?
2. If I run a factory and I have a choice between buying a machine to do a job and hiring people to do a job, what factors will affect whether I decide to go with humans or machines?

The question gets more complex of course when you get into minimum wages which are, for many industries, not far off what the market would set anyway.

1. No, because she's not afraid of housework.

2. Not a clue.

I'm still wondering how plunging thousands of workers below the poverty threshold and allowing employers to decide wage limits would make this country a better place to live and I still see no evidence to prove that abolishing the minimum wage would reduce the cost of living or reduce unemployment in any significant way.

Anynama141

dark crystal wrote: »

1. No, because she's not afraid of housework.

2. Not a clue.

Ok, you've demonstrated with these answers to rather easy questions that you are not interested in a serious discussion.

That's fine, this is AH, after all. But I'm not going to waste time and effort actually explaining stuff to someone who isn't interested and just wants a point-scoring game.

I'll also take those stupid answers as an acknowledgement that cheaper workers means more employment, ceteris paribus.

Augmerson

Augmerson wrote: »

Is there some kind of belief going about these days that the imposed austerity we are experiencing in Ireland and across Europe is not only required but also good for us?

I just think, from having listened to a few conversations with acquaintances or friends of friends and having read through a few Irish internet forums and beyond, that some people (at home at least) think higher taxes and more budget cuts are the only way to go.

I can see some kind of rational in the idea. Government expenditure is higher than Government income. Something has to change. What I don't agree with, is how this is approached. We are in are sixth year of austerity and recession. There is still serious unemployment and emigration. I don't believe austerity is working, in fact I feel it's just prolonging the recession. It's keeping us back.

I don't have any foolproof response to what should be done to tackle our current situation, other than say we should have done exactly what Iceland has done (but the chance to do that has passed) but cutting more and more money out of the economy like we are now doesn't work. If we could inject billions into our financial institutions, why can't we do the same for the economy with jobs programs or public works? I just think this is all madness, and I am sick of some people, political institutions and elements of the media promoting the idea that this is all getting us somewhere.

Perfectly willing to listen to the other side of the fence about this.

Also, in before anybody calls me crusty, hippy or lefty for feeling this way.

Where you limit the spending power of any society it will suffer greatly to be honest. Spending contrbutes to job creation and alot of MNCs would be drawn by the fact that consumerism of their product is big in the country of manufacture.

I dont trust our politicians one bit. They are self serving greedy and manipulating utterly disgraceful excuses for human beings. There is one or two independents i have some time for but the majority of party politicians are low life's to be frank. Everyone is taking a hammering for a mess which they the fat cat elitists in the banks and their property developing cronies are responsible for, and the weasels we continue to elect give us the two fingers, safe in the knowledge we'll re-elect them.
Really irks me to see the esteem they are held in by our public. I do agree with you. I suppose the hole we were in was massive and the clowns decided to plug the hole in the bank and ' put all the 'hamsters' on the wheel' in order to sort it out.

Enda's photo opportunity at the Mayo match last week was disgusting. Aided an abetted by the state broadcaster of course who are themselves another institution who are creaming off the top of the pot and giving very little back (Love/Hate aside )

Deleted User

Deleted User wrote: »

Where you limit the spending power of any society it will suffer greatly to be honest. Spending contrbutes to job creation

Well, in keynesian thinking, yeah
In other thinking... savings is for source of capital which has actual change
http://econstories.tv/2012/12/05/macrofollies/

And if you look at Friedman, spending shifts mainly with a change in permanent income, not temporary income
http://en.wikipedia.org/wiki/Permanent_income_hypothesis

Three Seasons

dark crystal wrote: »

Ok, I've googled and already found:

http://www.cepr.net/documents/publications/min-wage-2013-02.pdf

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/02/14/why-economists-are-so-puzzled-by-the-minimum-wage/

http://www.econbrowser.com/archives/2013/02/minimum_wage_an.html

I'm really trying to find the correlation here between minimum wage and high unemployment.

Who said there was a correlation between minimum wage and high unemployment.

The argument being made is that it causes unemployment.

I see now why you can't follow the logic.

Why not move the minimum wage up to 20 euro an hour? Can you answer that question properly.

Would society be better off with a minimum wage of 20 euro per hour?

Do you think any damage would be caused by having a minimum wage of 20 euro per hour? If so what?

Bullseye1

It can cause unemployment if social welfare is almost on a par with it. There is no point in abolishing MW without tackling the other issues which government has direct control over. But does your theory take account of people wanting to feel useful and not useless?

Why do you insist on claiming those not in favour of cutting MW are in favour of high per hour rates. I have not seen one person suggest it apart from those who are in favour of abolishing. In its current form MW should reflect inflation.

Three Seasons wrote: »

Who said there was a correlation between minimum wage and high unemployment.

The argument being made is that it causes unemployment.

I see now why you can't follow the logic.

Why not move the minimum wage up to 20 euro an hour? Can you answer that question properly.

Would society be better off with a minimum wage of 20 euro per hour?

Do you think any damage would be caused by having a minimum wage of 20 euro per hour? If so what?

Three Seasons

Bullseye1 wrote: »

It can cause unemployment if social welfare is almost on a par with it. There is no point in abolishing MW without tackling the other issues which government has direct control over. But does your theory take account of people wanting to feel useful and not useless?

Why do you insist on claiming those not in favour of cutting MW are in favour of high per hour rates. I have not seen one person suggest it apart from those who are in favour of abolishing. In its current form MW should reflect inflation.

So do you not think a min wage of 20 euro per hour would cause unemployment as social welfare is well below that?

johnr1

I have read the entire thread, and I think its a pity that it has degenerated into a min wage thread, as it started well on the topic of "austerity"
Im not familiar with "Kenysenian thinking" or any other school of economics, but I have read the links provided, and I'm with dark crystal, in that I haven't seen any evidence from our two new-reg proponents of cutting the min wage as to how it would help employment, just demands on everyone else to prove otherwise. That's troll behaviour imo.
I'm regarded as a raving capitalist rightie by some of my friends, yet I see no purpose to reducing the take home pay of people who earn barely enough to justify their effort over the effort made by the people on social welfare as it is.
I do however advocate cutting social welfare rates when an employer can't compete with the package the Dole office offers.

Three Seasons

johnr1 wrote: »

I have read the entire thread, and I think its a pity that it has degenerated into a min wage thread, as it started well on the topic of "austerity"
Im not familiar with "Kenysenian thinking" or any other school of economics, but I have read the links provided, and I'm with a dark crystal, in that I haven't seen any evidence from our two new-reg proponents of cutting the min wage as to how it would help employment, just demands on everyone else to prove otherwise. That's troll behaviour imo.
I'm regarded as a raving capitalist rightie by some of my friends, yet I see no purpose to reducing the take home pay of people who earn barely enough to justify their effort over the effort made by the people on social welfare as it is.
I do however advocate cutting social welfare rates when an employer can't compete with the package the Dole office offers.

The dole should be cut in addition.

The rationalel has been explained countless times. No one has answered properly the 100 euro per hour min wage question? It's been ignored be caused it will become blindingly obvious that it would cause unemployment to increase the min wage to 100 euro per hour.

johnr1

johnr1 wrote: »

I have read the entire thread, and I think its a pity that it has degenerated into a min wage thread, as it started well on the topic of "austerity"
Im not familiar with "Kenysenian thinking" or any other school of economics, but I have read the links provided, and I'm with dark crystal, in that I haven't seen any evidence from our two new-reg proponents of cutting the min wage as to how it would help employment, just demands on everyone else to prove otherwise. That's troll behaviour imo.
I'm regarded as a raving capitalist rightie by some of my friends, yet I see no purpose to reducing the take home pay of people who earn barely enough to justify their effort over the effort made by the people on social welfare as it is.
I do however advocate cutting social welfare rates when an employer can't compete with the package the Dole office offers.

Alright, some interesting reading
http://www.djei.ie/publications/employment/1999/nationalminimumwagereport/appenb.htm

The discussion of the 100 euro one is them trying to apply reductio: If you take the idea of a min wage to extremes, what happens - that much is obvious - and where does this effect stop happening? 50 euro, 20 euro, 10 euro an hour? Current MW? Lower again?

Bullseye1

Three Seasons wrote: »

So do you not think a min wage of 20 euro per hour would cause unemployment as social welfare is well below that?

No doubt. Many businesses would lay people off just as they have been because local authorities have increased commercial rates which must be paid at the beginning of the year.

Do you believe employment would increase if we only abolished he minimum wage and tackled nothing else including social welfare? How would inflation be reduced?

Three Seasons

Bullseye1 wrote: »

No doubt. Many businesses would lay people off just as they have been because local authorities have increased commercial rates which must be paid at the beginning of the year.

Do you believe employment would increase if we only abolished he minimum wage and tackled nothing else including social welfare? How would inflation be reduced?

If we only cut the minimum wage I believe unemployment would drop marginally, however the effect would be far greater if social welfare were reduced. With these two implementations in place I believe the standard of living would improve over time for the poorer members of society. The timeframe within which the improvement would be seen is hard to predict.

Bullseye1

You also need to abolish upward only rents and greatly reduce commercial rates (now that property tax is here). SMEs are the lifeblood on the domestic economy. They provide the majority of employment. We are currently doing nothing for them. It is absolutely pointless tackling minimum wage and social welfare payments and at the same point doing nothing to make it easier to stay in work like providing better cheaper public transport, reducing duty and vat on fuel. If someone is left with little or nothing out of their wage packet at the end of the week why would they bother? The approach needs to be complete.

johnr1

Three Seasons wrote: »

The dole should be cut in addition.

The rationalel has been explained countless times. No one has answered properly the 100 euro per hour min wage question? It's been ignored be caused it will become blindingly obvious that it would cause unemployment to increase the min wage to 100 euro per hour.

First, it's a stupid question given that the average wage isn't that high.

But, ok, I'll play; Because goods and services produced would have to rise dramatically to cover the increased cost, - massive unsustainable inflation.

To then extrapolate that its removal would lead to lower prices for goods and services is a classic jump of logic and in my opinion, wrong. The price of goods is largely set by "what the market will bear" rather than production cost.
Also, why cant you respond to the links to the recent studies posted by dark crystal?

bluewolf wrote: »

Alright, some interesting reading
http://www.djei.ie/publications/employment/1999/nationalminimumwagereport/appenb.htm

The discussion of the 100 euro one is them trying to apply reductio: If you take the idea of a min wage to extremes, what happens - that much is obvious - and where does this effect stop happening? 50 euro, 20 euro, 10 euro an hour? Current MW? Lower again?

Blue, I agree with you on most economic questions I've seen you post on, but can't on this one. I accept what would happen if taken to the extremes, but nobody here is suggesting raising the min wage to those levels. What is being discussed is the abolition of it entirely, and in my opinion it's a logical fallacy that its abolition would lead to a drop in the price of goods and services or increased employment.
Also, your study is 14 years old, -older than the opposing evidence posted, and done by a government quango I frankly don't believe did their work, rather more likely responded to pressure from vested interests as was t the way of the time.

johnr1

johnr1 wrote: »

Blue, I agree with you on most economic questions I've seen you post on, but can't on this one. I accept what would happen if taken to the extremes, but nobody here is suggesting raising the min wage to those levels. What is being discussed is the abolition of it entirely, and in my opinion it's a logical fallacy that its abolition would lead to a drop in the price of goods and services or increased employment.

Well, I think if it were at least lowered, people who have no skills or experience which make them employable would be able to get a foot in the door, and work their way up. As I mentioned before, a lot of them in the states have been part timers/students, not people trying to support families on min wage or below.
Of course, that's why we already have three tiers of it, but it needs to be kept up to date with the lack of inflation etc.

Also, your study is 14 years old, -older than the opposing evidence posted, and done by a government quango I frankly don't believe did their work, rather more likely responded to pressure from vested interests as was t the way of the time.

lol
The study is taken from before the introduction of the min wage in Ireland
The govt wanted to introduce it, and they looked into it and the effects of it in the UK. Of course it's old!
I said it was interesting reading, and I still think so

Mr. Incognito

Oh dear.

I read he first page of this thread and it was very interesting. Skip to the end and it has turned into a pi$$ing contest about economic theory that people don't understand.

Austery will not work. It has never worked. Anywhere, ever. Europe has a reality problem. It keeps robbing it's reserves to shore up losses that largely are paper investment losses underwritten on overvalued assets that are greatly inflated.

Until they take a collective deep breath and work together to say, sorry. That money is gone and we, the governments and the funds and the investment houses and YES the euro too. (it's INSANE to think you can protect your currency when half the countries that use it are bankrupt) Then we can hit bottom and stop crippling people and countries with debt and start growing with realistic values.

I studied economics in college and it never struck me as anything other than pseudo science for stupid people. It is useless. It predicts nothing. It's up there with the horoscopes for me. Macro was interesting for an overview. Micro is horse dung.

Like this 100 euro min wage debate. WHO CARES. No one has the reserves in a business to do that. It would be the result of hyperinflation not the other way round and where we are tied to the euro it's an academic exercise.

Ireland has options. We just keep electing uneducated cretins and populist morons. Another 26 year old political science student this week. Dear god. A degree in how to spin.

Proactive plans could be.

1. Identify specific industries that are cutting edge and growing. Half the PAYE contributions to employers in those industries and give tax breaks. The r and d tax breaks and the pharma industry is all that is keeping us afloat.

2. Merge AIB and Bank of Ireland. You will never sell them off to anyone that wants them viable. Selling one will result in another eircom where they will be asset stripped. Bankers bonuses annoying you? TAX them at 100% no need to interrupt privity of contract.

3. Build a decent airport in Cork. FFS. The port is there. Make it an industrial hub.

4. Fix the HSE. It is bloated with middle management. You know where they could go? Revenue, education, ANYWHERE where they are not sucking wages and cutting frontline services.

5. Grow a pair electorate and elect decent intelligent people. Unfortunately we are an Agrian society and backwards despite all our Celtic tiger pretentious so we are a little screwed. Our best and brightest are fed up and leaving. It's a waste.

Anynama141

Mr. Incognito wrote: »

Oh dear.

I read he first page of this thread and it was very interesting. Skip to the end and it has turned into a pi$$ing contest about economic theory that people don't understand.

Fair point. Perhaps AH isn't the place to try to explain basic economics. As I've said, I like the principle of the minimum wage - the question is whether it benefits society or not.

The emotionally appealing answer is 'yes'. The problem is that the evidence may suggest otherwise. Of course, people usually want to do the nice/right thing, and defending the minimum wage falls under that category, but people don't seem to realise that sometimes when you don't understand what you are doing you can do harm with your help. The guy who throws water on a chip pan fire isn't trying to make the problem worse - he just doesn't understand the consequences of what he's about to do.

In brief, before leaving the subject and getting back on topic, here are a couple of points about minimum wages that people may not have considered:

1. Minimum wages make it more expensive to hire people on average.
2. Making something more expensive reduces demand for it.
3. Some jobs will never produce enough value to justify paying the minimum wage - although they might do if it were possible to hire someone for slightly less.
4. From the supply side perspective, the cost of goods and services is a function of the cost of inputs to provide those. If the cost of these fall, prices will fall.
5. The people whose jobs have been eliminated due to a minimum wage (due to replacement by machinery or simply by society forgoing their service) have to be subsidised by taxing others. If those people were at work, those taxes would not be needed and instead the money would be spent on more goods and services, creating more work again.

In summary, supporting minimum wages may be a classic case of 'unintended consequences' - people think they are doing a good thing, but the consequences may actually be bad.

Back to the austerity point: it's interesting that, beyond the usual ranting complaining about the government, nobody has managed to actually to come up with any alternative to the current situation. I find that interesting: has it sunk in with people that the coalition here are not going down this road for a laugh, but rather because they have to?

Every government wants to make people feel rich and that everything is improving. Unfortunately, FF did that for a decade by borrowing against the future, and now the future is here.

Anynama141

Mr. Incognito wrote: »

Austery will not work. It has never worked. Anywhere, ever.

You make some good points, but this is just silly. Are you familiar with a country called Germany?

Mr. Incognito

Mr. Incognito wrote: »

Austery will not work. It has never worked. Anywhere, ever.

http://en.wikipedia.org/wiki/Expansionary_fiscal_contraction

http://www.nber.org/chapters/c10973.pdf

It has been done and of all places it was a success in 1980s Ireland.

From the paper:

Ireland stands out as the most prominent example of an
expansionary cut in public spending.

You crowd out the private sector when the public sector sucks up all the resources. You cripple the private sector when you tax it too much. You cripple your short, medium and long term growth rates when you borrow too much.

The only time borrowing to spend money makes sense economically is typically for capital and projects where the % return on your money is higher than the % of the interest on the money borrowed.

Mr. Incognito

Anynama141 wrote: »

You make some good points, but this is just silly. Are you familiar with a country called Germany?

Oh my. Germany is an exporting powerhouse. It has real labour collective bargaining. It has fantastic infrastructure and developed industry and agriculture. It is located on some of the largest rivers in Europe hat runs to the largest port in the world. it's population tends to rent modest houses and save instead of building mansions and it's teachers running to buy investment houses and dabbling as landlords.

Austery is raising taxes and significantly slashing government expenditure in one fiscal year. When has Germany tried this? It tried to print money in the 1930s and the results were so catastrophic it is used as the text book example of hyperinflation which led to the fringe party the nazis assuming power.

I think you meant to say that Germany has better controls on spending and inflation, but this is not austery sir.

Mr. Incognito

Deleted User wrote: »

http://en.wikipedia.org/wiki/Expansionary_fiscal_contraction

http://www.nber.org/chapters/c10973.pdf

It has been done and of all places it was a success in 1980s Ireland.

From the paper:



You crowd out the private sector when the public sector sucks up all the resources. You cripple the private sector when you tax it too much. You cripple your short, medium and long term growth rates when you borrow too much.

The only time borrowing to spend money makes sense economically is typically for capital and projects where the % return on your money is higher than the % of the interest on the money borrowed.

Personally, I think this is a load of bull. The global economy took off around that time and the US investment into Ireland dragged us with it.

We still had massive emigration until well into he 90s when the rest of the world was doing well.

Economic theory is always looking back and mostly gets it wrong. Economic theory looking forward is almost always wrong.

I am not getting sucked into economic debate anyway. It's all irrelevant childish point scoring. I'm going to avoid the squabble. Enjoy.

steddyeddy

Spain have a lower minimum wage than us. How's their job market doing?

Anynama141

Mr. Incognito wrote: »

Oh my. Germany is an exporting powerhouse. It has real labour collective bargaining. It has fantastic infrastructure and developed industry and agriculture. It is located on some of the largest rivers in Europe hat runs to the largest port in the world. it's population tends to rent modest houses and save instead of building mansions and it's teachers running to buy investment houses and dabbling as landlords.

Austery is raising taxes and significantly slashing government expenditure in one fiscal year. When has Germany tried this? It tried to print money in the 1930s and the results were so catastrophic it is used as the text book example of hyperinflation which led to the fringe party the nazis assuming power.

I think you meant to say that Germany has better controls on spending and inflation, but this is not austery sir.

All irrelevant. Germany went through a period of austerity after the reunification - it was a real mess for a while but now it is in great shape. Don't take my word for it, here's a report on it from well-know right-wing nutters, the BBC.

dark crystal

Anynama141 wrote: »

Ok, you've demonstrated with these answers to rather easy questions that you are not interested in a serious discussion.

That's fine, this is AH, after all. But I'm not going to waste time and effort actually explaining stuff to someone who isn't interested and just wants a point-scoring game.

I'll also take those stupid answers as an acknowledgement that cheaper workers means more employment, ceteris paribus.

Again, you have no practical model that bears out the economic theories you espouse, so calling my answers stupid, while others waffle on about raising the minimum wage to €100 p/h seems somewhat disingenuous to me.

However, as others have said, I'll leave the debate on minimum wage there as we're clearly not going to agree on the subject and like you say, it's turning into a point scoring game at this stage and going nowhere.

Anynama141

steddyeddy wrote: »

Spain have a lower minimum wage than us. How's their job market doing?

Brazil's minimum wage is lower, how is their job market doing? As is Estonia's, how is their job market? :rolleyes:

Phoebas

Mr. Incognito wrote: »

2. Merge AIB and Bank of Ireland. You will never sell them off to anyone that wants them viable.

BoI is not for sale, not state owned or controlled.

Anynama141

Mr. Incognito wrote: »

Economic theory is always looking back and mostly gets it wrong. Economic theory looking forward is almost always wrong.

If it's all voodoo to you, why are you even trying to discuss it? :rolleyes:

By the way, Cork has a decent airport - they spent a fortune on shiny new (very quiet) terminal only a couple of years ago. What else do you want 'them' to do about it, and where should 'they' get the money?

Anynama141

Phoebas wrote: »

BoI is not for sale, not state owned or controlled.

Don't confuse him with facts.

Mr. Incognito

Anynama141 wrote: »

All irrelevant. Germany went through a period of austerity after the reunification - it was a real mess for a while but now it is in great shape. Don't take my word for it, here's a report on it from well-know right-wing nutters, the BBC.

Once again. This is NOT austerity. It is one half of Germany pouring money into the other half. What happened to this money, east Germany needed to be rebuilt, the people needed jobs, who do you think provided these services, west Germany.

Look, people here don't know what they are talking about, as regards economics, but two economics cannot agree on anything. It's a pseudo science IMO. I really have to stop checking this thread, like picking a scab now. You believe whatever you want.

Phoebas

steddyeddy wrote: »

Spain have a lower minimum wage than us. How's their job market doing?

Spain's minimum wage is just one part of their screwed up labour market. Its probably not sensible to think that a minimum wage is the only ingredient in a labour market.