July 22nd Teatime: The Recession Diaries

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a1_neverworkalone.JPGHere’s a recession tip for you: join a trade union. Get your friends, workmates and family to join a trade union. It will improve your living standards, help economic growth and give out a dig-out to the Finance Minister Brian Lenihan. The Centre for Economic and Policy Research, one of the best American think-tanks, has recently published it’s ‘The Union Wage Advantage for Low Wage Workers’. Its conclusion is very simple: if you’re in a trade union, you’ll probably make more than if you were not.

The wage premium associated with trade union membership is well documented throughout Europe (though I’m not aware of a specifically Irish study – if anyone has a reference, please let me know). Though this study only concerns US workers, its finding are still instructive. Examining wages for union and non-union workers in similar jobs and sectors, the CEPR finds that:

  • On average, the unionised worker earns nearly 12 percent more than their non-unionised counterpart.
  • The wage premium for low-paid workers is even higher – over 20 percent.
  • Even for middle-income workers, the wage premium is nearly 14 percent

The finding for low-paid workers is particularly important – especially as you have the Small Firms Association and right-wing politicians demanding wage cuts for those in the lowest paid jobs. In Ireland, trade union membership in low-paid sectors is low:

  • Hotels and Restaurants: 7.8 percent are members
  • Wholesale and Retail: 16.8 percent
  • Other Services: 18.2 percent

Overall, only one in four private sector workers are trade union members. So there are a lot of people who could boost their incomes.

But how does the wage premium have wider economic benefits? Well, first and foremost, it puts more money in people’s pockets who then have more opportunities to spend. And spending is what we need, to maintain jobs, profits, etc.

It even gives the Finance Minister a hand. When €100 goes in profits, the Exchequer gets a return of only €12 in corporate tax revenue. But if that €100 finds itself in the employee’s pay cheque, the Exchequer gets a return of €22 for a standard rate taxpayer and €43 for a top rate taxpayer. That doesn’t count returns on spending taxes, etc. If I were a Finance Minister, I certainly would want to see rising wages.

But there’s that damn recession – companies hanging by their finger-tips. How could we possibly demand more money from them? Well, some companies do poorly, some companies get by and some companies do quite well. For instance, in just the last two days the Indo and the Irish Times reported that:

  • Ardagh Glass saw profits rise by 150 percent – up to €46 million
  • Dominos Pizzas (UK and Ireland) recorded a €13 million half-yearly profit, an increase of 33 percent
  • Bank shares rebounded, going up between 6 and 10 percent
  • The Port of Cork recorded its highest ever turnover – €25 million

That’s just two days of a slow week. It makes the UNITE demand for local bargaining all the more sensible. Where profits are high, workers should be allowed to bargain for higher percentages. If they can succeed it will help them and their families, help the economy and help Mr. Lenihan.

But to ensure that that happens, you have to join a union. Go on, it’s in the national interest.

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