August 22nd Morning: The Recession Diaries

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businessman.jpgTruly, a tale of two economic cities.  First, the Irish Times heads an article ‘Wage Increases Higher than EU Average in 2007′.  Citing a recent European Industrial Relations Observatory survey it stated:

‘Irish workers enjoyed higher wage increases than their counterparts across Europe in 2007 . . ‘

Well, actually they didn’t.  The report has it in black and white:  All countries (EU 27 and Norway) – 6.9 percent; Ireland – 4.8 percent.  You can either bang your head against the wall or accept that some journalism has difficulty with reading reports and looking at numbers.  The article goes on to state that:

‘ . . pay rises for Irish workers (are) running far ahead of the EU 15 average.’

Now, ‘far ahead’ is one of those subjective terms.  What does the Irish Times consider ‘far’?  The EU-15 average increase was 3.1 percent – Ireland was 4.8 percent (this gap narrowed – to 1.1 percent when adjusted for inflation, but let’s not employ anything so sophisticated as taking into account living conditions).  Of course, the Irish Times does not put any of this into any context.  That would undermine the broader narrative that workers are bleeding the economy dry.  So let’s do the work for them.

First, according to the AMECO database, operated by the European Commission, Ireland’s manufacturing wages in 2007 were below the EU-15 average, ranking 11th.  So wages may be  increasing faster than average, but its a catching-up process from historically low levels.  All low-wage countries are involved in this process.  The New Member States averaged 12 percent increases, with Latvia leading the table with a whopping 23 percent (the equivalent of IBEC in those countries must be having cardiac arrest with those numbers).

Second, what does this ‘far ahead’ actually amount to in terms of Euros in the pocket?  Again, using the AMECO database we find that the Irish wage increase was €560 more than the EU–15 average.  That’s less than €11 per week.  In the Irish Times lexicon, €11 per week is ‘far ahead’.  How much would Irish workers need just to reach the EU-15 average?  €3,157 per annum.  How much would Irish workers need to reach average manufacturing wage levels among the 10 wealthiest EU countries, which includes us?  Over €10,000 per year.  If €11 per week constitutes ‘far ahead’, what are the adjectives we should use to describe how far behind these averages we are?  Quantum?  Inter-galactic?  Light-years?

Let’s leave the plebeian city of workers’ wage increases and head towards the city of the rich and powerful (we are only allowed day passes and are constantly under surveillance by private security guards trained in Pyongyang).  In their ‘Report on Irish Directors’ Renumeration’, Hewitt Associates tracked the pay increases of all the Directors of companies listed on the Irish Stock Exchange:

  • Average Pay Increase:  12 percent
  • Average Total Increase (including bonuses and incentive payments):  30 percent.

Think on that for a moment – the wealthiest people in the country award themselves 30 percent increases. In Euros in the pocket, this amounts to increases of between €496,000 to €2 million per year.  Now that’s a ‘far ahead’ I think we can all agree on.  It’s even far ahead of these folks’ international peer group.  In the US, the average pay increase of Directors was 4 percent; in Europe, between 3.5 and 7.5 percent.

These figures were compiled up to May 2008.  So if you thought our home-grown directors would take their foot off the pedal as we roll through these recessionary time – then you don’t know the topography of the city of the rich and powerful.

We can take whatever we want from these figures – €11 weekly compared to €2 million in increases.  The one thing I take from it this: I am not going to take bloody lectures on competitiveness from the highest paid people in the country who award themselves Lotto-style payouts and then bitch about €11 per week.

And if that means being kicked out of the city of the rich and powerful – I’ll live with it.

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