IBEC and the Low-Paid: The Bloodletting. The Recession Diaries – October 6th

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It’s pre-budget submission time and IBEC has come out with a barn-stormer. They have all the usual demands we’d expect: more fiscal contraction, no increase in marginal tax rates, maintain our ultra-low corporate tax rate, more spending cuts, etc. etc. No surprises and no indication in IBEC’s submission that evinces either an understanding of the crisis we’re in – hence, the steady-as-she-goes Titanic route – nor much in the way of new thinking. That’s not to say their aren’t some interesting things. But taken as a whole it is one more brick in the deflationary wall – a wall that is close to collapsing on all of us.

And that’s the benign part of IBEC’s submission. They reserve the real bloodletting for the low-waged. Let’s look at their multi-prong attack on the living conditions of the lowest paid in the economy.

Even before the launch of their submission, IBEC wanted to cut living standards. They called for a pay freeze until 2013. This, alone, would cut people’s income by 3 to 4 percent in real terms depending on which measurement one uses (the EU’s HICP or our own CPI). But in their submission they let their deflationary mojo rip.

IBEC 1

First, IBEC proposes cutting personal and PAYE tax credits by 6 percent. For a single person this would  mean a rise in income tax by €220 a year – for all income earners. This is equivalent to a flat-rate income tax rise. What would the combined impact of a pay freeze and a cut in personal tax credits be?

Low and average paid would be hit harder than those on higher incomes – just what you’d expect from a flat-rate income tax rise. This is IBEC’s idea of ‘sharing the burden’. But they’re not done yet.

IBEC 2

Second, IBC wants to abolish Joint Labour Committees (JLCs). These committees set pay rates for hundreds of thousands in low-paid occupations – primarily in the hospitality, contract cleaning, hairdressing, retail and other sectors. One can’t automatically assume that, in the event of their abolition, these rates would fall to the national minimum wage level – but there would certainly be strong downward pressure. Let’s take four JLC rates ranging from €17,562 (for a hotel porter) to €20,300 (for a security guard). If wages fell by 5 percent arising from the abolition of the JLCs this is the effect:

This is IBEC’s idea of ‘we’re all in this together’.

And, of course, no attack on the low-paid would be complete without the demand to cut the minimum wage. IBEC doesn’t put a figure on it, nor do they give a timescale but they want to reduce the minimum wage to the EU-15 average ‘over-time’. What is the EU-15 average?

IBEC 3

In effect, IBEC wants to cut the national minimum wage by 20 percent. Of course, labour costs in low-paid sectors are one of the lowest in the EU-15. But no matter. This is IBEC’s idea of ‘each according to their means’.

Cutting pay, cutting disposable income, cutting labour protection – who would be the losers? Well, obviously, the low-paid. That goes without saying (which IBEC doesn’t). But there are other losers which IBEC doesn’t mention as well.

The next set of losers would ironically be the business sector itself. The Central Bank estimates that consumer spending will rise by 0.4 percent in 2011- effectively stagnant. With wages being cut across the board in real terms, with the income of those groups who spend literally everything they earn being cut more – what will happen. Less spending, less business turnover and sales – leading to more businesses failing or downsizing; this is IBEC’s idea of ‘enterprise support’.

Another big loser would be the Exchequer. IBEC claims cutting personal tax credits by 6 percent would increase tax revenue by €500 million. But when the impact of reduced VAT revenue arising from falling consumer spending; when the impact of higher unemployment costs arising from reduced demand; when the impact of lower business taxes arising from business closures; when all these are factored in, the gain in €500 million will be illusory. The Exchequer could end up in a loss situation.

This is why we will all be the losers under IBEC’s attack on the low-paid. What can we learn from all this? We can learn to be like IBEC. That’s right. IBEC is not interested in accommodating its agenda to some make-believe comfort zone of consensus – it is about pursuing its agenda ruthlessly, to ensure that the debate coheres to its logic, its dictates, its demands. So that if there is a new agreement, it will be done its own terms – because they will have bludgeoned their ‘partners’ into an acquiescence dressed up as a partnership. And if there is no agreement, no matter; IBEC will be leading the debate, popular opinion and government policy. Heads they win, tails they win.

Yes, progressives and trade unionists have a lot to learn from IBEC.

 

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