The Stability Programme Update, the latest economic and fiscal projections, signals the start of the budgetary politics that will inform the next Government. In particular, it shows the level of money available for the Government for spending increases and tax cuts. Speaking in the Dail yesterday, the Finance Minister stated:
‘On foot of these changes, my Department currently estimates the net fiscal space to be somewhere in the region of €10 billion to €11 billion over the period 2017 to 2021.’
Remember all that stuff about the fiscal space during the election? It was stated that there would be €8.6 billion available over the next five budgets. This has been increased by approximately €2 billion due to changes in the complex calculations. So, we have €10.5 billion.
An extra €2 billion: sound good? Not really – not when you look at the detail.
Let’s compare two main budgetary projections that were presented in Budget 2016 – only a few months ago – and the current projections published in the Stability Programme Update: investment and expenditure on public services (Government consumption).
Spending on investment and public services has been revised downwards in the current projections. The differences may seem small but it puts the increased €2 billion in ‘fiscal space’ the Minister referred to in perspective.
For instance, in the budget last year the Government projected investment spending over the five years to be €25 billion. They have revised this downwards to €23.5 billion – a cut of 6.2 percent. We’d have to increase investment by €1.5 billion just to get back to the projections in the budget – and that was already one of the lowest levels of investment in the EU.
Regarding expenditure on public services, over the five years the Government has revised this downwards by nearly €4 billion. Get the picture? Now let’s factor in inflation (using the GDP deflator – unfortunately, we don’t have an inflation projection for public services).
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The Sunday Business Post’s investigation into JobBridge was devastating. The programme has been used to staff the HSE, Hewlett-Packard, public enterprises, supermarkets and universities. A large number of interns report frustrations, especially as they have almost no workplace rights, while the investigation showed a scheme that grew out of control lacking robust monitoring and compliance mechanisms.
It’s time JobBridge was closed down. The youth section of Unite the Union has long campaign for its abolition; Impact has recently called for the programme to go. It’s already being reduced. The programme will be cut from €70 million last year to €51 million this year. Cut the rest of it.
And let’s use the money to create a real programme of work, targeted at people who are having a hard time in the market. Long-term unemployment can be a dismal experience. The longer you are out of work, the more difficult it can be to get back in: your current skills may be become degraded, previous work routines are undermine, there can be mental health issues, you get stuck so far into a rut that it is difficult to pull yourself out. Training programmes work best when the person is motivated and there is a belief that a job is possible at the other end. Long-term unemployment is the ultimate de-motivating experience, leaving people with little hope.
In 2015, long-term unemployment (without a job for more than a year) averaged 114,000. That amounts to 5.3 percent of the labour force. By contrast, long-term unemployment in the EU-15 makes up 4.7 percent.
When we turn to what can be called ‘chronic’ long-term unemployment – two years and longer – we find, on average, 83,000 stuck in this situation and, of this, 50,000 have been unemployed for four years or longer.
So let’s redirect the resources – approximately €85 million – from the JobBridge and Gateway programme) into a guaranteed real job programme. In other words, the state should become an employer of last resort; when people cannot find work in the labour market, the state will provide that work. What would such a programme look like?
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The National Competitiveness Council (NCC) has released its latest Cost of Doing Business in Ireland. It is always an interesting compilation of graphs, charts and statistics that compare Irish competitiveness against other countries. The current release has been accompanied with a media bustle about ‘high-cost’ Ireland. This, of course, has long been the case. The NCC lists a number of culprits: transport, utilities, credit and childcare.
And what would a ‘competitiveness’ review be without mentioning ‘labour costs’ (I think they mean ‘employee compensation’ which is not a cost but I’ll let that go for now). Once again, the NCC has produced a misleading picture about labour cost trends. This has resulted in media reports referring to the ‘high cost’ of wages. The NCC has even produced a graph to give the appearance that labour costs have been rising faster than the Eurozone average. I reproduce the graph below.
You might think, from a first glance, that since 2010 Irish workers have been getting pay rises that exceed the Eurozone average. The general picture is that, while wages fell between 2007 and 2010, since then they have been rising at a pretty swift pace. Thus, we have to watch out; otherwise our wage levels will become ‘uncompetitive’. Thus, we have to be more moderate, or ‘sustainable’.
The only problem with this picture is that it is wrong and misleading. The NCC graph is based on the data from Eurostat’s Quarterly Labour cost index which can be accessed here (it would be helpful if the NCC actually sourced the data source and not just the agency that produced the data). In this dataset, you can choose different types of measurement. I’m assuming the NCC is using the ‘percentage change compared to same period in previous year’ not seasonally adjusted (it works in some respects).
The measurement that the NCC uses tells you what it tells you but, at the same time, it can distort the picture. Here is an example. Let’s say that wages fall by 1 percent in year-on-year quarter. Then the next quarter it falls by 0.5 percent. Well, you’d say that wages are still falling though at a slower rate– and you’d be correct. However, using way the NCC measures it, it would show wages rising since the ½ percent fall is less than a 1 percent. This is the stuff of statistical battles.
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Spring Reading: A review of some of the book I have enjoyed so far this year.
The Opacity of Narrative by Peter Lamarque (Rowman & Littlefield)
We all like to tell stories but narrative is invested with meanings that make it more serious and questionable than we ever imagined. There is something called narratology –a term that Word 10 flags up as a spelling mistake – because a story isn’t simply a representation of a world that does or could exist. Fictional or not, a narrative is an artefact, not some entity in the natural world, and a postmodernist like Hayden White writes of historical narratives shaping the relationships that turn facts into a story with a particular significance. This isn’t saying historians constitute the actual facts but it does get close to saying the resulting narrative is not altogether different to a story that might emerge if they did. The historian shares something with the novelist: both recount and shape events within a temporal dimension, imposing a structure, and creating a narrative. Herodotus is a historian but what he writes is also a work of literature and the first Penguin edition classified it as fiction; Thomas Keneally’s Schindler’s Ark was published as nonfiction in America but fiction in Britain; Hitler’s Diaries turned out to be fiction but this doesn’t make it literature. The Opacity of Narrative sets out with admirable lucidity the questions and queries and the tricky issues in the fields of epistemology, philosophy and aesthetics that arise when narrative loses any claim to transparency. It becomes important to work on identifying kinds of narrative practice, the different conventions they follow and the nature of the truth claims involved and this book succeeds in making you think about what is involved in doing so. A story is never just a story.
China Miéville critical essays edited by Caroline Edwards and Tony Venezia
Art and Idea in the Novels of China Miéville by Carl Freedman (Gylphi)
The form of fictional stories that monopolize the subject matter of newspapers’ book reviews and the display tables in bookshops is representative realism, filling in a story in reassuringly familiar ways as if there is a readily knowable world out there and a novel can capture it verbally just as a photograph shows us what it is a photograph of. A photograph or a realistic novel, we naively feel, stands in a causal, mimetic relation to their subject matter but, as the essays brought together by Edwards and Venezia and the critical study by Freeman show, there is a narrative complexity to China Miéville’s novels that rejects such a model of transparency In place of a fixed line leading to a determined destination, Iron Council describes a train line (and the journey along it) that is always in the making: ‘Miles of track, reused, reused, it is the train’s future and its present, and it emerges a fraction more scarred as history and is hauled up again and becomes another future.’ In The City & The City the ability of
language to cement an ideology of seeing and unseeing is on show in a single city of two psychological halves, the inhabitants of one literally not seeing what is in front of their eyes. In Embassytown, a species incapable of understanding metaphor, for whom each word can mean one thing only since meaning does not depend on a system of differences, discovers what it means to use words non-literally. For Miéville, the issues raised by his imaginative stories are packed with political intent and this is what makes him the most interesting of all contemporary novelists.
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Workers at Tesco’s have voted overwhelmingly for industrial action to resist the proposed wage cuts that management is demanding. The issue is now going to the Workplace Relation Commission. This post is not about the details of the Tesco dispute (you can read about it here). However, it is timely to take a step back and look at wages that not only Tesco but all retail workers earn. And when you sneak that peak you will find that retail workers in Ireland are some of the poorest paid in the EU-15.
According to Eurostat (the baseline figures are from 2012, brought up to 2014 with the Labour Cost Index), Irish retail workers rank 12th in the EU-15. And these wages are well behind European averages.
- Irish retail workers would need a 20 percent increase to reach the EU-15 average.
But when we compare Ireland with our peer group, the comparison deteriorates dramatically. One peer group are Northern and Central European economies (NCEE). This is the EU-15 figure excluding the poorer Mediterranean countries (though it’s worth noting that Italian retail workers earn more than Irish). In this comparison:
- Irish retail workers would need a 35 percent increase in the hourly average wage.
A second peer group is other Small Open Economies (other SOE). This is a comparison used by the IMF and it refers to economies with small domestic markets and a high reliance on exports, just like Ireland. This category includes Austria, Belgium, Denmark, Finland and Sweden. In this comparison:
- Irish retail workers would need a 54 percent increase in the hourly average wage.
Some may object to this, claiming that if a company is not profitable, it cannot increase wages. This is true enough. But we are confronted with a problem: the last year we have comparative enterprise data in the retail sector is 2012 – a bottom point in the retail business cycle with the economy still mired in a domestic demand sector. Although profits per employed was about 15 percent below the EU-15, profits in the foreign-owned sector (such as Tesco) was the highest in the EU-15. So even with the consumer economy at rock bottom, a substantial part of the retail sector was doing ok.
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We will soon have a government. What kind will it be? Time and a Programme for Government will tell. But what we really need is an experimenting government; one that uses resources and creativity to experiment with different proposals. There are many good ideas out there but it is hard to know how they might impact on the economy and society were they introduced in one go. Commissions, green papers and studies can only tell you so much. We should experiment – trialling ideas for a limited period in different contexts and sectors. We can then assess the results to see if they are runners. Here are a few examples.
1. Shorter Working Week
I wrote about this here. In Sweden a number of trials are being conducted to assess the impact of a shorter working week in terms of cost, productivity, firm or agency performance, customer satisfaction and the health and well-being of the employees. Why not trial it here? We could select public and private sector workplaces to run 18-24 month experiments in reducing the working day. A study of productivity and all other elements would be done before and after the trial period and the results made public for study and debate.
2. Basic Income
Basic Income – a guaranteed payment to everyone regardless of employment status – is attracting more attention and discussion. Arguments centre around a new era of reduced formal work opportunities, the growing complexity of welfare states, strengthening workers’ bargaining power (if I have a living income to fall back on, I can walk away from the boss’s grief), etc.
But there are downsides: the high cost of implementation, inflation, unknown impact on the labour market. This is complicated by right-wing arguments that with Basic Income we can abolish the welfare state and minimum wages.
It is unlikely that a Government would introduce Basic Income all at once, or across the board. If it didn’t work out it would be very expensive to undo the policies and repair the damage. However, some places are conducting experiments – for instance,Utrecht and other Dutch cities. It will be limited to a certain cohort but the hope is to discover how it changes people’s behaviour and what the fiscal and bureaucratic impact would be. So why don’t we do the same thing – we could model it on the Dutch experiments so we don’t have to re-invent the wheel. It could be run out in urban and rural areas for a time-limited period with the effects to be studied afterwards.
3. Labour-Managed Enterprises
There has been increased academic interest in the performance of labour-managed enterprises (workers’ cooperatives, employee-ownership and other models). While extremely limited in Ireland, there are a considerable number operating in other countries – notably France, Spain and Italy – throughout the industrial and service sectors. Proponents argue that such enterprises increase productivity and firm performance while generating higher investment and reduced wage inequality.
Here is an opportunity to run a trial programme – through Enterprise Ireland, local enterprise boards or a new agency if that is seen a better fit. It would provide funding and training, and work with firms that are closing down due to poor performance or owner-retirement as well as greenfield start-ups. This experiment would take time – a firm may survive the first and even second year but could fold soon afterwards. However, this could be an on-going process, with periodic reports and analysis. This shouldn’t be too contentious – after all, it is about generating indigenous enterprises and putting people back to work. What we might find is that labour-managed firms are a better route to those goals, with positive spill-over effects in the community.
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This week I am delighted to welcome back Derick Varn to the show. After listening to the previous show about Cultural Marxism with Doug Lain, Derick sent me an email saying he’d like to come on the show and give his two cents. What followed was a wide ranging discussion on ideology, value theory, and the historical emergence of capitalism. We also discussed the possibility of a revolutionary movement based on a system without abstract value, Marx’s critique of the Gotha Program, and Star Trek as a Marxist Tract. And top of all that, the possible productivity of a communist state, game theory and alternative histories, and the Spanish revolution. You can find Derick’s blog here: https://symptomaticcommentary.wordpress.com/ You can find Derick’s and Amogh’s Podcast here:http://sympthomaticredness.libsyn.com/ The music on this episode was: ‘The Order of the Pharaonic Jesters’ by Sun Ra and his Arkestra ‘If Not For Money’ – The Wytches
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It’s starting. When the penny drops and the incoming Government finds there is less money in the kitty than their manifesto promises were based on, the scramble for scarce resources will be on. And the scramble to have a go at public sector workers – that will be on, too. This from management consultant Eddie Molloy in the Sunday Business Post (behind a paywall):
‘That (the Lansdowne Road Agreement) was clearly a sweetener with the prospect of an election ahead. Before disability, homelessness, flooding or anything else got a look in, a big chunk of the available funds had already been given away. The government chose pay restoration over services restoration.’
Ah, c’mon; public sector workers – in particular, the low-paid (the Lansdowne Road Agreement gave these workers an additional boost) – took from the disabled and the homeless? Interesting that Molloy didn’t write: ‘The Government chose tax breaks for high income groups over services restoration’ or ‘massive subsidies to the corporate sector over services restoration.’ No, just public sector workers. This is the type of argument we’re going to get – and it will probably get even more extreme.
Colm McCarthy, too, is not too keen about public sector pay increases. But at least his argument is one that can be engaged with. He rightly states that there’s little fiscal space; that’s probably an overstatement. He goes on to say:
‘Should a government be formed, an immediate priority should be to inject some reality into the discussions about public service pay. Are public servants poorly paid, relative to those in the private sector and in comparable public employment in the UK and elsewhere? The best way to compare, taking account of pensions and job security, would be a thorough benchmarking exercise, done openly and with all details published.’
Ok, let’s throw some reality into this discussion.
First, let’s measure public sector pay (employee compensation) as a percentage of GDP. For Ireland, I use the Irish Fiscal Council’s hybrid-GDP measurement, a compromise between GDP and GNP.
Ireland is well into the bottom half of the table, below the average of other countries. It should be noted that in some countries like Germany not all public sector pay is on the books. For instance, in the public health system, public sector pay is off-the-books, courtesy of quasi-public corporations (money spent is categorised in different ways).
It should also be noted that according to the Irish Government, public sector pay will fall from 9.8 percent in 2016 to 8.4 percent by 2021 (using the hybrid-measurement). And that’s including the full cost of the Lansdowne Road Agreement.
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With all the talk about industrial action and wage claims and wage offers and summer of discontent, etc. etc. etc. it is worth taking a step back and to look at the big picture. Are Irish workers paid too much in comparison with other EU-15 countries? This blog written by the Director of the Nevin Economic Research Institute, Dr. Tom Healy, looks at the adjusted wage share in the economy. That’s one way of measuring wages – and it shows Ireland performing pretty badly in comparison.
Here I am going to approach this issue by quantifying the proportion of the economy that goes on wages. But whenever you go down this route you are faced with a big question. Do we use GDP which is inflated by multi-national profits which are not generated here but are imported to take advantage of our corporate tax regime? Do we use GNP even though this is also inadequate as it excludes actual productive activity? Or do we use the Irish Fiscal Advisory Council’s hybrid-GDP which attempts to measure our actual economic or fiscal capacity?
Let’s take a cautious, conservative approach and use GNP. In terms of EU comparisons this means using Gross National Income (GNI) which is essentially GNP including payments from the EU (CAP funding, etc.). When we do this we find Irish workers, collectively, are paid a small percentage relative to workers in other EU countries.
The EU Commission’s AMECO database estimates for 2016 finds that Irish employee compensation is near the bottom of the EU-15 table. Employee compensation combines both wages and employer social insurance contributions; this is the standard measurement of wages and, as such, can be taken as a very close proxy to ‘labour costs’.
Throughout the EU-15, wages make up 48 percent of GNI. In Ireland compensation makes up only 40 percent – equal to Italy and ahead of lowly Greece (if we used GDP or the Fiscal Council’s hybrid-GDP, the percentage would be even lower).
What would happen if Irish wages rose to the average EU-15 level?
- Total wages would rise by €15.4 billion, or 20 percent more than today.
- That is the equivalent of €9,400 per Irish employee.
Of course, economies and wages are never so simple; therefore, you can’t run a slide-rule over gross numbers and extrapolate an optimal wage figure. Much depends on the bargaining power of workers vis-à-vis employers, the position in the business cycle, the sectoral structure of the economy (high-tech? medium-tech?), compositional effect, productivity levels, etc. However, we can’t get away from the fact that Irish wages take up far less of Gross National Income than in almost all other EU-15 countries.
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The April issue of Socialist Voice is now available online at http://www.communistpartyofireland.ie/sv/index.html
Table of contents:
A century ago this month, on 24 April 1916, members of the Irish Volunteers and the Citizen Army marched out and seized a number of sites mainly in Dublin and a small number of other places around the country. The Rising lasted six days, but its impact still reverberates a century later.
Antonio Gramsci wrote in his Prison Notebooks that “the crisis consists precisely in the fact that the old is dying and the new cannot be born . . .” Although this was written more than eighty years ago and in a very different world, he might well have been referring to the present day.
On 6 December last year the US-backed Venezuelan opposition achieved a victory in the parliamentary elections, winning a two-thirds majority in the National Assembly. As only their second victory in twenty attempts, it must have tasted very sweet following eighteen years of almost continuous losses.
One hundred years ago Irish men and women lit a spark that they hoped would lead to an Irish Republic, sovereign and free from the stranglehold of British imperialism. The revolutionary forces of 1916 were the product of the economic, political and social oppression visited upon the Irish people by the continued tyranny of Britain.
The last issue of Socialist Voice referred to the “pensions time bomb.” This is a term dreamed up by the bourgeoisie in the financial sector as part of a campaign to undermine state pensions and defined-benefit schemes. Now some other “time bombs” have arisen.
Amid the pageantry of the 1916 centenary, the revisionists and West-Brit media are on overdrive to present the rising as a failed, delusional blood lust. One of the defining characteristics in this is the omission of the real ideas of the leaders, not least Connolly’s socialism and Pearse’s concept of education.
Going hand in hand with a reduction in the stigma attached to mental illness is a growth in diagnoses. Some of this can be attributed to better health education, leading to fewer sick people going untreated; but with unprecedented numbers now receiving treatment, we have to ask, What part of modern society is making us ill?
William Shakespeare died four hundred years ago this month, on 23 April 1616. There is hardly a country or a language in the world that is not familiar at least with his name. Shakespeare’s poetry has had an impact on the English language like no other.
Bernard Murphy’s review of Capital in the Twenty-First Century by Thomas Picketty misses what, for me, is the elephant in the room: the role of the Soviet Union in the expansion of workers’ wealth in the post-1945 period. I can excuse (but not forgive) Picketty, and every single other reviewer for this omission, but hesitate to excuse Murphy, given that his review appeared in the newspaper of the Communist Party of Ireland.
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