Posts By Michael Taft


The Wake Up Call

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One of the more frustrating aspects about the budget season is that everyone is focused on the detail, the particulars; even more so when an election is looming.  The whole thing is backwards.  One should first start with a long-term programme.  Then we can see how the details of any particular budget serves that programme (or doesn’t).  No one is doing that.

Except the Nevin Economic Research Institute.  In their recent Quarterly Economic Observer, Dr. Tom McDonnell has produced an outline of such a long-term term framework and vision – a sustainable, prosperous and increasingly productive economy capable of raising incomes and reducing poverty.  It is rigorously argued and evidence-based and probably one of the best economic frameworks to emerge from the debate for some time.

This is not sexy stuff.  But it is the stuff of economic and social prosperity. 

Most of it all, it should serve as a wake-up call – not only to the Government but to progressives and trade unionists as well.  The programme is set out in Section 4 of theQuarterly Economic Outlook.  It is still in skeletal form; I understand that Dr. McDonnell will be producing a more comprehensive paper in late October.  But let’s go through some of the the headline proposals NERI is making.


  • Increase public investment
  • A new infrastructure bank to provide stable, long-term finance
  • Expert evaluation of infrastructural needs and specific projects (cos-benefit analysis)

This is a crucial area.  Think social housing, advanced-speed broadband, renewable energy generation, water & waste.  The Government’s capital programme released this week is a complete flop.  Investment will rise by €600 million over the next three years while tax cuts will cost €750 million next year. 

The emphasis on an infrastructural bank is intended to allow access to low-cost loans over the long-term, which works with the nature of infrastructural projects which have a long return horizon.  And we desperately need independent analysis of our infrastructural needs combined with publicly available and scrutinised cost-benefit analysis to ensure that we are getting value-for-money and that projects are economically viable, not politically expedient.

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The Desert of the Irish Debate

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There is an old American saying:  if you have nothing to say, wrap yourself up in the American flag and recite the constitution.  In Ireland, today, if a politician, a political party, has nothing to say, no new ideas to advance, then call for tax cuts.  The current deluge of leaks in the media about impending tax cuts are not evidence of sources having something to say; it is evidence of how the debate over future economic and social strategy has been turned into a desert.

And what tax is being hammered?  The most efficient, transparent, potentially progressive tax we have – a tax that even an army of accountants acting on behalf of the rich can’t get around:  the Universal Social Charge.  It is called a hated tax, an unfair tax, an anti-entrepreneurial tax.  Everything that is wrong with our income tax system is blamed on the USC whereas the reality is that the USC has the potential to repair much that is wrong with our income tax system, distorted and misshapen by the myriad of reliefs, allowances and exemptions – most of which benefit high-income groups.

People have been put under pressure from the tax increases during the period of recession.  It was irrational to reduce people’s take-home pay when economic growth was falling, wages were being cut in real terms, working hours and income supports (e.g. Child Benefit) were being cut.  Between 2008 and 2012, the effective tax rate rose by 30 percent.  This was a major contributor to lengthening and deepening the recession.

Today, however, the issue is not ‘high taxation’; it is that people’s living standards are low by EU-15 standards.  The debate over cutting taxes, however, shows how incapable political parties are of addressing this issue.  Rather than admit intellectual impotence, they propose tax cuts – which will only exacerbate the very problems they are incapable of addressing. 

Tax Cuts:  Giving More to Those Who Have More

Ireland has one of the highest levels of market inequality in the OECD.  As the recovery becomes embedded we are in danger of accelerating this trend.

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Could We Have a Little Bit of that Corbynomics Over Here?

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Jeremy Corbyn is now leader of the British Labour Party.  A Sunday Times article likens Jeremy to Caligula – an insane, murderous tyrant who appointed his horse Consul.  According to the Tories, he is a threat to Britain’s national security, economic security and, well, galactic security (watch out for those Corbynite Klingons).  Well, at the risk of Roman despotism and an alien invasion force landing on the Blaskets could we please have a little bit of Corbynomics here in Ireland?

For at the heart of Corbynomics is something quite modest:  a modernising investment drive to re-tool the UK economy.  It is a testament to the perversity of a debate that investing in high-speed broadband, public transport, social housing, school and hospital construction, green technology can be labelled as extremist.  Does anyone really suppose that British businesses would be outraged if they had a world class broadband system?  Or that the economy would dive into the abyss if more energy came from renewable resources rather than fossil fuels? 

Maybe the extremism comes from other aspects of Jeremy’s proposals.  Renationalise the railways and energy companies?  Yeah, so extreme that even a majority of Tory voters support renationalisation.  Combat multinationals’ aggressive tax planning and avoidance?  Yeah, forcing companies to pay taxes like the rest of us.  Build low-cost housing in London?  I’m sure tenants would be up in arms.  Everywhere you look in Corbynomics, you see common sense. 

Even orthodox commentators would seem to agree:

‘It is hard to exaggerate the decrepitude of infrastructure in much of the rich world.’

So begins a provocative article in the Economist, not noted for alarmist language.  It points out:

  • One in three railway bridges in Germany is over 100 years old,
  • So are half of London’s water mains.
  • In America the average bridge is 42 years old while the American Society of Civil Engineers rates around 14,000 of the country’s dams as ‘high hazard’ and 151,238 of its bridges as ‘deficient.

Such a state of affairs is not only highly inefficient, but potentially very dangerous.

Public investment is well down throughout Europe, the US and Ireland.


Almost all EU countries have significantly cut their public investment budgets – especially those countries that needed it most:  the poorer Mediterranean countries, Ireland, Romania. 

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The €2 Billion Start

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Today, Unite has published its 2016 pre-budget submission.  You can read the full submission here and the summary here.  In short, it calls for a €4.8 billion budget package comprising a €1.9 billion increase in expenditure on public services and social protection, a €550 million increase in public investment and focused tax reductions on the low paid (e.g. reform of the PRSI step-effect, refundable tax credits and indexation) worth €220 million.  This is to be paid for by tax increases on wealth and capital, along with increases in the social wage (employers’ PRSI) and the fiscal space allowed under the EU fiscal rules.

However, I want to focus on one particular proposal in the submission:  the temporary, once-off investment programme of €2 billion for social housing; in particular, focusing on the homeless and households with special needs.

This has been discussed previously on this blog.  Back in April 2014 I suggested that instead of the Government spending €7.1 billion on paying down debt, it should invest half of this into a special once-off investment programme in social housing.  The actual turnout for 2014 was €5 billion used to pay down debt.  At that time I wrote:

‘Let’s start with the conclusion: if by this time next year if there are people still homeless, it’s because the Government made a policy choice.  And the policy choice was to tolerate homelessness.’

Back in May 2014 Fr. Peter McVerry warned of a ‘tsunami of homelessness’:

‘In all the years I have been working with homeless people; it has never been so bad. We are, even I would say, beyond crisis at this stage.’

16 months later the situation has become worse. 

A comprehensive housing programme, one that addresses the myriad of issues such as homelessness, local authority waiting lists, rising rents and limited supply, house prices, planning, land prices – this is a big, big subject and is not amenable to sound-bite policies.  It will require joined-up strategies, long-term thinking and the intellectual courage to go beyond the ‘housing as just another market good’ thinking that dominates policy-making.

However, with winter coming on and more people becoming homeless, sleeping rough and / or living in wholly inadequate accommodation, we need short-term stop-gap remedies.  That’s the thinking behind Unite’s proposal for a €2 billion once-off investment programme – to address this immediate crisis. 

There are any number of options open to the Government in using this €2 billion:  fast-tracking refurbishment, acquisitions of short-term tenancies, conversion of idle buildings, extensions of current emergency accommodation, etc.  The key is that accommodation can be brought on stream quickly and efficiently.  One hopes that it is not too late.

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Cameron’s Swarm is Europe’s Solution

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David Cameron labelled them a ‘swarm’. Thousands of them have died in the Mediterranean.  Border fences are being built to keep them out:  Hungary, Spain, Bulgaria, Calais.  The Slovakian Government will take a handful of them but only if they are ‘Christian’ (apparently they don’t do Muslims or Mosques).  And all the while millions are being spent  on aperverse mini-stimulus – as ‘defence contractors, outsourcing companies and security forces find willing buyers for their security-based “solutions”, bringing new surveillance systems, patrol vessels, co-ordination centres and detention facilities to the market with little scrutiny or due diligence.‘  A rational political and economic response gives way to militarisation.

This is what has been labelled the ‘migration crisis’ – as hundreds of thousands are seeking refuge, asylum, work and a better life while risking oppression and even their lives to come to Europe. 

Much has been written on this subject – including this insightful analysis by Dr. Vincent Durac.  I don’t intend to survey all the issues or appropriate responses as this crisis has many origins and dynamics and will require substantial doses of enlightened national policy combined with international cooperation.  But here are a couple of thoughts.

First, the men, women and children that make up Cameron’s swarm – they are not a problem, they are a solution.  They are a solution to Europe’s ageing demographic, skill base and employment crisis.

A key part of this is the fact that Europe is growing old.  Using the EU’s main scenario demographic projection, we see that the EU’s total population will rise by 17 million while the number of over 65s will rise by 54 million.  Working age population will fall by 34 million.  12 of the 28 EU countries are actually projected to experience an overall fall in their populations.  With a higher proportion of elderly and a falling number of working age men and women, Europe is set to suffer a slow age crash.

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Eurostat Has Done Us a Favour

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We should not under-estimate the impact of the Eurostat ruling. It completely removes the rationale for Irish Water and the water charges.  After Eurostat, there is no policy, no direction, no strategy.  Ministers will downplay the ruling with a ‘move-on-nothing-to-see-here’ rhetoric, punctuated by a ‘there-is-no-alternative’ but all this does is expose the inability to grasp how fundamentally the landscape has changed.

Eurostat was never going to rule in any other way than it did.  The Government admitted this last April in the Spring Statement when it put all water expenditure back on the books in its projections up to 2020.  The fundamental issue is not whether enough people paid the charges.  It was the ‘market corporation’ rule:  did Irish Water look like and act like a commercial company in a market economy?  Eurostat said no – and this is all down to the Government’s headless-chicken response after the mass Right2Water protests last October and November.

The Government capped charges, froze them until 2018, and introduced an indirect subsidy through social transfers (the water conservation grant).  The lack of ‘economically significant prices’ (i.e. charges that reflect the cost of producing water) and government control led Eurostat to rightly label the whole exercise as a mere reorganisation of non-market activities.  Given all this, what company in the world could be considered a market entity?

The main rationale for the Government’s water policy was not charges; this could have been introduced as a stand-alone revenue-raising measure.  Nor was it the creation of a single water authority; that could have been done as a public agency rather than a corporation. The over-riding issue was to take the estimated €5.5 billion of desperately needed investment over the next seven years ‘off-the-books’.  Everything flows from this:  to take investment off the books you need to create a corporation, you need to charge a ‘market-like’ rate for the service.

Remember those lectures from Government Ministers and commentators with that ‘common-people-just-don’t-understand’ attitude?  Without the investment there would be water shortages while we would all be walking through sewage.  And the only way to get this investment was through Irish Water and charges.

Eurostat has killed that narrative.  Investment will be on –the-books.  With that foundation removed, the edifice – and the rationale for that edifice (the corporation, the charges) – crumbles.

What now?  Whatever they say in public Ministers must know its game over.  The only way to pass the Eurostat test is introduce ‘economically significant prices’.  This would mean reverting to prices based on usage with no cap determined by an independent regulator.  Is that likely?  No, not with the potential to bring another 100,000 to 200,000 on the streets.  The people didn’t win many victories during the austerity days; they won the battle over uncertain charges, PPs numbers and cut-offs.  No political party is going to challenge that.

How do progressives react to this?  The safe ground would be to call for the scrapping of the charges and the reform of Irish Water.  Fianna Fail is already calling for that.  Progressives can and must go further.  We can’t effectively challenge the current ‘steady-as-it-goes’ Government approach with a ‘steady-as-it-went’ that dominated past policy.  We need creative and innovative thinking that can not only address the issues but present an exciting, inclusive alternative to water supply and all public provision.


We need to increase investment to €600 million annually to modernise our infrastructure.

Water investment has been a bit of a roller-coaster ride.  We are now slightly ahead of 1995 levels after peaking in 2008.  We need to do better.

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No Country for Young People

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So you’re young, ready to take up work, make a bit of money and, most of all, make the social contribution that is expected of all members of the homo economicus species.  There’s only one problem.  You live in Ireland.

Following on from my previous blog on the weakness of our market economy to produce jobs – except in the construction sector – let’s look at employment growth by age.  Overall employment is rising, even if it is patchy.  But not for young people.   For young people, the jobs recession continues apace.


Employment grew by 2.2 percent overall.  But for young people – between 20 and 34 years – it fell by 1.5 percent.  Among older groups – over 50s – employment grew by 5 percent.

When we drill down further, we find that those aged between 30 and 34 years saw employment fell by 3.1 percent.

This is part of a longer trend.employment_growth2jpg

Since the crisis began, employment has fallen by 10 percent.  However, for those aged 20-34, employment fell by a third.  For other age groups, employment has recovered and increased – with employment among 50s and over increasing by 14 percent.

There has been some discussion about bringing Irish people back from abroad.  It has been suggested that a main obstacle is our ‘high’ tax regime (sigh).  As we see above, the problem remains what it has been some time ago – lack of jobs (though there will be some sectors that are undergoing growth).

Young people face more problems than just falling employment.  Since 2008, nearly 475,000 people have emigrated.  Unsurprisingly, the majority who left were young people.  Over 300,000 men and women aged between 20 and 34 years have left the country – or 65 percent of all those emigrating.


For those who stayed behind it’s still tough out there in the labour market.  The unemployment rate for those aged between 20 and 24 years the unemployment rate is 19.6 percent – twice the national average.  No wonder Eurostat estimates that 40 percent of young people are at risk of poverty or social exclusion (for the age group 18 – 24 years).

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Growing the Economy the Robin Hood Way

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Who said the following?

‘ . . . if the income share of the top 20 percent (the rich) increases, then GDP growth actually declines over the medium term, suggesting that the benefits do not trickle down. In contrast, an increase in the income share of the bottom 20 percent (the poor) is associated with higher GDP growth.’


‘The poor and the middle class (middle income) matter the most for growth.’


‘ . . enhanced power by the elite could result in a more limited provision of public goods that boost productivity and growth, and which disproportionately benefit the poor.

The Socialist Party of the World?  The European Zapatista League?  The People’s Front of Judea (or the Judean People’s Front or the Judean Popular People’s Front)? 

No, it was the International Monetary Fund, that crazy gang that gave us poverty, deprivation and economic deterioration to just about wherever they went (now playing in Greece).

The IMF has recently published Causes and Consequences of Income Inequality: A Global Perspective – a strongly argued study that concludes that increasing equality is one of the best things a country can do to promote sustainable growth (that, and investment).  They propose a number of channels – fiscal redistributive policies, investment in education and health, and financial inclusion policies (e.g. basic bank accounts, etc.).

A particularly noteworthy finding is an estimate of the impact of redistribution on growth. 


If the income share of the poorest 20 percent increases by one percentage point, GDP grows by 0.4 percentage points.  However, if the income share of the highest income group, the top 20 percent, increases, GDP growth actually falls.

In other words, redistribution that leads to greater equality is good for the economy; redistribution that favours the highest income groups is bad (Britain after the Tory budget, take note).  You want to grow the economy?  Do a Robin Hood on it – take from the rich and give to the poor.

So what can we make of the Minister for Finance’s latest comments

noonan1‘I use the Budget for economic management purposes and I’m going to cut personal taxes in this Budget . . . I’m going to cut the Universal Social Charge (USC) by at least 1 per cent and maybe a bit more.’

The ESRI estimated the impact of cutting the USC’s standard rate of 7 percent on income groups.  This is what they found.


A cut equivalent to €500 million (cutting the USC standard rate from 7 to 5.35 percent) has almost no impact on the poorest 20 percent.  There’s not much of an increase in the second quintile group (the 3rd and 4th deciles).  However, the greatest gains go to the highest income groups – the 9th and 10th deciles.

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Ireland’s Lean Mean Job Creating Machine is Looking a Bit Flabby

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You’d think, listening to Ministers reeling off employment numbers and media reports of new job announcements, that Ireland was some lean, mean job creation machine. Well, in comparison with other EU-15 countries we are neither mean nor lean. Indeed, we fall well behind in key sectors.

Let’s leave aside the arguments over the 2013 employment numbers.  I suggested that they were inflated due to a statistical re-alignment between the Quarter National Household Survey and the Census (you can read those arguments here andhere).  If people want to believe that job growth in 2013 (when domestic demand fell) was higher than in 2014 (when domestic demand rose by nearly 4 percent) – well, sure, go ahead.  I prefer to take on board the CSO’s warning about interpreting job creation trends in 2013.

Robust comparisons can only start with the last quarter of 2013.  That’s when the CSO finished its statistical re-alignment.  Therefore, we have two year-on-year periods to compare.  We should be cautious interpreting this data; it would be preferable to have a longer time-series.  Therefore, any conclusions are tentative and subject to revision.

The following looks at the market, or business, economy.  This is essentially the private sector, excluding the public sector dominated sectors (public administration, education and health) and the farming sector.  Here are the year-on-year figures for 2014 to 2015 Quarter 1.


This doesn’t look so bad.  Ireland’s employment growth is above the EU-15 average and ranks 4th in the table.  However, something interesting happens when we exclude the construction sector which is non-traded and which in the past the Irish economy overly-relied on for job creation.


Ireland falls well down the job creation table when construction is excluded  – below the EU-15 average.

In the last year, the Irish market economy generated 29,700 jobs.  Of this, 19,500 jobs were in the construction sector – or 66 percent.

When we look at the previous quarter – the 4th quarter of 2014 – we find a similar pattern.

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Supporting Syriza

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Question: which Eurozone government has 61 percent public support for their position in the Greek bailout negotiations?  Answers on a small postcard.  

Last January Syriza won 36 percent of the vote, which allowed them to enter government as the senior coalition party.  Yesterday, 61 percent of the Greek people supported Syriza’s rejection of the terms laid down by the 18 other Eurozone governments.   There can be no doubting the Syriza Government’s mandate. 

The next week will be crucial in hammering out a deal – if that is possible given the intransigence of the creditors to date.  How can we, in Ireland, provide concrete assistance to the people of Greece?

We can look to the honourable behaviour of the Greek Finance Minister Yanis Varoufakis as a guide. This is not the time, however tempting, to use the referendum result for domestic political purposes.  The Greek people need concrete support.  We should be calling on the Irish Government to take up the following positions in the upcoming negotiations. 

First, we should demand that the Irish Government now engage constructively in the negotiations with Greece:  first, by calling on the ECB to comply with their own commercial mandate and provide the necessary liquidity to allow the Greek banks to open.  In the short-term capital controls and withdrawal limits would have to remain, but re-opening the banks would take the pressure off businesses and households.  Failure to do this is a coercive political act.  Opening the banks should be the Irish Government’s first diplomatic stop.

Second, the key short-term issue is budgetary – allowing the Greek government to run a deficit.  Given the humanitarian crisis and the collapsing of the productive economy, the demand for a primary surplus (i.e. more revenue than expenditure when interest payments are excluded) is not only penal and irrational; for creditors it is the surest way to guarantee that debts will never be repaid.  Greek businesses need space to start growing and employing; fiscal policy should be assisting, not thwarting this.

Third, the Irish Government should support the establishment of a European Debt Conference.  This does not commit any government to a particular position but it at least provides a space, outside the day-to-day politics of the Eurogroup and the EU, to consider medium-term solutions – not only for Greece and the peripheral regions – but for the entire Eurozone.  My own preferred solution would run along these lines, but the Irish Government need not take up any position prior to such a conference being held.

And, fourth, the Irish Government should support the release of structural funds already committed to Greece to kick-start a badly need investment programme.  This could also involve reframing the National Strategic Reference Framework to allow Greek businesses to access the funds allocated to them but denied because of inflexible rules.

These should form the core of any progressive campaign to re-align Irish Government policy:

  • Open the banks
  • Suspend austerity (the first step in getting rid of it)
  • Support a European Debt Conference
  • An investment programme for the Greek economy

The Greek government would still be under strict supervision and required to make progress on reforms:  rehabilitating the tax collection system, ending corruption and patronage, and ending the dominance of oligarchical control over economic sectors.  But this wouldn’t pose a problem for the Syriza government.  These policies already form the core elements of the programme they were elected on.  These reforms will take time and can only succeed when the economy and society are given the fiscal and political space to implement them.  Hard to do much when your banks are closed.

Let’s not demand too much.  The Irish government does not bring the biggest battalion to the Eurogroup.  But it has a potentially influential voice given our experience of a bail-out.  And given the importance of this issue (keeping the Eurozone intact) it is amazing there has not been a parliamentary debate over what position the Government should adopt in these negotiations.  This should change immediately.

The Irish Government should be required to come into the Dail and explain and debate its negotiating position.

We have an opportunity to push the default button.  When Syriza was elected in January, the Eurozone governments should have been relieved: for finally, there was a Greek government that was intent on tackling the issues of reform – corruption, the patronage, the oligarchical controls; reforms which the previous New Democracy and PASOK failed at (or didn’t even try).  That didn’t end well.

There has now been, in effect, a second election in the form of a referendum.  There is no doubting Syriza’s mandate.  Nor is there doubting their continuing commitment to the reform and modernisation of the Greek economy. 

Let’s start anew.  There is still time.  And the Irish government can play a pivotal role in that.

That is the least we should demand of our elected representatives the EU.

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Irish Living Standards Fall Further Behind Europe

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In 2014, GDP increased by 4.8 percent – as often said, the fastest growing economy in Europe.  In 2014, employment increased by 40,000.  In 2014, the recovery started.

In 2014, living standards fell even further behind the EU-15 average.

Eurostat measures living standards through actual individual consumption.  Unlike private consumption, or consumer spending, actual individual consumption

‘ . . . encompasses consumer goods and services purchased directly by households, as well as services provided by non-profit institutions and the government for individual consumption (e.g., health and education services).’

It, therefore, measures consumption not only of goods and services, but public services provided by the government.  As Eurostat states:

‘Although GDP per capita is an important and widely used indicator of countries’ level of economic welfare, (actual individual) consumption per capita may be more useful for comparing the relative welfare of consumers across various countries.’

In short, actual individual consumption can be treated a proxy for living standards.  So what is the relative welfare of consumers (i.e. everyone) across Europe?  The following captures the relationship of real (after inflation) living standards in purchasing power parities between EU-15 countries and the EU-15 average.

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Free Education: A Really Modest Proposal

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Sometimes a proposal comes along that is so sensible and so modest that you wonder why it doesn’t feature high up the public agenda.  Take the proposal made recently by Barnardos:  at a very small cost the state could actually provide what it is constitutionally mandated to do:

‘Article 42.4:  The State shall provide for free primary education  . . . ‘

In its briefing, Providing Free Education for all Schoolchildren, Barnardos proposes that primary and secondary education be made free. They first outline the costs of education that are not covered under the current system, costs that are borne by families.

  • School books:  The cost of schoolbooks is estimated at €60 million.  However, the School Book Scheme only receives a subsidy of €15 million – leaving parents to pay out the rest.
  • Voluntary contributions:  Based on the Barnardos School Cost Survey 2014, parents are paying €89 million in voluntary contributions and €38.5 million for classroom resources.
  • School transport:  For a primary pupil availing of school transport, parents pay €100.  This rises to €350 for secondary pupils.  In total, parents are paying €27 million to transport their children to school.
  • Capitation grants:  these grants paid to schools on a per pupil basis have been cut by 15 percent since 2010 – or €35 million.

So how much would it cost to make education free?  Here are Barnardos’ estimates.


Providing the resources to ensure free primary education would cost €103 million; for secondary education, €127 million.  The total is €230 million.

Barnardos is proposing that in 2016, the centenary of that document that mentioned something about cherishing the children, the Government make primary education free.  Free secondary education would be phased in over three years.

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€1 – Because We’re Worth It

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The Low Pay Commission will soon be recommending an increase in the minimum wage.  How much should it recommend?  Let’s start with the conclusion:  the minimum wage should rise by €1 per hour.  Now, let’s go through the arguments.

First, some background:  the minimum wage (NMW) is €8.65 per hour.  This rate was set back in 2007.  In 2011 it was cut to €7.65 but only a few weeks later the current government restored the cut; this would have affected very workers as employers would have been prevented by law from cutting the pay of workers already employed. 

Ireland is the only EU-15 country that has frozen the NMW since 2007 (with the exception of poor Greece where the Institutions demanded a cut).


The average increase (bar Greece) has been 16 percent in other EU-15 countries with a NMW.  A number of other, poorer EU countries have actually doubled their NMW (Romania, Bulgaria and Latvia) – but these countries were starting off a low-base.

Over that period thee has been an alarming rise in deprivation among those at work. 

  • In 2008, when the recession began, 6.6 percent of people in work suffered deprivation
  • In 2013, this proportion rose to 19.2 percent

Approximately 350,000 in work suffer from multiple deprivation experiences.  This is not necessarily confined to low-paid employees; there will be self-employed in this category while many workers higher up the wage ladder may be suffering from deprivation due to debt issues or rising child costs.  Nonetheless, it is reasonable to assume that a significant proportion are low-paid employees.

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We Are Not a Cost

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If anyone is uncertain about the power relationship between employees and employers, I suggest they look to the Dunnes Stores dispute and the closure of Clerys.  These encapsulate the massive imbalance of power in the workplace. 

I won’t get into the details of these ongoing disputes.  Any rational person hopes the workers succeed – in the case of Dunnes Stores, to win the right to negotiate collectively and reduce the level of precariousness; in the case of the Clerys workers, to be given their fair share of compensation – and dignity – after years of services to the company.

So here, let’s take a step back and look at the presentation of the relationship between employees and employers.  This may seem, at first, abstract but it leads us to something fundamental.

It starts with costs.

Labels are powerful things.  For instance, costs; this is usually not a good thing:  ‘that was a costly venture’, ‘a costly holiday’, a ‘costly day out’.  These are things we usually try to avoid, unless the ‘cost was worth it’

‘Profit’, however, is usually something positive:  that was a ‘profitable experience’, I ‘profited’ from that lecture, we are ‘back in profit’.  Profit equals growth and prosperity.  Further, it is considered a good thing because it’s opposite – loss – is not.  Loss is bad for a household, a company, and a voluntary organisation.  Continued loss may result in bankruptcy or closure or poverty.

So when we discuss labour and capital in the economy or in a business, we are already using labels that colour the debate:  costs and profits.  If costs are something to be avoided or reduced in order to maximise benefit, then we must depress the price of labour (i.e. wages and working conditions), and diminish the agencies that champions this ‘cost’ (e.g. trade unions, the collective bargaining power of workers, legislation that benefits workers). 

Likewise, if profits are an unqualified good – we should support the agencies that maximise profits and gear our legal, labour and tax framework to that end. 

Even before we begin discussing the relationship between wages and profits, the former is considered a cost, a burden while the latter is a sign of prosperity, growth.

The interesting thing about this highly ideological reading, is that it is not vindicated by basic economic accounting (here comes the abstract part).  

An enterprise creates income by creating gross value-added.  We can measure this by the following:

Gross value-added equals sales revenue minus the purchase of goods and services needed to produce the product the enterprise is selling (rent, accountancy services, machinery maintenance, etc.). 

The important point here is that employees’ wages and working conditions is not a cost in the measurement for creating value.

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