Wages – income

SocialWelfarePayments

The War on Wages Spreads to Social Protection Payments

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This post originally appeared on Unite the Union’s Croke Park Report blog today. It is a follow-up to the previous post War on Wages.

Francis Byrne of OPEN made an excellent point in a tweet regarding the previous post on the war on wages:

‘Which will also of course inevitably provide a rationale for reducing weekly SW (social welfare) payments.’

This is a crucial point. Cutting wages hits social protection recipients – unemployed, old age, single parents, the invalid and sick – in two ways.

First, there is a reduction in tax revenue. In the private sector when pay is cut by €100, the state loses nearly €42 ((nearly €63 if the employee is in top tax rate). In the public sector the loss to the state is even higher given the pension levy and pension contributions. This leaves the Government with less revenue and, so, puts pressure on spending.

Second, wage cuts can drive down workers income towards social protection levels. Using the ‘incentive-to-work‘ argument, some will argue that social protection must be cut so that work ‘pays’.

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wageslip

The War on Wages

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Originally posted on Unite the Union’s Croke Park Report blog on the 2nd of April.

It is now clear that a systematic attack on wages is currently underway. This attack stretches across the private and public sectors, aimed at both low and higher income groups. It is nothing less than an attempt to re-order the economy into a low-wage, high profit economy – with the Government playing a leading role.

Croke Park 2 is a crucial part of this wage-cutting strategy. With the economy having returned to recession – and with key indicators (retail sales, industrial production, merchandise trade surplus) indicating that the decline has continued into the early part of this year – cutting wages makes no sense except as part of a long-term strategy to depress wages.

But it is not just the public sector. The Minister for Finance recently called for wages in the covered banking sector (AIB, Permanent TSB, Bank of Ireland) to be cut despite the fact that 40 percent of employees earn an average of €30,000 per year or less.

Private sector employers are getting in on the act. In the low-paid sectors, workers’ wages have been falling back to the national minimum wage level since the Joint Labour Committees (JLCs) were, first, struck down by the High Court and, then, reconstituted in a much weaker form by the current Government.

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devilinthedetail

Hitting the Lower Paid Even Harder

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This was originally posted on Unite's Croke Park Report blog.

The Government claims their proposed pay-cut deal is ‘fair and equitable’. They must have a strange idea of fairness and equity because when you drill down into the Euros and cents you find that the lower paid will be hit harder.

Let’s take the example of single person who works 10 Sundays a year. Currently they receive double-time. The proposed pay cut would reduce this to 1.75. The impact on gross incomes is the same across the income categories.

However, once you factor in the impact on disposable income (that is, after tax) the situation changes dramatically.

Those on lower pay will find they suffer a much higher impact on their take-home pay – a hit that many lower paid cannot afford or absorb. The reason for this is the interaction between the standard rate of tax and the top rate of tax. The Government, of course, is aware of this impact.

This trend will persist with couples – whether it is one or both spouses working. Those on the standard rate of tax will suffer a higher impact on their net income than those on the higher tax rate.

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A_SWMeanstest2

Means-Test Central

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The Troika is at it again – putting pressure on the Government to do something.  This time the ‘something‘ is to introduce more means-testing.

 ‘The Irish Times understands that the Government is under pressure from the EU-IMF-ECB troika to reduce the duration for which the means-tested jobseeker’s benefit is paid.  At present the payment – worth up to €188 a week – is paid for up to 12 months to people who are out of work and covered by social insurance. However, this would be reduced to nine months under proposals to be considered by the Cabinet.  As a result, those on the benefit would face moving on to means-tested jobseeker’s payments much earlier. This would see thousands of people receiving lower rates. The move is aimed at encouraging people to seek work, or what policymakers call a “labour activation measure”'

The report above is somewhat confused – Jobseekers’ Benefit is not means-tested (this could be a typo).  But you get the point:  increase means-testing.

This is being presented as a ‘work incentive’ measure but in truth it is cost-cutting measure – for many households, once their Benefit runs out they will either be excluded from Assistance (e.g. if their partner is working) or have the payment cut because they have savings, etc.

Or it is an attempt to drive people back into the labour market at lower wages; more people competing for fewer jobs has that effect.  Whichever, It will represent one more step in degrading an already enfeebled social insurance system.

But let’s take a step back and look at the wider picture.  To what extent does Ireland means-test its social protection payments compared to other EU countries?  There is a powerful lobby calling for more means-testing in order to ‘direct money to those who most need it’.  How do we compare now?

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A_keepout

The Unemployment Crisis: A Modest 0.7% Response

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Even the Government admits their policies are having little effect on job creation.  They expect unemployment to remain at 13 percent by 2015, a fall of only one percentage point since they took office.  The number of people at work will only grow by 12,000 over the lifetime of this Government. Truly, we are into a period of medium-term stagnation.

A number of analysts have rightly called for a sustained and substantial programme of investment.  This would boost growth in the medium-term while putting people back to work in the short-term.  But it cannot, alone, fill the jobs gap – especially for those seeking to participate in the service sectors of the economy.  There needs to be complementary strategies.

David Begg, General Secretary of ICTU, recently provided one of them. Speaking at the TEEU annual conference he said:

‘I would say that ultimately the State must be willing to contemplate being an employer of last resort through local authorities or social employment. The lessons of the Great Depression may have been lost but they are as valid in social terms now as they were in the 1930s. No country, no society can afford to regard so many of its unemployed citizens as expendable.’

The state as Employer of Last Resort (ELR) – that’s a considerable intervention.  The concept is simple:  during periods of enforced unemployment, where the private markets cannot employ people who want to work, the state should employ people until sufficient job creation commences.

An ELR programme would employ people through the mainstream public sector, local authorities, or community, voluntary and non-profit organisations on socially beneficial projects.  There are a number of questions over how this would work.  I will focus on two and, in so doing, start the work of outlining an ELR programme.

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0_a_DD_a_wages

Income Distribution Data Shows What Is Behind the Central Bank’s Agenda

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In the post What’s Behind the Central Bank’s Destructive Agenda to Drive Down Wages? commenter Laura Farrell made a point on incomes and wage competitiveness which I think is worth addressing.

Laura said:

“What neither the Central Bank nor this article accounts for is the inequality in Irish wages. One of the reasons that our “average” looks so high is because of the distortion caused by a small number of very high earners, particularly in public sector funded roles. Lower end roles, even in skilled industries, have been falling lower for years while wages at the upper end take off.”

It’s quite common to get comments like this, which make statements about high and low earners without making any reference to data that is easy enough to access and link to. For example, you could look at the CSO Statistical Yearbook 2011 Earnings which show Irish earnings for last year, or you could look at how earnings in Ireland for several sectors compare to other EU countries.

However, rather than wading through that you could read this article by Dr Micheál Collins of the Nevin Economic Research Institute (NERI) which provides a great deal of clarity on the issue of income distribution using the CSO data. It’s so clear in fact that I thought it worth including in full here:

“Each year, since 2004, the Central Statistics Office (CSO) has collected detailed information on the income and living conditions of a representative sample of households across the Republic of Ireland. In general, the survey covers more than 5,000 households and 12,000 individuals. The information provided by this survey is useful for understanding the spread of income across households and it highlights the current and persisting gaps in the distribution of that income between rich, poor and middle income families. The latest data, published in March 2012, is for the year 2010; a year when the recession continued to bite and the wage reductions, welfare cuts and tax increases of various budgets were continuing to have notable impacts on Irish families and the challenges many face to make ends meet.

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DAYSCHOOL: Capitalist Crisis and the Left Alternative

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The following recordings are from the final session in the dayschool organised by Irish Socialist Network and Fourthwrite. The session was held today, Saturday 7 November 2009, in the Central Hotel, Dublin. The title of…

 
 Introduction, Mick O'Reilly [4:43m]: Play Now | Play in Popup | Download

 
 Murray Smith: Play Now | Play in Popup | Download

 
 Ciaran Perry [14:57m]: Play Now | Play in Popup | Download

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