It is reported that the Minister Richard Bruton will propose that tax cuts are needed to keep the economy on course. Well, at least this has the virtue of consistency since this is the same Minister who proposed that high-paid company executives should pay hardly any taxes at all. Over the next few months we will get a Goldilocks debate over taxation – is it too hot, is it too cold, is it just right. But there’s an elephant in the room ready to stomp on the poor girl – and this will hardly get a mention.
For we are a low-waged, low-earning economy – and it is getting worse.
According to Eurostat Irish earnings have always been below EU averages. Even in 2008, when Irish earnings peaked, we were still well below average. Today, after four years of wage stagnation, we are falling further behind. In 2012 average earnings for:
- Other EU-15 countries was €38,525
- EU-15 countries not in bail-out: €41,963
- Other Small Open Economies: €45,123
- Ireland: €32,626
Since 2008 Irish earnings have flat-lined. In other EU-15 countries, earnings have increased by 10 percent while in other small open economies, earnings have increased by 13 percent.
To give another perspective, average Irish earnings would have to rise by 18 percent just to reach the average of other EU-15 countries. They would have to rise by 29 percent just to reach the average of core EU-15 countries. And they would have to rise by a phenomenal 38 percent just to reach the average of other small open economies.
Of course, there is that little matter of the ‘recession’. Many might argue that in a recession, what can you expect? Yes, recessions don’t help average earnings. But neither do discretionary pay cuts. To what extent that pay cuts or freezes are opportunistic on the part of the employer is difficult to assess. The rise in profits, however, is not. The EU AMECO database shows profits in Ireland rising by 24 percent since the profit trough in 2009; in other EU-15 countries the rise has been 7 percent – in line with growth in average earnings.
As always, we have to be careful when comparing data like earnings. Much depends on the composition of the workforce. For instance, if more people are working in manufacturing, the wage will be higher than in economies where the number of hospitality workers is high. So one would have to do a sectoral comparison to get more insight.
Further, if there are high levels of part-time workers, this will reduce the average.
However, there is strong support from other data coming on stream for the proposition that our wages and earnings are well below the European averages. The following is from Eurostat which measures hourly labour costs in the business economy, which is essentially the private sector.
Private sector hourly labour costs in Ireland are 14 percent below the average of other EU-15 countries. This falls to 21 percent when compared with the core EU-15 countries; and when compared to the average of other small open economies, it falls to 30 percent below average. Are we seeing a picture here?
We are a relatively low-waged economy, we are a low-earning workforce. And such economies find it hard to generate tax revenue. But you don’t get that perspective to the agenda and you certainly won’t hear it from Government ministers. They are too busy trying to drive down wages – whether it is in the public sector, the banking sector (where 40 percent of bank staff earn €30,000 or less), in the low-paid sectors where many of the protections under the Joint Labour Committee have been undermined under Government ‘reforms’. All this talk about ‘increased competitiveness’? Cut wages.
So when you hear some commentator or Minister, pretending to champion the hard-pressed workers by calling for tax cuts, just remember: the tax cut is a diversion.
The real issue is pay and earnings.
The combined worth of the 6 Walmart heirs and heiresses is greater than that of the bottom 41% of American families (48.8 million households). How do the grinning kids of Sam Walton stay so rich? By paying their employees slave wages and not providing benefits, forcing them to use food stamps and medicaid. Above, a poster by Miel Macassey that shows how Walmart siphons money from taxpayers so it can pay its workers (which represent 1% of the American workforce) an average of $8.81 an hour without having them and their kids drop dead of starvation.
And the inquiry found that even one year after the cuts kicked in those who were overpaid had not yet been alerted.
“One year after implementation of the pay rate changes, the Department has not yet contacted the individuals overpaid in the first part of 2011 or put in place repayment arrangements,” the C&AG found.
Its inquiry found that 1,600 secondary teachers were overpaid €560,000, about €350 each on average, 1,400 primary teachers about the same and 1,700 non-teaching staff working in schools a total of €148,000.
“The policy of the Department is to recover all overpayments,” the C&AG’s report stated.
The error was caused after it took the Department of Education seven months from budget day in December 2010 to prepare and issue a circular on revised pay scales and nine months to implement the payroll changes.
The overpayment figures could only measure how much was paid to teachers directly under the control of the Department of Education. No figure is known for the teachers in Vocational Education Committees.
The Department of Public Expenditure and Reform told the C&AG: “It is the responsibility of the management in each of the public service sectors concerned to ensure the implementation of the Government decision in respect of the pay reductions in question.
“The Department does not have a direct role in overseeing such implementation arrangements in the public service, other than in the civil service, and is not in a position to say whether there were similar instances in the wider public service.”