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Patslatt1

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Jack Welch,former CEO of giant conglomerate GE and highly respected management consultant in retirement argued for a 10% employee dismissal rate a year for optimal efficiency. While that rate may seem shocking to many, the opposite practice of government mandated,excessive job security including lifetime jobs can have serious consequences for economies and especially for the public sectors that have lifetime job security.

Jack Welch's advocacy of routine 10% dismissals aside, in dynamic market economies companies should be allowed to cope with economic recessions and constant disruption from technological change by quickly implementing redundancies and reallocations of workforces. That would improve productivity and prevent mass corporate insolvencies.

As for the public sector in Ireland, lifetime job security can make employees complacent and slow to upskill. In government,this is evident in continual bungling such as the unforgivable cost overrun on the St James hospital.

With the guarantee of lifetime job security, public sector workers represented by aggressive trade unions don't have to worry that excessive pay and pensions demands might cause financial pressures that would lead to redundancies,unlike private sector workers without trade union seniority. The result is public sector pay in Ireland that on average is about 45% higher than the privare sector, nearly the biggest gap in the EU alongside nearly bankrupt Italy and Greece.

In recessions, the full impact of the fall off in demand is taken by the Irish private sector with big increases in unemployment while public sector employment remains stable. If public sector employment was cut as in the UK, that would make room for fiscal stimulus spending: cuts in taxes to low paid private sector workers who spend most of their incomes,increases in unemployment spending and increased spending on infrastructure. In Ireland, to maintain full employment in the public sector in recessions, the government traditionally guts infrastructure spending, even on housing despite the increased housing shortages, the opposite of what should happen.

It will likely take a politically radical action to remove lifetime employment from the politically powerful public sector. The Covid economic depression may provide the opportunity to do so when massive budget deficits need to be curbed again. Taxes on the PAYE class are maxed out and there would be intense resistance to big jumps in LPT. The fiscal solution should be removal of lifetime employment in the public sector, coupled with redundancies and a public sector pay freeze. If the economy were to grow at 3.5% a year nominal GNP, a pay freeze for about seven years would reduce the public sector pay premium over the private sector to about the same level as the UK's 13%. Which political party would propose this?
 

owedtojoy

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I do not agree with the presmise. Jack Welch took a fairly brutalist approach to employment, and it seems his philosophy was to keep the hired hands subservient and fearful. That is not a happy or productive workforce, and seem positively Dickensian to me.

Nor should the Government be firing people in a recession, when unemployment would already be high. It would also mean breaking any Union influence, which means a Thatcherite war of attrition nobody needs.

I am all for making the public service more productive, but this is not the way to do it.
 

Patslatt1

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In Keynesian economic stimulus, tax cuts for low income people and their unemployment payments have far bigger multiplier effects as they spend most of their incomes than tax cuts to high income people who tend to save the cuts. So it makes sense to cut back on government high income employment and spending in bloated programmes to fund Keynesian stimulus on low incomes. Such cutbacks would relieve the private sector from bearing the full brunt of recessions.
 

Fullforward

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Jack Welch,former CEO of giant conglomerate GE and highly respected management consultant in retirement argued for a 10% employee dismissal rate a year for optimal efficiency.
Are Jack and his ilk part of the 10%?
 

borntorum

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Pat cites Jack Welch as a business figure to emulate, and in doing so just shows that he is in thrall to an out-of-date, bankrupt ideology.


For decades ge managers had an over-exalted sense of their own abilities, which led to narcissism, hubris and the bending, if not breaking, of accounting rules to hit their profit targets. This eclipsed any strategic vision they may have had.
That's The Economist's view, not the New Internationalist.
 

Patslatt1

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How are GE doing today?
Welch's successor wrecked GE with a bad acquisition and indecisive management over many years. But conglomerates don't generally work efficiently in the long run even with good management as shown by experience in the 1960s and 70s because they lack focus and suffer from bureaucracy on capital allocation. "Diworseification" was the word coined by legendary investment manager Peter Lynch of Fidelity to describe acquisitions in unrelated businesses.
 

Patslatt1

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Pat cites Jack Welch as a business figure to emulate, and in doing so just shows that he is in thrall to an out-of-date, bankrupt ideology.




That's The Economist's view, not the New Internationalist.
Welch was extremely capable as manager and consultant. His major strategic error was thinking that a diversified conglomerate could be efficiently run with good managers, contrary to the evidence of conglomerate failures in the 1960s and 70s for lack of focus.
Some diversified companies succeed if they share a common culture, 3M being an example of a chemical engineering culture. Placing trust in top managers of diversified subsidiaries may work well too. Berkshire Hathway's HQ management under Warren Buffett believes in trusting the top mangers of the various companies acquired;that's a contrast to HQs that wear down their subsidiaries with constant spreadsheet meddling by financial managers who don't understand the businesses. They think all reality is contained in spreadsheets.
 

owedtojoy

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In Keynesian economic stimulus, tax cuts for low income people and their unemployment payments have far bigger multiplier effects as they spend most of their incomes than tax cuts to high income people who tend to save the cuts. So it makes sense to cut back on government high income employment and spending in bloated programmes to fund Keynesian stimulus on low incomes. Such cutbacks would relieve the private sector from bearing the full brunt of recessions.
So you reckon it would be cheaper in the long run to pay 10% of the public service payroll unemployment benefit instead of wages in a recession? Meanwhile, probably provoking a mass backlash of Gallic proportions (e.g. French workers defending their pensions) and the enmity of the public service unions.

If you want to follow the policies of Ebenezer Scrooge, a.k.a. Jack Welch, first you would need to break the Trade Unions, by outlawing civil servant membership. And I am not sure if you really want to do that, or if it would be worthwhile. Welch was not worried about campaigning for re-election, and unionbusting was the main focus of his drive for profit.


When Jack Welch took over GE, he brought a very different perspective to the question of unions. He wanted them out. He was no outsider. He has worked for GE for twenty years before becoming CEO.
But rather than learn how unions can sustain a workplace where workers feel valued, where they have safe and healthy jobs, and where they make wages that allow them to live with dignity, the lesson Welch took was that unions got in the way of maximizing profits.
 

Patslatt1

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So you reckon it would be cheaper in the long run to pay 10% of the public service payroll unemployment benefit instead of wages in a recession? Meanwhile, probably provoking a mass backlash of Gallic proportions (e.g. French workers defending their pensions) and the enmity of the public service unions.

If you want to follow the policies of Ebenezer Scrooge, a.k.a. Jack Welch, first you would need to break the Trade Unions, by outlawing civil servant membership. And I am not sure if you really want to do that, or if it would be worthwhile. Welch was not worried about campaigning for re-election, and unionbusting was the main focus of his drive for profit.

Trade unions are needed most where they prove impossible to organise, in the lowest paid jobs. Historically,they were easy to organise in big factories of businesses that have control of their markets but globalisation has reduced their numbers. Domestic businesses such as construction are not affected by globalisation.

Trade unions counter the influence of big business and prevent workplace injustices, good points in their favour. Where they do harm is in preventing rapid adaptation to disruptive technologies in automation and digitisation and making excessive wage demands. The UK lost a lot of industry thanks to trade unions' rigid demarcation on who could do what in factories and militant wage demands that looted the UK economy in the 1970s inflation.

As for the public sector unions in Ireland, the status quo of lifetime employment prevents efficient workforce management and exempts the workers from the effects of recessions. Typically, overdue workforce redundancies occur in recessions. Why should the private sector alone have to bear the full impact of recession redundancies while many bloated government programmes and departments continue business as usual?

As I mentioned, public sector redundancies in the UK have the effect of reallocating money to support low income people in Keynesian stimulus programmes. Given that Irish public sector workers are higher paid than the UK relative to the private sector, this reallocation effect could be greater.

Of course, the cosseted public sector would be upset at having to face some of the same job insecurity as the private sector. But it is time for abolition of lifetime job security which they have abused to make greedy wage and pension gains knowing they can't be made redundant, unlike private sector workers.

The cost of their excessive wages and pensions is resulting in shortages of skills in Irish hospitals among other areas. It threatens to bankrupt the state in twenty years as the ratio of workers to pensioners falls off. In the USA,states like Illinois struggle to fund state employee pensions. In contrast,Irish government pensions are not funded, so unless a few million immigrants are allowed in, either bankruptcy or reneging on pensions is inevitable.
 

Finbar10

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For that Jack Welch 10% firing approach, Mr. Burns of the Simpsons and his "release the hounds" policy flashes into my mind! :) On one hand, there may be just that added spurt of speed, extra whites in the eyes, and increased motivation to not be in that back 10% that gets chewed up by the hounds. Of course, it may also not help collegiality as those towards the back jostle and shove and try to trip each other up. Even the top performers may be a tad nervous. One may now be comfortably well to the front. However, it only takes some minor random unfortunate accident, e.g. twisting one's ankle in a pothole, and then au revoir! :)

I suspect this relentless and unforgiving approach is not popular even in the corporate world. Of course, there is always going to be an issue that public sector workers, with the strong bargaining power of unions in large-scale organizations and with employers that are effectively politicians needing their votes, will always tend to be better paid and have better conditions than private sector employees that don't have these advantages. The scale of this advantage varies from country to country but does always tend to be there (a moderate advantage of this type probably isn't a bad thing). It's IMO unfair and inefficient if that becomes excessive. Still, I can't imagine politicians anywhere instituting a "Devil take the hindmost" type public sector employment setup. It might even give the voters some ideas about possible interesting political setups ;) , e.g. annual votes (not every 4 or 5 years), no cushy severance payments, and those failing to get elected disbarred from ever running again; I'm not sure that would produce a healthy politics!
 

owedtojoy

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Trade unions are needed most where they prove impossible to organise, in the lowest paid jobs. Historically,they were easy to organise in big factories of businesses that have control of their markets but globalisation has reduced their numbers. Domestic businesses such as construction are not affected by globalisation.

Trade unions counter the influence of big business and prevent workplace injustices, good points in their favour. Where they do harm is in preventing rapid adaptation to disruptive technologies in automation and digitisation and making excessive wage demands. The UK lost a lot of industry thanks to trade unions' rigid demarcation on who could do what in factories and militant wage demands that looted the UK economy in the 1970s inflation.

As for the public sector unions in Ireland, the status quo of lifetime employment prevents efficient workforce management and exempts the workers from the effects of recessions. Typically, overdue workforce redundancies occur in recessions. Why should the private sector alone have to bear the full impact of recession redundancies while many bloated government programmes and departments continue business as usual?

As I mentioned, public sector redundancies in the UK have the effect of reallocating money to support low income people in Keynesian stimulus programmes. Given that Irish public sector workers are higher paid than the UK relative to the private sector, this reallocation effect could be greater.

Of course, the cosseted public sector would be upset at having to face some of the same job insecurity as the private sector. But it is time for abolition of lifetime job security which they have abused to make greedy wage and pension gains knowing they can't be made redundant, unlike private sector workers.

The cost of their excessive wages and pensions is resulting in shortages of skills in Irish hospitals among other areas. It threatens to bankrupt the state in twenty years as the ratio of workers to pensioners falls off. In the USA,states like Illinois struggle to fund state employee pensions. In contrast,Irish government pensions are not funded, so unless a few million immigrants are allowed in, either bankruptcy or reneging on pensions is inevitable.
YOu would have a hard job explaining that to the public sector workers who might lose their jobs. The theory sounds great, I am all for Keynesian stimulus, but the theoretical benefits you get might be lost in the bitter fight to implement it.

I think, in a recession, a Government needs to pick its fights, and this is not one it wants or needs. Similarly, preparation in the boom part of the business cycle, by passing the laws necessary for implementation, would be a fairly futile battle as well - imagine an Irish coalition agreeing it among theselves, let alone implementing it!

It could only be done by a hard-right Conservative Government with a massive majority.
 

Patslatt1

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For that Jack Welch 10% firing approach, Mr. Burns of the Simpsons and his "release the hounds" policy flashes into my mind! :) On one hand, there may be just that added spurt of speed, extra whites in the eyes, and increased motivation to not be in that back 10% that gets chewed up by the hounds. Of course, it may also not help collegiality as those towards the back jostle and shove and try to trip each other up. Even the top performers may be a tad nervous. One may now be comfortably well to the front. However, it only takes some minor random unfortunate accident, e.g. twisting one's ankle in a pothole, and then au revoir! :)

I suspect this relentless and unforgiving approach is not popular even in the corporate world. Of course, there is always going to be an issue that public sector workers, with the strong bargaining power of unions in large-scale organizations and with employers that are effectively politicians needing their votes, will always tend to be better paid and have better conditions than private sector employees that don't have these advantages. The scale of this advantage varies from country to country but does always tend to be there (a moderate advantage of this type probably isn't a bad thing). It's IMO unfair and inefficient if that becomes excessive. Still, I can't imagine politicians anywhere instituting a "Devil take the hindmost" type public sector employment setup. It might even give the voters some ideas about possible interesting political setups ;) , e.g. annual votes (not every 4 or 5 years), no cushy severance payments, and those failing to get elected disbarred from ever running again; I'm not sure that would produce a healthy politics!
"Still, I can't imagine politicians anywhere instituting a "Devil take the hindmost" type public sector employment setup",you wrote. In Italy, there was a plague of "Baby Pensioners" retiring in their thirties. Many civil servants hang up their coat in government offices and proceed to their private sector job.The parliament belatedly passed a law that government employees could not be paid more than the well paid prime minister. That was a severe blow to a big city police chief on an absurd 800,000 euos a year. The Italians are masters of ripping off the state.

But the Greeks have outdone Italians. Maybe because the civil war that defeated the communists after WW2 bitterly divided right and left, Greek governments have been filling government jobs with their supporters on huge pay and pensions. That diversion of money to insiders is why the Greek welfare state left people hungry in the financial crisis.
 

Patslatt1

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YOu would have a hard job explaining that to the public sector workers who might lose their jobs. The theory sounds great, I am all for Keynesian stimulus, but the theoretical benefits you get might be lost in the bitter fight to implement it.

I think, in a recession, a Government needs to pick its fights, and this is not one it wants or needs. Similarly, preparation in the boom part of the business cycle, by passing the laws necessary for implementation, would be a fairly futile battle as well - imagine an Irish coalition agreeing it among theselves, let alone implementing it!

It could only be done by a hard-right Conservative Government with a massive majority.
It's important to prioritise a pay freeze for the public sector and, if the economy stalls with high deficits,even a pay cut. The private sector can't take all the pressures of recession. Yet the government is planning a 2% pay increase.
 

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