The government should cut all our pay

cyberianpan

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There are increasing concerns about Ireland's competitiveness.

Commentators such as David McWilliams have said it would be nice if we still had the punt, as we could devalue it and thus restore competitiveness.

However that radical solution is fraught with problems.

Instead the government should introduce a 10% income levy on all income and all employees. The revenue from this would immediately be rebated to the employers.

This would mean that everyone would take a 10% pay cut - so the collective action problem would be solved. 5% this year, 5% next year (or maybe all at once- timing and amount subject to econometric analysis)

There would be some issues to sort out regards the self employed: they'd have to prove they were using the rebate to cut their prices. Yes there'd be a small "deadweight" cost of administration associated with this tax, but I don't think it would be too high. Overall it would reduce our competitiveness, which will be vital to retain jobs from foreign companies - and attract more investment.

If any company felt they didn't need the rebate: they could just use it to increase the wages of their staff.

And other measures would remain needed for the fiscal adjustment (realigning PS pay with private sector, cutting dole and other spending etc)... as well as a 10% cut to the minimum wage & social welfare

cYp
 
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Bobert

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Why not cut other costs, such as VAT, utilities, PRSI, etc.?
 

cyberianpan

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The government needs revenue... so cutting VAT & PRSI wouldn't work

My proposal for the 10% pay cut would mean utilities could come down in price. For semi-states the ministers could order them to use the 10% to do just that

cYp
 

advertismo II

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A ten percent cut won't help Ireland compete with eastern europe, never mind India or China.


The natural growth of communities and society as a whole slowly but inevitably moves towards the betterment of all their participants.
But as this robs the few of their pathological need to elevate themselves above the masses, we have witnessed a 'downgrading' of Ireland; health, education, housing, standards of living and of employment. There is a gulf of inequality that hasn't existed on this island for nearly a century.

The fact is, we could survive without IBEC, and their plants in the small firms assoc., but not vice-versa.
 

Dreaded_Estate

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What differences to you see between this and a 10% levy on income tax and then using the money for employment supports?

Wouldn't this be easier to administrate if we transferred the employers PRSI to the employee?
 

cyberianpan

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A ten percent cut won't help Ireland compete with eastern europe, never mind India or China.
.
China and Easter Europe can only compete with us on some stuff... and that will happen anyway. What we'll see there will be our lower skilled workers wages falling.... and living standards in China & India increasing

We need to be worried about losing business to France... Belfast also

One good thing is that the cost of transition & upheaval itself is quite high, so that means HUGE savings are needed to justify moving

This 10% cut would make a real difference regards the MNCs


cYp
 

sharper

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This is quite possibly the most ridiculous idea I've seen on here and there are some fairly ridiculous posts on the economy forum.

Is there any problem you don't think can be solved by slapping a tax on something somewhere? The idea of taxing employees directly and giving the money back to their employers is certainly a novel one.

I like how you say "there would be some issues to sort out for the self employed" as if there was no issue with directly taxing one group of people by a staggering amount and paying that money directly to someone else.

Here's a handy hint: Employers that need to cut wages are already doing so. They don't need the government to come in and do it for them.
 

cyberianpan

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What differences to you see between this and a 10% levy on income tax and then using the money for employment supports?
This gives the money to the employers... who as job creators know best

Wouldn't this be easier to administrate if we transferred the employers PRSI to the employee?
Easier - but that wouldn't be revenue neutral :-(

cYp
 

cyberianpan

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This is quite possibly the most ridiculous idea I've seen on here and there are some fairly ridiculous posts on the economy forum.

Is there any problem you don't think can be solved by slapping a tax on something somewhere? The idea of taxing employees directly and giving the money back to their employers is certainly a novel one.

...

Here's a handy hint: Employers that need to cut wages are already doing so. They don't need the government to come in and do it for them.
In olden times we'd simply have devalued

We don't have control over monetary policy now - and simple fact is Germany & Ireland are different.

So we need novel economics

There's a collective action problem with current paycuts... people want prices to fall, and making it all happen in sequence is tough

Also the private sector is cutting bonuses - pay is part of contract - and needs employee agreement to cut it. This new tax wouldn't need consent.

cYp
 

Dreaded_Estate

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This gives the money to the employers... who as job creators know best



Easier - but that wouldn't be revenue neutral :-(

cYp
It would be broadly neutral cYp.

Isn't what you are proposing almost identical to a 10% increase in income tax and an equal 10% reduction in employers PRSI?
 

cyberianpan

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It would be broadly neutral cYp.

Isn't what you are proposing almost identical to a 10% increase in income tax and an equal 10% reduction in employers PRSI?
To be clear: I am proposing a levy...on ALL earned income. So no TFA

That money be given straight back to the employer

So the State makes nothing & loses nothing

cYp
 

sharper

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Also the private sector is cutting bonuses - pay is part of contract - and needs employee agreement to cut it. This new tax wouldn't need consent.
Employees generally get the option of pay cuts of job losses. Where businesses cannot cut jobs they get the option of pay cuts or the firm shutting down. This notion that "employee consent" is an enormous barrier to paycuts is frankly ridiculous.

Firms which need to cut their staff's pay by 10% have already done so. Your tax would help exactly nobody but would do a great job of wreaking havoc.
 

Cassandra Syndrome

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There are increasing concerns about Ireland's competitiveness.

Commentators such as David McWilliams have said it would be nice if we still had the punt, as we could devalue it and thus restore competitiveness.

However that radical solution is fraught with problems.

Instead the government should introduce a 10% income levy on all income and all employees. The revenue from this would immediately be rebated to the employers.

This would mean that everyone would take a 10% pay cut - so the collective action problem would be solved. 5% this year, 5% next year.

There would be some issues to sort out regards the self employed: they'd have to prove they were using the rebate to cut their prices. Yes there'd be a small "deadweight" cost of administration associated with this tax, but I don't think it would be too high. Overall it would reduce our competitiveness, which will be vital to retain jobs from foreign companies - and attract more investment.

If any company felt they didn't need the rebate: they could just use it to increase the wages of their staff.

And other measures would remain needed for the fiscal adjustment (realigning PS pay with private sector, cutting dole and other spending etc)

cYp
This is an insane proposal. People who are familar with my posts would correctly assume I am not the biggest fan of John Mayward Keynes. However the man did state a lot of truisms, some of them plagerised. (My personal favourite "In the long term we are all dead")
His Paradox of Thrift concept (plagerised by the way) has merit.

His fear on wage cuts and falling incomes are statements on logic. Less disposable income less consumption, less production more layoffs more unemployment less income less consumption etc.
However he did not trust Say's Law in that the free market as a mechanism will correct this problem automatically and employment would increase in other areas where there is capacity. He argued that it is the duty of the government to step in and to avoid this death spiral.

In his Paradox of thrift model he argued that during a recession and falling incomes people increase their savings. This is damaging as consumption plummets further again decreasing production more unemployment etc.
A report during the week showed that people are increasing their savings.

Your proposal of creating a government sponsored market externality in the labour market of reducing wages by 10% further will be catastrophic. Savings will increase. Consumption will plummet. The Marginal Propensity to Consume will drop further too, rendering any injection of stimulus from the other aggregate demand functions such as investment, government expenditure or exports with a reduced multiplier effect.

The instigator of recoveries, Private investment, who Keynes correctly used the analogy of "animal spirits" to mutually act in unison and firms collectively increase investment will not happen in your scenario as firms will not purchase capital items if everyones disposable income is going to reduce.

Firms should be at this moment at time, reviewing their operations and determining what output they will have in the future. Their capital output ratio is crucial in their decision making of investing. Collectively firms can start investing while consumers are cutting back in expectation of increased aggregate demand. This activates the accelerator principle, requiring land, labour and capital to be utilised. People involved in this market make money and starting buying and consuming. Consumption increases, demand for labour increases, production increases, wages increase employment increases, output and National income increase. The multiplier is set off agian in harmony with the accelerator.

So 10% cut in wages across the board is WRONG. It will push the multiplier and accelerator further in reverse and will intensify our deflationary depression.

Oh wait a minute, I am anti NAMA. Therefore according to you CYP, I am a retard. So I should stop talking about this. For a minute there I thought I was discussing the consequences of Neo Keynesianism in Ireland after being accustomed to Neo Liberalism which has rendered so in an unfortunate Neo Feudalist state.

Over and out, I should be in a titty bar now being a complete drunken sheople dreaming about having the superior intellect of Sir 10 million letters after whatever name you have Cyberianpan.
 

atlantic

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Let the government piss off and get its own house and employees in order,instead of acting the bollocks with the private sector.
There are increasing concerns about Ireland's competitiveness.

Commentators such as David McWilliams have said it would be nice if we still had the punt, as we could devalue it and thus restore competitiveness.

However that radical solution is fraught with problems.

Instead the government should introduce a 10% income levy on all income and all employees. The revenue from this would immediately be rebated to the employers.

This would mean that everyone would take a 10% pay cut - so the collective action problem would be solved. 5% this year, 5% next year.

There would be some issues to sort out regards the self employed: they'd have to prove they were using the rebate to cut their prices. Yes there'd be a small "deadweight" cost of administration associated with this tax, but I don't think it would be too high. Overall it would reduce our competitiveness, which will be vital to retain jobs from foreign companies - and attract more investment.

If any company felt they didn't need the rebate: they could just use it to increase the wages of their staff.

And other measures would remain needed for the fiscal adjustment (realigning PS pay with private sector, cutting dole and other spending etc)

cYp
 

Mitsui2

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I know that quibbles with it aren't your favourite subject, cYp, but in the aftermath of NAMA I personally figure all rational discusssion along these lines is simply off the agenda.

To me the extraordinary measures taken to ensure the passing of this millstone around the taxpayers' collective neck amounts to a cancellation by the government of the most basic and fundamental link in the social contract: the government is deliberately acting against the present and particularly future wellbeing of the governed.

In the light of this no trust whatsoever can be placed in them. If we all accepted your suggestion they would, if previous form is anything to go by, simply use any savings to further cushion their paymasters.
 

cyberianpan

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I know that quibbles with it aren't your favourite subject, cYp, but in the aftermath of NAMA I personally figure all rational discusssion along these lines is simply off the agenda.

To me the extraordinary measures taken to ensure the passing of this millstone around the taxpayers' collective neck amounts to a cancellation by the government of the most basic and fundamental link in the social contract: the government is deliberately acting against the present and particularly future wellbeing of the governed.

In the light of this no trust whatsoever can be placed in them. If we all accepted your suggestion they would, if previous form is anything to go by, simply use any savings to further cushion their paymasters.
The government gets no extra money from my suggestion

It is just a paycut

And the employers can ignore it if they wish: by giving it back to the employees

cYp
 

Quinn Quinn

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In olden times we'd simply have devalued

We don't have control over monetary policy now - and simple fact is Germany & Ireland are different.

So we need novel economics

There's a collective action problem with current paycuts... people want prices to fall, and making it all happen in sequence is tough

Also the private sector is cutting bonuses - pay is part of contract - and needs employee agreement to cut it. This new tax wouldn't need consent.

cYp
what a simple fool you have shown yourself up to be! My god what a joke you are ! Look how you also attack the disabled here....http://www.politics.ie/development-editorial/118308-ok-make-fun-mock-disabled-people.html
 

cyberianpan

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Let the government piss off and get its own house and employees in order,instead of acting the bollocks with the private sector.
There's a collective action problem regards employer pay cuts, also some employers are paying part of their wage bill from capital reserves ... so depending when the upswing is they could all be doing paycuts at different times

My proposal still allows an employer to opt out, if they really think they have the money ... but through moral suasion few will

And this is the only way for us to get a 10% devaluation to restore competitiveness

If it was done as a short sharp shock at the budget... then over the sleepy period of Christmas firms could figure out how to apply price cuts... and we'd be more attractive to FDI

Obviously this calls for a 10% SW & min wage cut also ... and the people with debt will get hurt most... but without it we risk leeching out jobs, and suffering slow deflation.

cYp
 
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I think only unemployment of 20% would put this on the table.
Policy makers would probably leave the Euro before they would do this.
Instead we will see a long slow grinding reduction in costs while everyone fights to keep the same size slice of pie as the cake shrinks.
It is going to get uglier.
 

Malcolm X

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Why can't we increase corporation tax? We have a ridiculously low tax on corporate profits. Tax the hell out of these parasites and if they don't like it seize all thier assets.
 


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