How To Lose Friends and Alienate Tax-Payers

23 November, 2009

The public sector strikers might as well be protesting against the recession, as though such a beast could be tamed by opprobrium. They seem to be confusing the dire economic circumstances facing the state and public finances, with some discretionary government policy that can be reconsidered.

Quite simply, the government has to cut back on public sector pay, and quite significantly so. According to the Department of Finance, the Irish government has suffered a €26 billion deficit in expenditure over revenue thus far in 2009. Next year, it could be worse.

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The Economics of €2 Spar Hot Chicken-Fillet Rolls

12 November, 2009

SandwichThe recession has brought down prices throughout the economy, in response to faltering demand. In Dublin, the most poignant example of this is Spar’s much celebrated €2 hot chicken-fillet roll.

But in the same shop, many prices haven’t fallen as much. Why is this? Like the canary in the coal mine, the €2 hot chicken-fillet roll acts as an indicator in case of recovering consumer spending.

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Better Late Than Never

25 July, 2009

Salary The Irish Times reports on remarks made by Minister of State for Labour Affairs, Dara Calleary that suggest a willingness to let firms plead ‘inability to pay’ the minimum wage. Minister for Finance, Brian Lenihan also indicated that such measures may be considered if it becomes clear that it is a barrier to job creation.

Back in April, some arguments for reducing the minimum wage in Ireland were considered here. The debate has taken on new urgency in light of budgetary conditions, as the state is desperate to keep people in jobs and off the dole. Although long overdue, their proposal is far from perfect.

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Common Threads of Depression

27 June, 2009

Silver DollarIn 1890, the Silver Purchase Act threatened to cause inflation – to the benefit of farmers and miners, at the expense of business interests and banks. As the Great Depression of the 1930s raged, real wages of labourers continued to climb.

The most recent financial crisis was characterised by defaulting sub-prime borrowers, who were lent more money than they could afford. It is no coincidence that in each case, depression was invited or prolonged by politics championing a reallocation of society’s resources.

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The Price of the Euro

11 May, 2009

David McWilliams offers his solution to Ireland’s problems by suggesting the abandonment of the Euro. It is true that Ireland can only become competitive again by repricing itself, whether through deflation or devaluation. However, the Maastricht Treaty outlines no route for countries to leave the monetary union.

The transition mechanism is the most difficult aspect of the debate, but a topic which has remained relatively untouched so far by any commentators. First of all though, note that devaluation is no panacea.

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Recipe for Recovery?

10 May, 2009

The Economist critiques Gordon Brown’s tax changes in the UK. By pandering to the masses and allowing dictation of policy by politics, they will damage the long-term recovery prospects for the economy and drive out the economy’s highest earners. The entire country will suffer for this myopia, even if voters are not angered in the short-term.

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Minimum Wage, Maximum Unemployment

23 April, 2009

EurosThe days when the minimum wage didn’t significantly impact on employment levels are now long gone. By artificially raising wages, they are kept above the market clearing rate which would otherwise dominate. During the boom years, this effect was arguable insignificant. This is not the case in the current climate, and the government needs to take immediate action.

Considering how long full employment subsisted, clearly the legislation merely transferred returns from capital and enterprise to the worker. However, now firms are under substantially more pressure to cut costs. By keeping the minimum wage as high as it is now, the government is in danger of making jobs which could otherwise be created unviable. There is also the risk that workers will be laid off, but whom firms would have liked to keep for a lower wage. These people then accept social welfare payments, and the taxpayer suffers.

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