Why Tax Breaks Aren’t Bad

23 March, 2010

The economist Robert H Frank in his book ‘The Return of the Economic Naturalist’ completely dismisses the case in favour of tax breaks for the rich (a policy aggressively pursued by the then Bush administration). As far as boosting employment is concerned, he claims, it doesn’t matter what tax rate business owners are paying.

If the addition of another worker to the company is profitable, the entrepreneur will hire him regardless of what tax rate he is paying. This is the decision criterion of the rational utility-maximising capitalist, he says. Although Frank’s logic is extremely elegant, it is ultimately flawed.

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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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The Looming Spectre of Protectionism

28 May, 2009

The BBC reports on the efforts of international governments to save jobs. The current economic crisis provides an environment pursuant to protectionism, and policies that protect domestic employment at the expense of free trade.

There are ways of assuaging the harms imposed on society by the painful corrections necessary to return economies to full employment. They must be embraced, or the world will be plunged into further economic despair.

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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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Big Government Ignorance

22 April, 2009

UnemployedPatricia Callan, Director of the Small Firms’ Association, recently spoke before an assembled crowd during an event at which I was in attendance. She made an extremely valid point, that the unemployed in Ireland at the moment for the most part are not lacking skills.

Rather, unemployment during difficult economic times (especially due to faltering competitiveness) can often be characterised by people signing onto the Live Register with impressive skill-sets. This is the phenomenon in Ireland currently. The problem is that these people are unable to find jobs that suit them, because companies are cutting costs and reducing expansion.

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Paying People to Work

21 April, 2009

UnemploymentThere has long been argument over whether the European Union constitutes what economists call an “optimal currency area”. The worsening economic conditions in the state are bringing the arguments against into sharp focus. Ireland has for long suffered wage inflation higher than the rest of the current monetary union. This increased the purchasing power of Irish consumers, and intially brought prosperity. Meanwhile, the country’s competitiveness was suffering as it became a more expensive place to do business. This is the major source of Ireland’s current employment crisis.

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