Maintaining demand in the ecomony

// January 29th, 2009 // 1 Comment » // CPSU, irish economy, public spending

A representative of the CPSU was on the 6.1 News two weeks ago saying that we should have no pay cuts in the public service because above all we must “maintain demand in the economy!”. Not a bad idea but is paying public servants the best way to do that? I mean following his logic we could get out of this if we were to pay them all 20% sure that would help us no end by increasing demand by 20% or at least that’s what he seems to think.

Only 1/6 of the workforce are in the public service which is roughly 17%, so a 10% cut in those salaries would only amount to a 1.6% reduction in demand while saving 2 Billion for the budget. This potential 1.6% drop in demand is as nothing compared to the actual drop due to people losing their jobs in the private sector. But hey let’s all focus on making sure that we don’t have that killer 1.6% drop.

In contrast to the above I tend to agree that lying off loads of low paid public servants wouldn’t save that much money when you consider that we take back about 1/3 of their pay in taxes and PRSI and it would lead to greater reductions in services. Yet would cutting pay by the same amount have the same effect? If one in ten jobs went it is reasonable to think that even with the remaining 90% taking up some slack that there would be less people around to do the same work so that same work wouldn’t happen. However, if you cut salaries by 10% across the board would the people affected really work 10% less? Would members of An Garda Siochana guard us 10% less, would teachers teach 10% less well? There is no requirement that a 10% pay cut should lead to any substantive cut in services while a cut in numbers employed almost automatically means a reduction in services. And haven’t many of of those providing public services been telling us that their jobs are vocations? like teachers and doctors and nurses?

Job Losses, Pay cuts, or reduction in services

// January 11th, 2009 // No Comments » // irish economy, public spending

We need to reduce the amount of money that is spent by the state. If the choice in reducing public spending is to be either one of job cuts, a reduction in services or pay cuts across the board then the latter seems the more equitable choice.

What if we were to ensure no cutbacks in pay for those under 30K, but a 3% cut for those between 30 and 50K and 7% for those between 50K and 80K and 10% cut for those over 80K. This would be an across the board pay cut. Overnight everyone in the public service would be taking home less money. See the same thing may well happen but it will involve job losses and as a consequence as loss of services.

People will argue that this will suppress demand, but so too would job cuts. Which is worse for the economy: fewer people working for the same money who are in fear of losing their jobs and so afraid to spend or more people working for less money but who are confident that they will have jobs next year and so can spend on the domestic economy? Not all aspects of living have gone up in the last while, the cost of servicing mortgages has dropped in the last 12 months, so people won’t have quite. True there will be those in negative equity but the value of your house doesn’t matter in the short term if you don’t have to sell and you would be more likely to be selling because you lost your job not because your take home pay went down by 3%.

In combination with this, the state should actually step in to reduce the costs borne by the public by actually delivering the services it is suppose to instead of the public having to source those services privately or even having to contribute cash to themselves. Imagine an education system where parents didn’t have to organise money to pay for the upkeep of the school, ho

And we should push hard for reforms in those areas of services where bottlenecks exists and in which costs spiralled out of control over the last decade. Solicitors for example, and isn’t it odd that the auctioneering business allows the same person to act for the buyer and the seller? I mean whose interest is the priority there I wonder?

If some of the burden was lifted from the working public then we could all live on a few quid less.