The Minimum Wage: How To Prevent Job Creation

Much of the developed world is suffering a jobs crisis, and the experience for Ireland is worse than most. The Irish legal framework for the jobs market, beyond a basic minimum wage, has also had a complicated system of “Joint Labour Committees” which are capable of imposing additional wage requirements on particular sectors of the economy (affecting about 200,000 people). This system was found to be unconstitutional last summer. Replacement legislation is coming down the pipeline now, with the government promising to extend an employer’s right to plead “inability to pay“.

The current legislative proposals permit an employer – subject to certain conditions – to apply to the Labour Court for a derogation from the wage rates set in the sectoral wage agreement on the basis of inability to pay.

The derogation can be granted for between three months and two years – provided an employer has not been granted an exemption within the previous five years for the same workers.

The Labour Court must be satisfied that without the exemption, there would be a substantial risk to jobs or to the sustainability of the employer’s business.

The change is described by a government spokesman as “minor”. They don’t want to be seen to be undermining the wages of the low-paid, but the truth is that this system does no good at all for the people who need the most help, who are just below the bottom rung of the jobs ladder: those who are looking for work.

Involuntary “unemployment” would not exist in the free market; anyone who can work would be hired, if they would only lower their asking price. When market-clearing wage rates are illegal, however, unemployment is inevitable.

Thought experiment: Imagine that the price of a new car was set by government at an artifically high level, as a result of the government having been lobbied by manufacturers of some of the more expensive models. Imagine that you could only negotiate a lower price if you presented your case formally to a special government committee, who would decide whether or not you could afford it. Do you think that more or fewer new cars would be bought?

Irish County Councils little more than tax-consuming worker cooperatives

Hat-tip to cyberianpan for bringing our attention to the following story in yesterday’s Times. While the gist of the article was unsurprising – public sector employees demanding time off work for spurious reasons – there were some small details which were genuinely shocking, and in particular this one:

Staff at Leitrim county council also won a Labour Court case last month, forcing management to give them time off to attend a non-existent festival.

Management had sought to cancel a traditional half-day to attend a local regatta after it was discontinued due to the worsening economic climate. But Impact argued the annual festival leave had been an entitlement to employees for many years and there were “other festivals” staff could go to.

I can attest to the deeply ingrained culture of laziness, mediocrity and stagnation within these councils. The excellent members of staff who do exist within their ranks are unfortunately no match for institutions where customer service is the lowest priority, and expanding entitlements the highest.

Things wouldn’t be quite so dire if the unions didn’t bring every petty complaint in front of the Labour Court. But it’s inconceivable that behaviour like the above could continue for any length of time if the Councils’ monopolistic, taxpayer-funded privileges were revoked.

Best Wishes to the Healthcare Rally…

I’ve been reading some more about this upcoming healthcare rally. Part of me is suspicious that it will consist mostly of opportunistic trade unionists, but I’m willing to accept, for the sake of argument, that the protestors really will have the best of intentions.

An umbrella group of health unions and patient campaign groups is planning a march for a better public health service.

The group includes the Dublin Council of Trade Unions, medical and nursing organisations and families affected by the superbug, MRSA.

A march and rally will take place from 2.30pm next Saturday, from Parnell Square to Molesworth Street in Dublin.

The SIPTU representative makes a good point in the above article: Ireland is a wealthy country and can afford a decent, well-funded health service. My disagreement (again, assuming for the sake of argument that the trade unions really are putting the general interest ahead of their own self-interest) is over the correct process that would bring about a decent health service.

For example, I can buy a 1.8GHz desktop PC with Vista and a 17″ flat screen monitor for less than €500, yet nobody campaigned for a decent public PC service. There were no marches and rallies outside Leinster House. Nobody wrote letters to the Editor complaining that PCs were too expensive, that we had an “apartheid” PC market which exploited the working classes.

What happened was that governments did nothing, imposed no additional taxes or regulations over the computer industry, and spontaneous market forces were allowed to have their effect. The result was rapid technological improvement and constantly falling prices – benign deflation, if you like.

This pattern is visible again and again. If you leave industry alone, prices will fall while the product improves. But you politicise it and get the government involved, you invite a disaster like the Irish healthcare service.

I commented earlier on Dublin Opinion that it was a mistake to think that the US monetary system was an example of laissez-faire capitalism. This is no less true in healthcare. As Damien Kiberd has noted, the government accounts for an overwhelming percentage of healthcare spending, employs 120,000 health workers and exerts massively bureacratic top-down control through the HSE. To conclude from its failings that the free market must be rejected just seems terribly strange.

If you want to see healthcare costs go down while the product improves, you simply must remove the government from the industry. It’s true that not everybody will receive an infinite supply of healthcare in a free market (just as not everybody can afford as many computers as they might like), but an infinite supply of any good is not something that exists in this world. Either the market will allocate healthcare according to the laws of supply and demand, or the government will ration it politically, as it does right now, with endless waiting lists and shortages.

The choice is ours.

Striking Proletariat on “over €140,000 per annum”

Ryanair has welcomed the 24-hour strike notice served by air traffic controllers for Thursday February 28 saying the IAA, airlines, and passengers should stand up to “overpaid public service workers”.

The air traffic controllers who, according to the airline, earn over €140,000 a year are pursuing a reduction in their “already low hours” (34.7 hours per week) and a 15% pay increase just to volunteer for overtime as well as an overtime rate of €1,200 per day (€150 per hour).

According to an Impact spokesman, the above figures are “speculative“.