Wage Cuts Will Not Bring Recovery Claims New Book on Economic Crash

national | anti-capitalism | news report Friday June 26, 2009 13:17 by kevin - swp info at swp dot ie PO Box 1648 Dublin 8 01-8722682

Report of Kieran Allen's book launch in Wynns Hotel last night

Speaking at a public meeting in Wynn’s Hotel on his new book, Ireland’s Economic Crash, Kieran Allen, long-standing socialist and a senior UCD sociologist condemned the ‘elite consensus’ that wage cuts will bring an economic recovery to Ireland.
A recording of the meeting with slideshow will be posted on www.swp.ie later today.

‘The employers organisation’s IBEC are using shock therapy to promote the notion of an economy wide wage cut of 10 percent. While the population is still reeling under the impact of the economic crash, IBEC has carefully constructed a media campaign to encourage a belief that wage cuts will bring more exports which will bring more jobs.

There is no evidence to support this assertion.

‘ The facts of the matter are:

• Figure from the US Bureau of Labour Statistics show that the
wages of Irish production workers are still below those of most other
EU-15 countries.
• Irish workers get less holidays than their EU counterparts
• Irish employers pay the lowest social security contribution of
any employers in the EU.

‘Wage costs have therefore not been the key factor in the decline in exports. The root of the problem lies in the transformation of the Irish economy in recent hears into a centre for financial and property speculation. That policy has been fully supported by IBEC. Ireland’s role as tax haven for US multi-nationals is also being undercut by a number of eastern European countries.

‘Irish wages are higher than those in Eastern Europe. While the average wage in Ireland is €37,500 a year, it is only €7,500 a year in Poland.

‘But given this gap, a 10 percent wage cut will make little difference.
The unstated logic of IBEC’s position is that wages will have to be cut continuously by 10 percent for a number of years. That could only trigger off a further race to the bottom that could only bring further misery for the people of Europe.

‘It is important to remember that the economic experts who promote this economic orthodoxy were the very people who totally failed to predict the crash. The ESRI, for example, actually predicted an increase of 30,000 jobs in 2009 in their Quarterly Economic report in 2008.

‘When one’s predictions are wrong by such a wide margin, it is difficult to see why anyone should take their advocacy of wage cuts seriously.

‘The protagonists of wage cuts fail to explain why Ireland’s main manufacturing exports comes from the two industries which pay the highest wages – chemicals and pharmaceuticals - while the sector dominated by low wages – textiles- has been least successful in exports.

‘They also fail to even acknowledge the critique of wage cuts offered by economists like Keynes who showed how a decrease in aggregate demand could only deepen the recession.

‘Irish economists are doing a grave disservice by offering an intellectual cover for a new form of Thatcherism which is allowing unemployment to rise dramatically without any serious state intervention in order to terrify working people into an acceptance of wage cuts.

Ireland’s Economic Crash is published by Liffey Press and the Dublin meeting was part of a series of meetings held in Sligo, Cavan, Galway, Cork, Tralee, and Waterford.