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Thread: The government should cut all our pay

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    Politics.ie Member cyberianpan's Avatar
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    Default The government should cut all our pay

    There are increasing concerns about Ireland's competitiveness.

    Commentators such as David McWilliams have said it would be nice if we still had the punt, as we could devalue it and thus restore competitiveness.

    However that radical solution is fraught with problems.

    Instead the government should introduce a 10% income levy on all income and all employees. The revenue from this would immediately be rebated to the employers.

    This would mean that everyone would take a 10% pay cut - so the collective action problem would be solved. 5% this year, 5% next year (or maybe all at once- timing and amount subject to econometric analysis)

    There would be some issues to sort out regards the self employed: they'd have to prove they were using the rebate to cut their prices. Yes there'd be a small "deadweight" cost of administration associated with this tax, but I don't think it would be too high. Overall it would reduce our competitiveness, which will be vital to retain jobs from foreign companies - and attract more investment.

    If any company felt they didn't need the rebate: they could just use it to increase the wages of their staff.

    And other measures would remain needed for the fiscal adjustment (realigning PS pay with private sector, cutting dole and other spending etc)... as well as a 10% cut to the minimum wage & social welfare

    cYp
    Last edited by cyberianpan; 16th November 2009 at 11:51 PM. Reason: clarified
    "Yawn , am I alive yet ?"

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    Politics.ie Member Bobert's Avatar
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    Why not cut other costs, such as VAT, utilities, PRSI, etc.?
    Every one sees what you appear to be, few really know what you are, and those few dare not oppose themselves to the opinion of the many, who have the majesty of the state to defend them.

    - Niccolò Machiavelli

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    Politics.ie Member cyberianpan's Avatar
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    The government needs revenue... so cutting VAT & PRSI wouldn't work

    My proposal for the 10% pay cut would mean utilities could come down in price. For semi-states the ministers could order them to use the 10% to do just that

    cYp
    "Yawn , am I alive yet ?"

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    A ten percent cut won't help Ireland compete with eastern europe, never mind India or China.


    The natural growth of communities and society as a whole slowly but inevitably moves towards the betterment of all their participants.
    But as this robs the few of their pathological need to elevate themselves above the masses, we have witnessed a 'downgrading' of Ireland; health, education, housing, standards of living and of employment. There is a gulf of inequality that hasn't existed on this island for nearly a century.

    The fact is, we could survive without IBEC, and their plants in the small firms assoc., but not vice-versa.

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    Politics.ie Member Dreaded_Estate's Avatar
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    What differences to you see between this and a 10% levy on income tax and then using the money for employment supports?

    Wouldn't this be easier to administrate if we transferred the employers PRSI to the employee?

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    Politics.ie Member cyberianpan's Avatar
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    Quote Originally Posted by advertismo II View Post
    A ten percent cut won't help Ireland compete with eastern europe, never mind India or China.
    .
    China and Easter Europe can only compete with us on some stuff... and that will happen anyway. What we'll see there will be our lower skilled workers wages falling.... and living standards in China & India increasing

    We need to be worried about losing business to France... Belfast also

    One good thing is that the cost of transition & upheaval itself is quite high, so that means HUGE savings are needed to justify moving

    This 10% cut would make a real difference regards the MNCs


    cYp
    "Yawn , am I alive yet ?"

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    This is quite possibly the most ridiculous idea I've seen on here and there are some fairly ridiculous posts on the economy forum.

    Is there any problem you don't think can be solved by slapping a tax on something somewhere? The idea of taxing employees directly and giving the money back to their employers is certainly a novel one.

    I like how you say "there would be some issues to sort out for the self employed" as if there was no issue with directly taxing one group of people by a staggering amount and paying that money directly to someone else.

    Here's a handy hint: Employers that need to cut wages are already doing so. They don't need the government to come in and do it for them.

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    Politics.ie Member cyberianpan's Avatar
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    Quote Originally Posted by Dreaded_Estate View Post
    What differences to you see between this and a 10% levy on income tax and then using the money for employment supports?
    This gives the money to the employers... who as job creators know best

    Quote Originally Posted by Dreaded_Estate View Post
    Wouldn't this be easier to administrate if we transferred the employers PRSI to the employee?
    Easier - but that wouldn't be revenue neutral

    cYp
    "Yawn , am I alive yet ?"

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    Politics.ie Member cyberianpan's Avatar
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    Quote Originally Posted by sharper View Post
    This is quite possibly the most ridiculous idea I've seen on here and there are some fairly ridiculous posts on the economy forum.

    Is there any problem you don't think can be solved by slapping a tax on something somewhere? The idea of taxing employees directly and giving the money back to their employers is certainly a novel one.

    ...

    Here's a handy hint: Employers that need to cut wages are already doing so. They don't need the government to come in and do it for them.
    In olden times we'd simply have devalued

    We don't have control over monetary policy now - and simple fact is Germany & Ireland are different.

    So we need novel economics

    There's a collective action problem with current paycuts... people want prices to fall, and making it all happen in sequence is tough

    Also the private sector is cutting bonuses - pay is part of contract - and needs employee agreement to cut it. This new tax wouldn't need consent.

    cYp
    "Yawn , am I alive yet ?"

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    Politics.ie Member Dreaded_Estate's Avatar
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    Quote Originally Posted by cyberianpan View Post
    This gives the money to the employers... who as job creators know best



    Easier - but that wouldn't be revenue neutral

    cYp
    It would be broadly neutral cYp.

    Isn't what you are proposing almost identical to a 10% increase in income tax and an equal 10% reduction in employers PRSI?

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