Pay cuts versus job losses
When workers at Corus and JCB offer to cut pay to preserve jobs, it's legitimate to ask whether a rise in inflation was ever the kind of serious threat it was perceived to be earlier this year by the Bank of England's Monetary Policy Committee.
The MPC delayed cuts in interest rates, because it feared that rises in energy and food prices could feed through into higher endemic inflation through pressure from employees for compensatory pay rises.
There were plenty of voices outside the Bank of England questioning whether this was a well-grounded fear, given that the Thatcherite and post-Thatcherite reforms of the labour market have decisively tilted the balance of power in the workplace away from collectively organised employees towards employers.
However, on the MPC itself, Danny Blanchflower was a lone voice arguing that the inflationary risks were much smaller than the deflationary pressures of an economy slowing down fast.
Blanchflower has won the argument by knockout - though he may regret it, in that there's plenty of evidence that our economy is even weaker than he may have feared.
The pressures of frequently being the minority of one on the MPC were not easy for him. And he's decided that he's had enough of this particular game of soldiers, and he's therefore standing down in May.
Which some will see as something of a loss to the quality of the debate on the MPC.
As for the implications of the offer by Corus's trade unions of a 10% across-the-board pay cut for 25,000 employees, they seem to me to be significant.
The hope of the unions is that such a big reduction in the wage bill of Corus - albeit a cut that would last for just six months - would avoid the need for the Llanwern plant in south Wales to be closed.
And the unions would hope that those who manage Corus would also take a 10% cut, in an act of solidarity.
Their initiative is redolent of a collective determination to avoid unnecessary hardship in the very painful recession that appears to have gripped most rich countries including the UK in a particularly severe way.
Their behaviour is consistent with the possible re-making of capitalism I described in the note I put out on Monday (see "The New Capitalism").
But the initiative will be derided by the red-in-tooth-and-claw managers of the 1980s and 1990s, who would see it as a Micawberish fudge to delay a necessary permanent reduction in the overheads of a business that needs to adjust to harsh new economic realities.
So it may not be a life or death moment for the "sauve-qui-peut" dogma that has ruled in boardrooms and also conditioned governments' industrial policies for almost 30 years. But it's certainly a significant moment.
UPDATE, 10:13 AM:
Michael Leahy, general secretary of the Community union, said this to Radio Wales:
"Any proposals which have come forward have done so as consequence of proposals that have been put by the company. We've commented on those and put forward a number of alternatives and we haven't reached a conclusion.
"They've put a number of proposals including a general pay cut. They've not even suggested this is an alternative to reductions in the workforce or closures, but we know however if the order book stays as it is for a long period of time, then we know structural changes may need to take place in Corus."
He said members would be informed a range of options were on the table but they and Corus were committed to avoiding closures and job losses, if at all possible.
"We realise that there's been a global downturn in production of steel and people wanting steel - in fact we realise there's been over 40% reduction in the order books for steel in Corus UK and Europe-wide.
"We've been discussing a range of possible arrangements to ensure we have a sustainable industry going forward and to protect the interests of our members - they have mortgages and commitments. We didn't want a dramatic impact on their jobs or ability to earn as a consequence of this crisis."
I'm 
© MMIX~RS~q~RS~~RS~z~RS~53~RS~)
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My money is on permanent job cuts and no reduction in pay for the management.
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Dear Robert
The labour party are in the "OLD PERVERBIAL,----?
Cancellation of the Euro Fighter, and now the Carriers, and a Major Major Defence Buget Scandal, ie Overspend, this is serious, and it will affect jobs.
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Not too sure on your logic here Robert. Pay cuts were often advocated as an alternative to job losses in previous tough times, and even not-so-tough. There was less realism from workers then, though.
It is unlikely that you, me or anyone else outside the business actually knows the economics of the plant in question. It maybe that the unions are correct in that saving what could be as much as £25 million from the cashflow could be the difference between closure and keeping the plant running until the economy recovers. Corus has been part of a lot of takeover activity in the last decade and could well have a lot of debt to service.
It is also unlikely that the solution is merely "cutting overheads", which typically only form a small part of the costs of a large capital plant like a steelworks. Costs of direct labour would not in any event count as overheads.
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How about MP's and Ministers doing the same?
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It may be a reasonable offer, combined with natural wastage & perhaps some voluntary redundancy it could save jobs albeit a plant may need to run at a smaller scale.
It is difficult to judge without knowing all the figures of the business concerned.
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Don't forget to tell the CSA about a change of circumstances. I could not tell them that my income was reduced by £6,000 per annum as the financial data was not available until 10 months after the end of the tax year. They refused to make the adjustment for another 6 years, when they did they backdated it to the date they were originally informed, not the date of the income reduction. When I originally informed them of my reduction in income they said they never reduce assessments unless you go on the dole.
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Yes, agree with reforse (post#1). It will be pay cuts AND job losses. Tata bought corus is make as much money for itself as possible. Recession provides a golden opportunity to cut costs to increase the bottom line in years to come.
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"it's legitimate to ask whether a rise in inflation was ever the kind of serious threat it was perceived to be earlier this year"
OK, it's fair enough to ask.
But in defence of the Committee, this economic collapse has happened extremely suddenly, andcaught out a lot of front-line industrial firms, never mind the Committee. For example, taking one of the companies you mention, Corus was reporting rising turnover, deliveries, earnings and profits in it's August accounts, and as recently as September was still posting price increases for its steel.
A mere two months later it was announcing plant shut-downs for the winter periods.
This collapse has caught almost everyone out.
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This move by Corus is significant because it highlights a crucial difference that exists between two groups - those who believe in the survival of the fittest, and those who believe in adaptation.
It would help if an awareness grew in the way Nature has a margin for intelligent adaptation and co-operation that the present, obsolete capitalism has denied for too long.
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JCB tried this and ended up with the Job losses anyway. Corus may be different becuase once the (over)stock(ed) levels fall off enough into early next year some orders will come back.
The New capitalism might well go bust before it gets going though. Inflation is going to be a real problem with the quantitative easing
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You write
"When workers at Corus and JCB offer to cut pay to preserve jobs, it's legitimate to ask whether a rise in inflation..."
I don't really follow your argument.
The workers have a stark choice - a 10% pay cut or a 100% pay cut.
I don't think inflation comes into their equation, and I don't see why it needs to come into your sentence either...
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I would like to wish these guys good luck, and i fear they may need it.
At the moment in business everyone is very nervous, you can sense it, its like a bad smell thats not very strong, but you can smell it.
I think that the failure of Wooolies to find a buyer is going to increase the pressure on other retailers.
I was in our local national chain Diy store last night and i have to say that it was direly empty and has been everytime i have been in lately.
It would not surprise me if they and other big names especially one of the big electricals went down after christmas.
As to the bosses not taking a pay cut witht their staff, they would have to be mad not to. Look how the US car firms directors were slated for turning up in their corporate jets, the days of one rule for one are well and truly over.
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As I understand it – the biggest investors are the pension funds – investing for us – (my pension on the line here)
– so why do we continue to allow huge salaries and bonuses at the top when the man on the shop floor is either taking a pay cut or losing his job –
Does this mean I am contemplating a socialist state of control – no – but clearly sauve-qui-peut is no longer an option.
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From Mr Peston:
"Their initiative is redolent of a collective determination to avoid unnecessary hardship in the very painful recession that appears to have gripped most rich countries including the UK in a particularly severe way."
Again Robert, you have called into doubt Gordon`s Brown world-saving powers.
It seems Gordon "trillions for the bankers" Brown`s reputation for fiscal prudence is falling apart faster than a cheap suit.
Even the state organ`s business front man is jumping ship!
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It'll be interesting to see what happens with the public sector pay over the coming years.
Another point, slightly off topic, is that the Treasury Select Committee is discussing on Monday:
"1.11 The role of the media in financial stability and whether financial journalists should operate under any form of reporting restrictions during banking crises."
I hope that the BBC is preparing a submission to the Committee on this matter, as it sounds like the start of censorship to me.
http://www.parliament.uk/parliamentary_committees/treasury_committee/tc0708pn85.cfm
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Dear Robert
I totally agree with *6,
The CSA are a major arrogant vindictive, and Discriminative organisation who use Government Bully tactics against the individual
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As we approach the annual poll tax hike, how about a 10% pay reduction for the teachers,police,firemen,doctors, nurses etc. etc.? The gap between public and private sector is now unsustainable.
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The work-force in industries such as steel-making in this country which have gone through the trauma of restructuring carry that dire memory within its culture. This is why there is a determination to bear the pain collectively as otherwise each man is pitched against the other as they struggle to survive.
We should all learn from this example and adopt it as a standard.
This is why I have complete contempt for the Masters of the Universe and the newly declared Saviour of the World who have caused this recession (slump?) by their incompetence and greed.
What is needed in this country is not to look for examples of individual genius that will save the day. We don't need great leaders with huge egos to be massaged. We need simple folk who know what they love and love what they know.
This country now needs to accept that we must all stand together and deal with the distress now arriving at homes close by as a common difficulty and adopt our own collective strategies to cope with it.
From those simple answers will come the means to resolve the major problems. It will take time and take courage.
The people of this country have proved time and again that courage is its coin. All we need is the time.
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It baffles me why wage reductions rather than redundancies are not the order of the day at the banks too.
After all, a 10% or even 25% reduction in all but the most menial of bank salaries represents a wage level which a large section of the population would happily live - or at least get by on.
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The real issue is in relation to executive pay.
There has obviously been derision about the bonuses they earned in the past decade but the basic salaries rose significantly as well based on the premise of growth which we now know was false. The real issue is when will these executive salaries fall to reflect the new world.
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It seems to me that there are two ways we can collectively tighten our belts:
1. Ruthlessly cut jobs so that the poorest pay (as usual) but the richest carry on creaming what they can off the top (i.e. the Tory policy)
2. Manage reduced salaries and headcount in a way that eases the downturn by everyone taking a smaller hit now rather than a bigger hit later due to further reduced tax revenues and high unemployment.
Mass job cuts is not good for the economy, whatever die-hard, neo-liberals might say, and is even worse for society. A whole generation has grown up to be permanently out-of-work because of Tory economic policies of the 80s. Wasted lives and wasted opportunity. Let's not repeat that disastrous economic policy that ignores human psychology and human nature.
If individuals take home less pay and work less hours, there is the opportunity for those extra hours to be converted to the social and economic good of the nation. What we need is a sense of social cohesiveness: the goal of economic stability, maybe not today or tomorrow, but within 5 years if we all keep our nerve.
Cameron would rather conserve the position of the rich, the bankers and merchants who got us into this mess in the first place at the cost of the hard-working. He'd ruin the country for a bit of political power.
Yes, we need to avoid companies paying for people to do nothing - I'm not arguing for a return to profitless inefficiency. But there is a middle ground - an old-fashioned liberalism - that doesn't trust markets, but makes the most of them for the social good. That should be the goal of the next government. Not balancing the books, but balancing the medium- and long-term with the short-term, not in terms of the economy alone, but in terms of the social good - that is the good of the majority of individuals.
Hard work will get us out of this, not worklessness.
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Bet you won't read about this in the tabloids.
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Expectation
Oil price rise and it’s impact on all prices = inflation tendency.
Oil fall from 147 dollars to
Under 50 dollars
=
Lower pressure on all prices
The sooner we move from oil-based economy the better
Maybe the US will get its act in gear with Obama
Nuclear power = more stability in energy prices
Also we are held to ransome by GAS
Which also rose
UMMMMMMMM
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If the problem at Corus is that costs are too high then the union offer is entirely rational. But I suspect the problem is that there is simply no market for the steel. If car plants are shutting down for extended breaks and construction is faltering then who is to buy raw steel? A 10pc reduction in wage costs won't help if there's no market for the product.
Incidentally Robert, please don't spoil an otherwise excellent post by introducing a straw man red-in-tooth-and-claw manager. If you can quote an actual plant manager then fine, but please don't follow the lazy reporting convention --- which the Today programme presenters do far too often --- of saying "opponents of the scheme are going to say...".
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Post 4, interesting point somehow can't see that one happening though.
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RP,
You ought to think about this more widely. Corus is just one (very public) example of wage cuts. And it's not just happening in the UK, eg Aer Lingus staff have just voted overwhelmingly in favour of pay/benefits cuts.
Looked at from a macro perspective, this begins to scream deflation. It would be good to know what risk BoE/Treasury sees of sustained deflation, its impact (eg on proposed fiscal stimulus), and the steps that would be taken to drag us out of it.
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I read the "New Capitalism" piece on Monday and I've re-read it now. I can't see how the Corus and JCB stories are consistent with it at all.
At a stretch, this action may make Corus a little more compatible with Chinese steelmakers and make a tiny contribution towards rebalancing UK-Chinese trade; or it may reduce the disposable income of Corus workers and therefore get them to spend less on imports. But this is on a highly selective reading!
A more relevant factor is behavioural. There is lots of research about why wages do not generally fall when a company becomes less competitive. Neoclassical theory indicates that they should. But psychology and behavioural economics give some plausible reasons that they won't.
So why does this effect not take place more often? And, counter to Robert's article, why was the MPC right not to rely on this kind of cut? Answers here:
http://www.knowingandmaking.com/2008/12/wage-reductions-in-downturn.html
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Post 12 re the DIY stores. Homebase's radio adverts are offering freee insurance on conservatories, bathrooms and windows to try to encourage people to buy.
I imagine there are a lot of people who lost money on MFI.
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Excess production is the problem at the moment and although it is gratifying to see the workers at Corus putting job security before income, I cannot help but worry that job losses will be inevitable in any case. Look at all the products such as cars, filling showrooms, car parks and fields waiting to be sold. The demand is not there. The best that can be hoped is that if workers at Corus in the UK are flexible enough, then the plant closures will occur elsewhere.
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Another good article that highlights the confusing signals being given by markets, especially the collpase in yields on government bonds versus the spike in perceived credit default insurance.
http://www.bloomberg.com/news/commentary/columnists.html
Check the article entitled: "Deflation Says Buy Bonds; Supply Flood Says Sell" by Mark Gilbert
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#21 : "Cameron would rather conserve the position of the rich, the bankers and merchants who got us into this mess in the first place at the cost of the hard-working. He'd ruin the country for a bit of political power."
Utter junk! It is Brown who is wrecking the future prospects of this country with excessive borrowing. It is Brown who has been in Government these past 11 years. It is Brown who failed to regulate the banking industry. It is Brown who was deficit spending during the boom, leaving the country totally unprepared for the bust.
The German Finance Minister is absolutely right about Brownomics - they will put a millstone round the neck of this country for decades to come!
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@6
The CSA bluffed you
I managed a reassement in 2000 going back through to 1996. they ended up paying me over £5000 all of which they had already paid out and were unable to recover from my former partner.
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This time round manufacturing is not a problem industry. Anyone who has managed to stay in business despite a high pound and brutal competition from China has had to be efficient and well managed. With 25% currency devaluation these industries could be very successful once the immediate crisis phase is passed. The employees are just being rational and betting on things being better in 6 months.
The bloated problem industries this time are banking, government, law and medicine. Professionals who have been isolated from global competition and invest in property have done very well over the last few years. The government have done a very poor job of controlling staff numbers and wage inflation in the higher pay grades, although younger and customer facing staff have been treated badly. Bonuses for GPs which double pay for less work are symptomatic of an employer who does not care about cost control.
If we could get some sense and voluntary wage deflation in the 'state sponsored' problem industries as there is in the manufacturing sector we might be able to get through this with less unemployment and less inflation. Unfortunately, the only politically acceptable way to reduce public sector pay and property prices is through inflation.
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And another interesting one, this time from ECB seeking to rein in market expectations of further big interest rate cuts for the Euro.
It's a bit out of line with what's happened in Switzerland, where the central bank has become the first main one to cut rates to below 1%. Rates have been cut by 50bp to 0.5% this morning.
http://www.bloomberg.com/?b=0
Relevant article is entitled: "ECB Sees Rebound in 2009; Stark Says Room to Cut Interest Rates `Limited'"
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It seems that every ones solution to this is to tighten belts......
....... oh, sorry - with the exception of Brown!
As we speak GB/AD will be convincing the owners of Corus to pay their staff more in the hope they'll go out and buy more goods made of steel, thereby reinflating their own market....
Roll Up! Roll Up! Come and see Gordon Brown's 'Amazing Perpetual Motion Money-go-Round' - 'The more you spend, the more you earn!
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its a shame that real workers ie steel workers(people who actually do usefull work) have to take a pay cut...i would suggest people like moyles and a few more in the beeb take massive pay cuts and reduce the cost of the tax that the bbc levies on everybody. also its a sign of comman sense at last that everything doesnt have to keep going up all the time.
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Pay cuts were common in the thirties slump and even affected public sector workers. Corus workers are to be commended. We will only get through this without the sort of unrest that they are having Greece at the moment if some of the pain is shared. There are going to be massive job cuts and redundancies, in the city, in building and in retail. Some people have done very well out of the last few years and are very comfortable thank you. Company directors, lawyers, doctors and many professional people have seen a considerable rise in their standard of living compared to a few years ago.
No society will last very long if it allows one half of society to be bancrupted and thrown out of their houses while the other is more than comfortable. It is no good the Tories complaining about a massive future tax burden. These are extreme circumstances and the lesson of the thirties is that government must take the lead and spend spend spend. I am no supporter of Brown and his self satisfied freudian slip yesterday about 'saving the world' only reveals his true character. I blame him more than anyone for the mess and the vast debt bubble. He is however on the right track on how to get us out of it.
He should immediately impose a 50% tax rate on anyone earning more than 50K to help share out the pain. That way he could spend even more. He should remove VAT on building repairs for a year. He should spend money on insulating houses. He should build those aircraft carriers. He should help with retraining and getting people back into work.
We live in 'interesting times'. There are no certainties any more. We need to pull together and help each other before we slide into anarchy. A few weeks ago we were very close to a total banking failure. Just think how long we would last if all ATM's said 'Sorry. This service is no longer available' and the supermarkets only took cash.
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Re: Danny Blanchflower.
But the problem with the UK economy over the past 3 years until Le Crunch was that gov spending was unsubstainable not inflation.
Look it is simple. Gordon Brown had a budget in 2001. He'd overspent by 2004. His solution was to spend more. 2008 the solution is to spend more.
I don't think so. Hence run on pound. International financiers get it as do the Germans. The UK is going down the plughole. The result is going to be huge unemployment. Prior to stimulus 3-4million, after ?
For labour voters - this is what you voted for.
Non-labour voters bad luck but you knew it was coming.
Remember No Free Lunch
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I wish the workers of Corus good luck and think they are smart doing what they can for themselves and each other.
There is no way of knowing if the plan will work or not as we have no details of the company finances. However, what this has to do with the MPC and Blanchflower i have no idea. Corus and their order book is being affected by demand around the world and Tata has borrowed tens of billions accross its businesses on the back of low interest rates including several of our most famous car brands - Jaguar & Land Rover. Now the world economy is contracting but the debts are still on the books.
This is all part of the same global deleveraging.
Blanchflower was wrong all the time and following his nonsense would have at best prolonged the party a bit longer. He was a voice in the wilderness for good reason. It is because our interest rates were too low for too long that we are in the worst mess in Europe.
Come on Robert buck up.
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I've copied this from my original posting on an earlier blog, as I think it's an interesting and important interview.
Brown v Merkel appears a popular bout on here today, so check this interview in Newsweek with Germany's Finance Minister. It's worth noting that he's a member of the Social Democrats, ie ought to be closer to Brown/Darling than Merkel is.
This is the what politicians generally should be doing/saying. I wish this guy had more influence across Europe generally. He's just so much more honest about the limit of governments' ability to influence events than GB/Ally D.
http://www.newsweek.com/id/172613
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Don't agree with much of your premise Robert.
We still have a government that believes we can recover from these 30% falls in production within 12 months
Start asking questions, we need answers so that we can discover where they expect floor will be
Up until now the policy appears to be similar to falling from a great height and when you see the bottom we'll all take a collective leap and jump down...seems like fantasy to me
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I am a bit puzzled as to the lack of demand for Corus steel. In less than 4 years we are holding the London Olympics, which is a huge investment/construction project. All modern stadia are either partially or fully covered, and a typical construction will have the roof supported by steel columns and beams.
So, the question is: where is the steel coming from if it is not Corus in the UK. If it is being imported, as a taxpayer funding this project, I would be appalled. It would be scandalous and yet another example of a government good at soundbites but useless at doing, managing or governing.
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Would a reduction in public sector salaries (across the board MPs!) benefit the country twice as much in that, not only would we be paying Gross less for their services, but their 2/3 Final Salary pensions (which push public sector debt in real terms well above 100% GDP) would also be reduced greatly?
This is a question rather than a policy - I really am not sure of the veracity
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RP: "it's legitimate to ask whether a rise in inflation was ever the kind of serious threat it was perceived to be earlier this year by the Bank of England's Monetary Policy Committee"
The Corus workers will certainly be feeling the effects of "inflation" as the cost of most things relative to their new income has just shot up...
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All companies should have a core wage base as part of its overall cost base together with a economic bonus pay structure that increases in good times and deflated back towards zero in bad.
Use of short term contract workers that are culled at nescessary times and plenty of other schemes to help stability during rough periods.
In the case of Corus, it should be the evaluated from the sales up rather than the costs down.
What are the confirmed /projected sales for the next 12months?
What are the costs?
What is the minimum profit margin exceptable? Is it break even?
What is the workforce nescessary to do it?
The choice is then cull the workforce to the amount needed or split the amount available between the 25000.
The offer of 10% is a red herring
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10.20am and only 29 posts, the 'Usual Suspects' must be having a long lie-in or is the blog not worth commenting on for them?
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32. At 10:10am on 11 Dec 2008, Pot_Kettle wrote:
@6
The CSA bluffed you
+
They also bluffed themselves. They told me that I lost all rights of appeal as I did not notify them of the change in circumstances within 28 days. However they applied a backdated increase due to changes in tax circumstances, where I appealed both decisions.
But at the end of the day you don't really win anything, all you to is get them to correct overcharging on top of their usual charges. i.e you have to fight to be given the most basic rights.
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Whilst selecting pay cuts in order to protect jobs may seem a rational and viable choice its benefits may be just short term and ultimately futile. This is not just recession it is structural readjustment which will lead to a significant downsizing before future regrowth occurs. Those companies that come through will need to be leaner and fitter ( employ fewer and better people but pay them well ). What is key is that a new and fit for purpose breed of managers and directors - and dare I say politicians - replace those that have led us to disaster with such consumate aplomp and total belief that they personally were not to blame ! Sadly at present we look like going into the future with much the same cast of jokers pulling the strings at every level. This has to change if UK PLC is to resurect itself and thrive in the future. Time for some new talent to emerge!
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Dear Robert.
Irony of irony, I was actually watching you chatting to Huw Edwards on BBC News 24 about Woolowrths last night, when this chain of events started !
finger of fate
This is entirely relevant to Pestons blog moderators, as the story relates to Woolworths. It explains perhaps, why they've gone into administration and what God thinks about it... !
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Blanchflower seemed to be the only one on the MPC who did not have his head in the clouds - it is sad that he has gone, although I can understand his frustration with dealing with people who were clearly out of touch with reality.
Investors (including our pension funds) have lost a fortune, partly if not largely due to the incompetence of the BoE's handling of the credit crunch.
Investors have had to face reality in declining share prices, and those made unemployed to date likewise.
It is now time for those in work to acknowledge reality as well, by accepting pay cuts as necessary, or face unemployment too. The money-for-very-little mentality amongst many people which has persisted for years (dare I give many London builders as an example) has to stop.
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Post 18
Couldn't agree more
At our Company (we manufacture & supply the construction industry) which has obviously had a major impact on orders, all staff including the MD have taken pay cuts and reduced hours, this along with other cost cutting will hopefully allow us to continue in business( for a few months at least) but without this we would all be unemployed by the end of December.
What the country/people need to see is some well thought out plans to aid recovery, not more government initiatives that do not help most people.
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What a pity the public sector unions do not have the same vision!
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Don't forget it was Blanchflower, a consistently dove-ish advisor, who wanted low interest rates even during the worst excesses of the housing bubble.
It is people like he who helped cause the problem. Claiming that he won the argument is like lauding an arms dealer who predicts a war.
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As has been said here, it seems that our government does not really grasp the severity of the oncoming tsunami.
What is needed more than anything else is massive investment in education - Britain needs to make its population among the best, the brightest and and the most innovative in the world, not the most mediocre.
GB & AD need to realise that there is no quick fix to this and that while they need to let events run their course, their role should be to help people pick up the pieces and rebuild a more sustainable economy funded by real growth rather than debt.
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# 53
Blanchflower only joined MPC in 2006, so not sure how he could be responsible for not increasing rates from 2003 onwards, which is when the problem over too-low rates really started.
And I think he only went into "maverick mode" in late-2007, when he became the first (correctly as it turned out) to see a link between the developing credit contraction, impact on UK house values, and a general economic downturn.
He seems to have been much more in tune with the real economy than the career-BoE members of MPC.
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Where is Supercalmdown when you need cheering up with his call for a 10% INCREASE in public sector pay.
In all seriousness, any reductions in salary need to come from the top down. It will not help the country to increase the inequality further.
Remember the median salary in the UK is only ~21k gbp so 50% of people earn less than this.
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Perhaps the BoE committee needs some members who have mortgages, little savings and rely on their regular monthly income to make ends meet? For example, most of the population?
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It's an entirely logical step to offer to work for less and keep 90% of your wages, rather than stick to your principles and lose the lot! In essence, it's no different from a firm cutting its prices to compete in a down turn.
It also has the advantage that the firm retains trained/skilled staff who may not want willingly to return to a firm that boots them out when it suits them.
It also says a lot about the concern of the workforce for each other, something which many contributors to HYS could well reflect upon, mean, miserable s**ds that many of them are.
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any company in trouble has to cut its overheads and running costs.....SO UK Ltd must do the same, cut public sector pay, cut public sector jobs, (why do we need 650 MP's?) change the rules on the gold plated pensions, stop stupid projects like ID cards which are going to cost a fortune for little or no return, you cannot expect the private sector to take all the pain.
Gordon's policy of ever expanding the non productive public sector has a lot to answer for, just how many Parenting Co-ordination Managers does one need?
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54 wrote
"What is needed more than anything else is massive investment in education - Britain needs to make its population among the best, the brightest and and the most innovative in the world, not the most mediocre."
Unfortunately that would mean the government accepting that some children are brighter and higher achievers than others - and that goes completely against Labour's 'social levelling' policies in education.
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So, Robert, interest rates have been too high for all of 2008, have they?
How then do you view the 12% charged by our 'government' to its subject banks for their PIBS, and how on earth do you think they can pay this, increase lending to businesses falling bankrupt by the day and repay the 'government'.
Or is it all a dastardly back-door nationalisation?
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# 51
Just as a follow up, my partner's firm have done something similar. They are in the property sector, and have unfortuantely had to release about 30% of staff this year. However, they're seeking to mitigate things by agreeing salary cuts of 5-20%, as well as making no company contributions to staff pensions in 2009. Incidentally, the higher salary cuts are being taken by senior managers. She doesn't know what 2008 bonuses will be yet, but she's assuming zero across the board. If so, it means the bigger impact again will be felt by the most senior.
I think there's rather more acceptance generally of a common interest between managers and the managed than RP cares to suggest.
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#43 ... what a pity that you don't understand how the public sector pension schemes work. Being "unfunded", the only difference your proposal would make on pensions would be to reduce the pension payable to those people who retire during the reduction.
The unfunded nature of the schemes means that taxes paid now go to pay pensions that are due now ... there is no fund to call upon ... and those pensions would not change if pay for non-retired employees is reduced. So, no cost reduction there.
Moreover, part of the costs are covered by member contributions which are based on a percentage of salary and therefore would go down if pay is reduced, leaving the taxpayer to pick up the difference. So, it would probably cost the taxpayer more in the short term to reduce the salaries of public sector workers.
Besides, most public sector workers (excluding those at the top end and doctors) already earn less than their equivalents in the private sector. My wife (a primary school teacher) works just as hard as I do but earns about two thirds of my salary ... her compensation being that she has a much better pension scheme to look forward to at retirement than I do.
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How can the people of this country show our PM just what we think of his world saving policies.
The government is out of control and far from leading us out of trouble are digging us deeper into the mire and are now even being rubbished by economists world wide.
He has to call an election the country needs to give whoever is in charge their backing May would save a massive amount of money.
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35 wrote:
"Gordon Brown's 'Amazing Perpetual Motion Money-go-Round' - 'The more you spend, the more you earn!"
That's brilliant! What a vivid vision - encapsulates it perfectly.
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BROWN RECEIVES INTERNATIONAL SUPPORT
Another World Leader has endorsed Browns style of leadership in his own major announcement.
http://news.bbc.co.uk/1/hi/world/africa/7777178.stm
It certainly makes me feel that the recession will be short lived, because Cap'n Darling said so and there's not long left in it.
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#56
Given the cost of living in the UK and that simple fact that average salaries are around £24k its no wander that debt has got so out of control.
A combined salary of £48k is simply not enough to sustain a family with two kids, a mortgage, car, provide for a pension etc. Britain is seriously overpriced compared to average earnings.
There has to be a fundamental repricing of commodities against average salaries to enable a sustainable economy going forward.
Perhaps joining the Euro would really help in this regard.
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Gladly have taken a pay cut (was on £22,000 as a conveyancer with 30 odd years experience) rather than redundancy. But no option given. I am lucky I could never afford to marry and or have children, or would be even worse for them now.
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Re management v worker pay
The problem in this country (and probably everywhere else) is that salary always increases by percentages, so if you start at year 1 with a worker earning £100 per week and a top manager earning £1000 per week and their salaries each increase by 10% per annum then within a decade the manger will be earning well over £2300, whereas the worker will only be earning just over £230.
Society cannot not allow this to continue.
Why do we need growth year on year?
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The Corus union leadership should be organising strike action and demanding that the government bail out the company. Not cow towing to management offering to cut pay.
If Brown can use tax payers money to bail out the banks and the super rich then Woolies and Corus workers deserve the same treatment. Brown got the economy in the state it's in and Corus management are responsible for it's problems not the workers at Corus.
If New Labour keep bailing out the rich and then expecting workers to pay for the crisis there will be no alternative but to follow Greek workers and organise a general strike. Don't expect workers to pay for an economic crisis caused by neo-liberal governments and big business.
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Robert,
Only when we see the public sector Unions accept pay cuts could we see deflation, and that is NEVER going to happen since Gordon Brown is wrongly determined to avoid deflation in favour of hyperinflation to wipe out his debts.
I can guarantee you that next year and 2010 we are going to have a long winter of discontent 10x worse than the 70's with striking public workers, the country at a standstill, and riots Greek style, especially if the Tories win the June election and try to impose public sector job cuts. Either this or Gordon Brown will give in to his paymaster Unions, avoid public sector job losses, and as the pound crashes due to our bankrupcy we will get hyperinflation Zimbabwe style.
At the moment it is only in the minority small business private sector that people are losing their jobs and accepting some pay cuts.
See http://www.marketoracle.co.uk/Article7526.html
for the true level of our National debt.
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Comment No4. Nice idea but.............. listen and watched the debate on the Speeker on Monday. Very Interesting.
Harman the old Civil Rights lawyer with a smug look on her face. Never was there such a one sided debate. Then the Division, which I felt sure would bring success to Ming's motion. But no, the reason for the smug smile the Labour whipped the vote and won by 4. Bllody close in the circumstances.
Why don't the Torys and Lib's just walk out for a couple of months. I sure it would bring down this government and show the public what a waste of time debate is when this happens.
Sorry Iam off topic
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#70
Nice post, except for the fact that the 10% wage cut at Corus is being proposed by the unions, not managers.
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I work in a sector where job cuts and a zero pay rise are both being enforced. But out of context that I suppose is not a very clever point. The zero pay rise is argued on the grounds that a rise the employer would rather not have afforded had recently been honoured. If it is really a matter of unadaffordable settlements, and it is the economic reality that you can duck out of a classic wage-price spiral by not having them, then NuLabour have steered us back into the politics of the 1960_70s, and perhaps the game's up!
A pity the Shadow Chancellor has been so scathing about the Euro. For his leader that is. Some room to manoevre on that one would be a distinct advantage to him I fancy.
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Surely it's David Blanchflower? Danny was a (very good) footballer
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As I understand it there are many corus employees who would jump at the chance of redundancy. The age profile across corus operations has steadily increased since privatization all those years ago. Some of the men on the plants are 'beyond retirement' age and many others are close enough to retirement with reasonable pension pots to be able to take 'early retirement' by choice. Part of the problem for Corus is the poor quality of their middle and senior management, past and present. The workforce have been suffering for years a slow 'death by a thousand management initiatives', which has made doing the job on the 'coal-face' very difficult. If it were not for the glut of cheap money over the last few years these sorts of problems would have emerged sooner than they have. As for 'sharing the pain' of any pay reduction: it's unlikely. There's a hard core of macho management sentiment in the company (a legacy of past 'struggles') which will fight any attempt to undermine their pay and perks.
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56. At 10:52am on 11 Dec 2008, reforse wrote:
"Remember the median salary in the UK is only ~21k gbp so 50% of people earn less than this."
Simply because the median salary is "only 21k" it does not mean 50% of people earn less than this at all. You also need to take account of part time work which distorts the median salary picture - 18K is a rubbish income for a 40 hour week, but is fine for a 20 hour week for a busy mum (for example).
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It's very rough on them and I hope that any firms where workers have to take a pay cut would see it go through to the top as well.
On the other hand, I regard strategic redundancy (to improve the health of a firm rather than a desperate survival measure) as simply good management, and indeed bosses at such a company are doing a good job and should be well rewarded.
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@70 spec
Yeah that works, back to the 70's comrades
Can you name me one time that industrial action has benefited the worker. They dont get paid while their out and the business usually loses its customers that they fail to supply. All strike action ever achieves is the worker loses out and often the business goes to the wall.
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Job losses to preserve profits, taxpayers bail outs to preserve profits, unregulatated utilities prices on UK consumers to preserve EU profits.
Socialism, just smells funny to me.
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75
I hear by the BBC that Danny is his nickname in the business. Jolly lot aren't they?
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#40
Great article, I'm moving to Germany tomorrow!
Someone that is doing what appears right, rather than doing what he thinks will get him re-elected.
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Comment #69 by fatcat, ending "why do we need growth year on year?"
The answer to that from most economists is that without growth there is stagnation and recession and lots of gloom and despondency.
The answer from people who can do maths a bit better, and haven't been contaminated by economic theory, is that that is absolutely the right question to ask! There is a difference between stability, with a healthy throughput of cash and movement of goods for example, and stagnation.
More growth in some sense equals more energy in the system, which generates more instability and chaos. That's a straight consequence of the maths (analogous to heating water - eventually it boils, and the situation inside the water is chaotic), but it's not really filtered through to the economists yet. There isn't a lot of mention of chaos on the websites which explain the mathematics of economics and finance. There's a bit here and there, but most economists would prefer to ignore it, or at least to ensure that it is somebody else's problem.
Keeping the economic situation in the world stable does require keeping the economic maths in a non-chaotic region. Which is going to take some work, and some tight regulation once it's achieved.
It'll be a very bumpy road in the meantime!
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Sorry I am on a mission. It's cold and I am drugged up on strong "real" coffee, its cheaper than booze.
Brown takes 2.5% off VAT and tells us to spend. So should I forget that I am un employed mainly because of his (Sorry the US's) mis-mangement of our economy. Should I go shopping up to the limit of my credit (never even used a third of it in the past and then only for a few months). If I do then the government will help me like they do the herd out there that have over extended themselves.
Just received yet another e-mail telling me I have been unsuccessful on a job application (for which I was over qualified).
Benefit for Work - Bring it on - But like most that this government says it will do it will come to nothing. It's a New Labour/Blair Politics policy talking and doing nothing, save our Middle East Wars (how much have they cost apart from in human life of course)
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The biggest problem right now is not DEMAND for credit but SUPPLY of it. So lower interest rates have made and will continue to make the situation worse. No, inflation won't result, but the credit crunch will worsen. The lower interest rates get, the harder it will be to borrow, and the more the recession will bite.
This recession is NOT like previous ones. They were characterised by lack of DEMAND for credit at the prices (interest rates) available. Right now people and businesses want to borrow but can't.
Deflation, if it occurs, will be caused by lack of demand in the economy caused by lack of supply of credit CAUSED BY INTEREST RATES THAT ARE TOO LOW!! Every reduction in rates by the government/ Bank of England will make the recession worse and increase the likelihood of deflation.
"Their behaviour is consistent with the remaking of capitalism"?? Give us all a break, Robert. It's consistent with a free market for labour.
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I agree with PaulDeberry #17 that something has to be done about public sector pay. If not a paycut surely they should have their pensions put on a more realistic basis - higher contributions and retirement at 65.
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63 - dcacooper - thanks for your insight and candour.
I appreciate that the pension pot is unfunded and what is paid out now comes from this years' HMRC pot - but as we have moved through an immensely tough period with increasing number of baby-boomers heading for retirement, in increasing numbers from the public sector as this has expanded wildly, would there not be a net positive effect in addressing public sector wages now rather than later (in the form of culls and closures)?
This should also mitigate the reduction in contributions from current workers as there would be more of them for longer paying into the pot as increasing numbers retire on slightly revised allowances.
I understand that people in the public sector work hard for their money, which in many cases is less than they may receive in the private sector, but for this they get more than just an over generous pension paid for by all of our children and grandchildren, - they get rather more security and insulation from the woes of this current economic storm and the protection of the Saviour of the World as the lights go out for the rest of us
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When I was a lad brought up in good old fashioned Keynsian economics, I learned that there were two types of inflation, demand-pull and cost-push. The problem with the MPC strategy of dealing with inflation, namely increasing interest rates, is that is works best with demand-pull, where the increase in interest rates helps reduce demand, than with cost-push, in particular where the costs are increasing mainly due to factors external to the UK such as increase in commodity prices, especially oil.
In the 1980's opposition politicians described government policy of controlling economic activity through interest rates like playing golf with just one club. Maybe as part of the new capitalism, other forms of economic management other than just interest rates will come into play - basically we are talking about fiscal policies, i.e. changing tax and public spending policies as a way of regulating the economy, playing a much greater role in the future.
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#77 wrote
"Simply because the median salary is "only 21k" it does not mean 50% of people earn less than this at all."
Actually it means exactly that. If the median is 21k then 50% of incomes are this or less. It is a straightforward mathematical concept with absolutely zero wiggle room.
As the average salary is nearer 25k it shows, vs the median, how the fewer higher salaries distort it.
So what if some people work part time, if it suits their lifestyle and they can afford it it is not relevant.
18k may be a rubbish salary for a forty hour week to you, but for a hell of a lot of people that is what they earn, they don't choose to have a small income. A small reduction in it means a lot more, and so if there is to be financial pain the higher salaried members of society should take, at the minimum, their fair share.
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Re: 82
Yes. I agree.
Parliament is an electioneering chamber.
Exactly what we don't need in a time of crisis...
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It is understandable that the workers at JCB and Corus are prepared to take pay cuts in order to save their jobs, but with less pay their purchasing power will be less. This will contribute to the vicious circle deepening the recession.
It is also the case that because of the fall in the exchange value of the pound relative to the euro, Corus and JCB effectively already have a more than 25% reduction in their UK costs as far as sales in Europe are concerned. If this is not enough, a further 10% reduction probably will not help.
Because of the weakness of sterling the UK will probably have to wait for recovery in the US and the Eurozone to pull it out of recession.
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#43 2/3 final salary pensions? Where please?
Most public sector workers I know get at most 50%. I wouldn't begrudge a dustman or a nurse that.
The only people who get more are senior management who are retired early for incompetence.
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# 82
I agree about him not worrying about getting re-elected. Note that there's an election due in September 2009 in Germany. He's also in the opposite political party to Chancellor Merkel. Makes his honesty even more impressive, and highlights what a bunch of munchkins the UK has masquerading as "leaders" (across all the parties).
I have no idea whether the UK or German approach is best. Time will tell. I do know which politician has been most honest, though, and it's Steinbruek.
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# 86
Never mind higher pension contributions for public sector pensions, let's make them defined contribution like the bulk of private sector workers. Why should the private sector provide protection against investment performance, when the people providing it don't get that pretection themselves anymore? We also need them putting on a sustainable basis, ie a segregated portfolio of assets from which to pay future pensions. At the moment, public sector pensions are simply paid out of current tax receipts. As RP has pointed out several times recently, these are likely to take a long-term hit, even after we come out of recession, because the financial services sector will make a much smaller contribution going forward. Spending cuts are needed to balance this longer-term. Public sector pensions are an obvious starting point.
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The other thing about public sector pensions is that they are now moving to "average salary schemes".
The real problem is that most public sector pension contributions just go into the exchequer, not actually into a pension fund.
This is one of the differences with Germany, where the welfare state is based on compulsory insurances, usually paid to the equivalent of friendly societies. Not that they don't have problems with this. Partly because of the usual demographic changes, and partly because the friendly societies are themselves huge bureaucracies: perceived to be overpaid and unaccountable. My information comes from a German relative, formerly chief statistician of a major city. Incidentally, she herself took a paycut a few years ago when that city had a financial crisis.
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Robert
I think someone is rattling your cage. The union did not suggest this 10% cut in pay.
The bosses of the company have recommended this.
I have also read that the factory is probably going to close in any event because the owners are now looking at its capacity as 'surplus to requirements'
I thought your entry today was to good to be true. My understanding is that the union is considering strike action.
Striking may not be a good idea as no one needs their steel right now. A bit like when the miners went on strike with 18 months coal sitting above ground in huge piles.
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#40 JayPee28bpr thank you for the link!
http://www.newsweek.com/id/172613
''…Making political decisions means taking responsibility in an environment of uncertainty. When in doubt, I'd say the risk is greater of burning money without significant effects and in the end having a budget weighed down with even more debt. For me the only stimulus measures that make sense are those that create jobs and have a positive structural effect beyond the economic cycle…''
(Steinbrück- Germany's Finance Minister)
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It's not a question of begrudging anyone (with the possible exception of HMG and her Opposition) what they receive. I do think that addressing some painful issues relating to pensions liability at the same time as reviewing the policy of heedless expansion of the State and borrowing might be advisable.
Discontent is certainly coming, in many places it's here already.
Let's act rationally
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Salary cuts, falling pound, RPI forecast to fall, UK will soon be the export powerhouse of the world - our prices will be bargain basement but UK citizens still wont be able to afford them - it will be export or die!
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Bert - this makes perfect sense - pity the public sector wouldn't take it on board and see what is happening in the real world
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I work in the city, and pretty much everone here agrees that MPC got it wrong. My dad called it better and when your dad is giving you better monetary advice than the MCP you know something has gone wrong.
The MPC has been a reactionary decision making body who has contributed to the UK economies woes. Smooth interest rate changes are a sign of a well managed economy. You just have to look at the large step changes made by the MCP to see they are well behind the curve (literally) on rate changes.
King should be sacked, simple, he is not up to the job!
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Robert - in May you wrote on this blog that 'the evidence of the hard data is unambiguous - and it's that the bigger problem in Britain right now isn't low growth, it's rising inflation'.
It is easy to criticise the MPC for not cutting rates sooner, but you should admit that even you made the same mistake not so long ago.
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How many fat cats either business / government (Local-National) / or indeed inflation proof rich will have to endure similar drastic measures? I'll tell you none! Perhaps some may forego that annual bonus or pension fattning exercise but they'll be in the very small minority. I speak from experience because I'm surrounded by some of these very same individuals. Just recently I found out the canteen workers whom I knew were low paid but in fact are just above the minimum wage, guess what the highest paid company director gets........ £1.5m and that was company house posting of 2007....Captain's Of Industry
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It is ironic that some now want to turn on the public sector. Public sector pay has been kept down in the name of the battle against inflation for the last thirty years or so. In the private sector inflation busting pay has been justified because of the risk taking element of capitalism. It also used to be justified by the argument of reward for 'wealth creation.' Now most of that cobbled together justification has been blown away. The country still needs real jobs done by teachers, nurses, police, social workers and so on. It patently doesn't need merchant bankers, PR gurus, insurance salesman, financial advisers, advertisers, consultants and the rest of the flabby bunch of tertiary industry 'debt creators' that have got us into this mess.
Ian Murray
Ian Murray
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# 35 thinkb4
Right on the money! Brown's supreme mix of economic incompetence and political arrogance is simultaneously breathtaking and downright frightening.
It's even beginning to dawn on Robert Peston just how pitiful a mess the Labour Party has (once again) made of governing this country. He's been resisting telling-it-as-it-is for fear of frightening the horses, I suspect. Some of us have for some time been clear about just how shockingly bad this is all getting. There is so much information and expert comment out there now pointing to unprecedented global financial and economic problems (and watch out for the social problems that will flow from them), that even the BBC is going to have to acknowledge just how bad this is becoming.
This time Labour has made such an ocean-going mess of their time in power that it'll take more than a couple of terms of another political party to fix it (and the Tories seem bereft of ideas at the moment); it'll take the lifetime of our children - if they're lucky. And by that I mean if Peak Oil doesn't kick the next generation when it's down, trying to recover from the current global financial mess.
Aren't our politicians wonderful? Where's Churchill when you most need him?
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I think we need some transparency about public sector pensions.
Teachers pay, for example, 6.4% of salary to their pension. The Employer (us) pays 14.1%
On retirement they get a lump sum and an index linked pension calculated on the number of years servce and final salary.
The average classroom teachers pay is 32,200. This excludes head teachers etc.
Pension = Service * Salary / 80.
The Lump sum received = 3 * Pension.
i.e 32K * only 30 years service = £12,000 per annum index linked + 36,000 lump sum.
The maximum contribution made would be 61,440 (6.4% = 2048 per annum = 61,440 max over 30 years (£170 per month contribution) out of gross salary of £2683))
Unlike private sector pensions there is no risk of the pension being regulary trashed by stock market crashes.
The Police Pension system is even more generous.
The average public sector wage is approximately 240 pounds per month more than the average private sector worker.
The average private sector pension pot is around 20,000.
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90% of something is better than 100% of practically nothing. Only those with mortgages would get significant state help given changes being implemented (ie those who have borrwed get help but those who were cautious have to spend their capital).
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Seeing a lot of praise for Blanchflower on this post. I dont think it is deserved a lot.
The MPC in recent years has been various grades of stupidity/ignorance.
The interest rate cut in 2004 was scandalous and added 2 years to the housing bubble.
The exclusion of housing, our biggest expense, from inflation was ridiculous. Yes, everyone's principal home is an expense, not an investment.
And whilst he correctly called the threat of deflation rather than inflation earlier thanthe other muppets, his remedy of near-zero interest rates makes him little better than GB/AD with their presription of more borrowing to fix over-borrowing!! From the sublime to the ridiculous.
The only credit I can give him, is that his understanding may be coloured by the Fed's ability as lender of the last resort for the WORLD allows it do do so.
Not on our little island I'm afraid!!
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# 77
Your comment on rubbish salaries is correct.
Work out what the minimum wage brings in for a forty hour week.
Then consider that the earner pays income tax and national insurance on this pittance.
If the government wanted benefits, taxes and earnings to be more equitably aligned there needs to be root and branch reform and radical thinking.
Try this as a starting point
Suggestion on tax and benefits relationship
Scrap employee National Insurance altogether
Cap benefits to individuals/families to ensure they are NEVER more than the minimum wage assuming a 40 hour week is worked.
Place the personal allowance per annum at half the minimum wage assuming a 40 hour week is worked and 8 hours overtime at time and half.
(((5.52*40) + (5.52*8*1.5))/2)*52 = £7463, for the purpose of this exercise say £7500
Scrap National insurance altogether for employees and pick it up as an income tax.
Tax bands should move as a factor of the minimum wage with small increments so the tax/benefit trap is mitigated
Income for the individual £7500 no tax
Income for the individual £7500 to £11250 tax at 15%
Income for the individual £11,250 to £15000 tax at 17.5%
Income for the individual 15,000 to 18750 tax at 20%
Income for the individual 18750 to 22500 tax at 22.5%
Income for the individual 22500 to 26250 tax at 25%
Income for the individual 26250 to 30000 tax at 27.5%
Income for the individual 30000 to 33750 tax at 30%
Income for the individual 33750 to 37500 tax at 32.5%
Income for the individual 37500 to 41250 tax at 35%
Income for the individual 41250 to 45000 tax at 37.5%
Income for the individual 45000 to 48750 tax at 40%
Income for the individual 48750 to 52500 tax at 42.5%
Income for the individual 52500 to 56250 tax at 45%
Income for the individual 56250 to 60000 tax at 47.5%
Income for the individual 60000 and above tax at 50%
This removes national insurance as an element, ensures the tax bandings are simple, understood to be fairer vis a vis the national minimum wage and removes the very grave disincentive to come off benefits as well as providing the treasury a greater take as people become more prosperous
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#85
What utter rubbish you write about interest rates being too low.
I presume from this statement you are a saver. No one will want to borrow your money to pay you an interest rate if the economy is in free fall, the payment of interest to savers depends on a business or individual using that money to buy goods and services and therefore expand the economy. If we enter a prolonged period of deflation then demand for credit will be much reduced hence it is better to have a period of very low interest rates to boost the economy saving many thousands of jobs and in the long term protecting savings in what ever form, be it cash or assets.
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Meanwhile, the pound gained one cent against the US dollar, edging at $1.4924 in mid-afternoon trading.
This was posted on the beeb at 1231
since when did 1230 become midafternoon
http://news.bbc.co.uk/1/hi/business/7777448.stm
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#106 "The average public sector wage is approximately 240 pounds per month more than the average private sector worker."
You may be right, but I'd be interested in where you get your figures, and whether it compares like with like for full time/part time and rates for skills, etc.
However, it would be better to look at the median salary rather than the average. Public sector salaries are highly skewed towards "management", of which there seems to be an awful lot.
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Re 103. The huge sums paid to some company chief exectutives and to quangocrats and charity heads are indeed a scandal and not enough attention has been paid to the subject. Far worse, of couse, is the vast sums extracted by insiders in the finance industry --- legally, as remuneration, I should add.
Some people's contribution to an enterprise is more effective than some others, and I can understand that a few people should be paid, say, three times average wage, to reflect their superior contribution. But 68 times median wage? Especially for such a nebulous subject as management, where there isn't even a body of skill to acquire or knowlede to learn. Surely your company would have been better off hiring a dozen or so people on minimum wage and averaging their decision, rather than one cossetted indivual on a telephone number salary. What the scandalously high salaries show, I think, is a market failure. For some reason there is a barrier to entry to top jobs which means the lucky encumbants get paid monopoly (or should that be Monopoly?) wages.
And whilst I'm on the soapbox, casino capitalism, as practiced in the City, is a zero-sum game. So if a few hundred people are extracting several hundred million pounds for themselves, somebody else has correspondingly lost the same amount. And I suspect that the loser is you and I through our pension funds.
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#77 with all due respect mate you're wrong.
Part-time wages are advertised "pro-rata" which means that the 18k advertised as the salary is actually the full time wage, this is then divided by the number of hours (usually 37.5 per week) and then multiplied by the number of hours actually worked.
Therefore someone on 18k part time pro-rata would actually be earning half that, or less.
The median wage is most definitely 21k.
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'Steel consumption has fallen by 40%'
Well you can thank the almost complete collapse of the Construction Industry for that.
It is over 6 MONTHS ago now that most of the Large Housebuilders culled major numbers of their Workforces. In this prelude to the current downturn the Govt were urged to introduce widescale social housing projects, to stimulate the Construction industry.
I dont see anything happening where I am, and we are going to need a lot of social housing soon....
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For goodness sake all you people suggesting public sector pensions be cut, think of the implications. These people have contributed to their pensions, they were part of the contract they signed up for, they may well have been part of what attracted them to the job in the first place. To cut pensions for these people is more serious than a cut in current wage as it amounts to a retrospective tax increase on everything ever earned! Consider the effects on YOUR motivation/morale if the government imposed a retrospective tax on every penny you had ever earned. It's not as if most public sector posts (teacher, nurse etc) are overpaid or ever get opportunity for bonuses in the good times. IF you MUST put a retrospective tax on earnings then there are a lot of city bonuses out there that have been at obscene levels for years and are STILL being paid now even if there has been some curtailment.
And no, I am not a public sector employee but hats off to many of them, I wouldn't want to be a teacher, nurse or policeman. Often dealing with society's worst people at their most objectionable.
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#111
'Meanwhile, the pound gained one cent against the US dollar, edging at $1.4924 in mid-afternoon trading.
This was posted on the beeb at 1231
since when did 1230 become midafternoon'
They are preparing us for the 6 hour working day.
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# 104
Private sector pay has risen over the last 20 years or so primarily because the private sector has become more productive, ie fewer people generating the same output, The public sector has become less productive.
Part of the reason is the way the two sectors are measured. The private sector tends to value outputs, eg is measured in terms of profitability, return on capital etc. The public sector is obsessed with inputs, eg government announcing extra expenditure of GBP X billion is seen in and of itself as "a result".
Consequently the value of public sector work has declined over time. Go back 30 years and income levels between private and public sector were fairly comparable. An inability to adapt is why the public sector has fallen behind. Added to that is the greater job security in public sector (less risk therefore less reward) and better benefits. And you might keep in mind the much worse sickness records in the public sector, ie generally the public sector works fewer days for any given level of pay.
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# 108
I've not been trying to praise Blanchflower, just make sure people get the facts straight and don't blame one person alond for faults that lie elsewhere.
In your case, I tend to agree with you about the rate cut in 2004 being wrong. However, Blanchflower only joined MPC in 2006, so this one wasn't on his watch.
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It should be obvious to anyone that looks at the data that the current public sector pension promise is a lie e.g. the graph of national debt and the proportion which is accounted for by public pensions from #71.
There isn't going to be enough tax money to pay for it so it won't be paid. Somebody will put the pension age up by ten years or change the rules in some other way so it becomes fundable. The public sector pension commitment is the same kind of commitment as '80% reduction in carbon by 2020'. Easy to make now because the pain is in the future and someone else will be in charge by then.
I would bet that the next phase of redundancies in the public sector is going to be done through early retirement and people in their 50s on the highest salaries are going to be queuing up to get out before the pension system is reformed. The rest of us are going to pay for this for 30+ years.
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77. - Your understanding of wage levels is a wee bit out of kilter and a tad over optimistic.
The average wage in this country is 26.5K. The average 'working' wage is 16.8K.
I work in IT as a skilled team leader. IT is a service industry that Maggie said would be one of the replacement industries for our manufacturing when she destroyed it in the 80's. Up until a few years ago it was, but unfortunately the Chinese, Brazilians, Indians and Russians have schools and universities and are pricing our IT out of the market. I am a team leader. My wage is 15.6K. My team earn 14.8K. My manager - degree educated, in her 30's and in charge of 100 people - earns 28K but she also gets a company Astra van. None of us have company pensions to look forward to.
You want high high wages and a decent pension try public sector. Every time jobs come up with the council etc round here - even for road sweepers - we're always applying.
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109 - get real, if National Insurance were abolished how would the government know who was employed legally and who isn't? Your NI number is the only number cross referenced on the system - and they get that wrong much of the time!
Once we all have identity cards of course this will all change - the 'NI' won't stand for National Insurance Number, but National Identity Number - they're still figuring out the final tax bands for holding one, so dont start giving them ideas of introducing new income tax bands as well!
Rember this simple equation;
((("Simple idea") x (>1)) + "Chaos")) = "no change"
I got it off my Exel Formulae list by the way.
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to 112
the figures come from the Goverment.....
"Median earnings of full-time male employees was £498 per week in April 2007; for women the median was £394.
The occupations with the highest earnings in 2007 were 'Health professionals', (median pay of full-time employees of £1,019 a week), followed by 'Corporate managers' (£702) and 'Science and technology professionals' (£670). The lowest paid of all full-time employees were 'Sales occupations', at £264 a week.
The monetary difference between the median level of full-time earnings in the public sector (£498 per week in April 2007) and the private sector (£439 per week) has widened over the year to April 2007, following annual increases of 3.0 per cent and 2.9 per cent respectively."
Source: Annual Survey of Hours and Earnings (ASHE)
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Dear Robert,
Just read today’s post and am a little taken aback to find that you have turned on the BOE, only a few months back you were warning (like the BOE) of the economic consequences of inflation, this week deflation, last week it was " Why punish savers?", there is irony in the above I wonder if you have the economic competence to appreciate it.
You should consider a career in politics you certainly have the knack for jumping on bandwagons.
I seem to remember during the Northern Rock fiasco you and Mervyn King were standing shoulder to shoulder postulating about moral hazard, you went further and poured petrol on an already flammable situation by spreading panic with sensationalist reporting, had it not been for the run on the bank caused at least in part by your reporting there is a reasonable possibility that the Rock would not have been nationalised, albeit temporarily.
This week your ego seems to have grown again as you enlightened us with your note “ The new capitalism” a schoolboys guide to the credit crunch, full of big words and little wisdom.
As a rule I wouldn’t bother responding to your blog however, since you are the BBC Business Editor I think you need to be taken to task. You are abusing your position as Business Editor, you always sensationalise and sex up your reporting, dwelling on the bad news, reporting it out of context, selectively reporting this or that report over another, all to increase your own public profile whilst debasing the BBC brand.
Others may see you as an economic guru, I’m afraid I keep seeing Gordon Brittas
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It is now turning into a two tier economy.
The Public sector and the Private sector.
Every day we are hearing about job losses in the private sector but never in the public sector.
Surely it is time to take a hard look at public sector spending.
What is really necessary in times of recession and what is just downright wasteful.
Every time public finance cuts are mentioned Gordon Brown reels off Education and the NHS to frighten us off.
There are so many other departments which can probably be more efficiently managed or amalgamated to cut costs.
Or perhaps he won't cut public spending because these are the voters he is relying on to win the next election.
It will have to happen. He cannot keep borrowing to prop up so much dead weight.
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116 Frazer_Hush
What do you think hyper-inflation will do to all who have saved, whatever sector of our malfunctioning society the occupy?
That's where we're going as it's the only way our crack management team will be able to conceive a way out of the borrowing on top of borrowing, debt to replace debt debacle we find ourselves in
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#116
My brother works in the public sector and agrees that it's a cossetted, easy life. As he says, knowing it's a joke doesn't mean he should leave it.
I run a private business and the people in my business live in the real world. It's tough, but through concerted effort we give ourselves the best chance of a secure future.
As I've told my brother, enjoy it while it's there because it only exists by the consent of those of us funding it.
It's not the fault of the people that they have such a feeble employer, nor their fault that their employer runs an unfunded pension scheme.
It'll become their problem though, when the taps are switched off.
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JayPee28bpr @ 30 - Great article:
"A year ago, Wall Street’s then-Big 5 investment houses paid their employees bonuses totaling $39 billion. That was a record amount. It should stand forever. "
How much are Northern Rock and Bradford and Bingley paying their staff in bonuses over the next few weeks, with taxpayer money?
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# 116
I think the intention (my intention anyway) is to cap the liability of public sector pensions. So, to the extent that people have contributed to date into such schemes, their entitlements would be protected. In future, though, they would have similar schemes to those most private sector workers now have, namely defined contribution with the pension holder taking the investment risk. I agree we can't backdate entitlement cuts. However, I think there is a consensus outside of the public sector at least, that continuing to provide generous pension arrangements, paid for by people who themselves have nothing similar, is simply unjustifiable.
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Never never offer a pay cut in the naive hope that this will prevent redundancies. My union did this a few years ago, the pay was cut and the redundancies followed a month later.
When the company was tackled on this their reply was that "we should not have been so stupid".
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#60 JayPee28bpr
I'm afraid I disagree. There is a HUGE difference between managers and "managed".
At Northern Rock, Senior Managers are collecting 120% bonuses over the next two years, while the admin staff collect 60%!
Now, while there's an argument to say they should all get nothing, surely if they are to get something it should be the same across the board!
Manager's greed. Paying themselves what they like, emptying the value from a company WE own before it goes to the wall in 2010 -
Disgusting!
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# 125
Good points. I tend to look at this at a very macro level. RP has noted several times that one result of the decline of the financial services industry is likely to be a reduction in the tax take from that industry. Pre-crash it constituted over 10% of UK GDP (and tax revenues). In the short term, for example, it's likely that all the corporation tax revenue from banks etc will be lost (banks now have massive tax losses that will ensure they pay no tax for the foreseeable future). My guess is that we're looking at a minimum tax loss of GBP 10 billion overall resulting from the financial crisis.
There are only two ways to cover this: increase the overall tax take in order to recover this tax from elsewhere. I don't see that as politically saleable. Or cut public expenditure by GBP 10 billion a year. That means cutting routine spending, meaning fewer workers etc.
Incidentally, I'm assuming the extra borrowing we're making now will be repayable via sale of government bank shareholdings in future. Many might think I'm a bit optimistic on that one.
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12
The trouble is ordinary working peoples salaries have not kept up with the real increases in cost of living.
Thus leading to a weak high street with seriously lower sales.
Also, those goods which are made cheaply available are of a lower quality than their predecessors.
For example, plastic has come to replace steel in a lot of kitchen appliances.
Makes the goods cheaper, but lower quality.
The official inflation rate is supposed to compare things of comparable quality of manufacture, but I suspect it does not.
Some good news, my rate of Inflation is now running at eight and one half percent.
Mostly due to the faling back of petrol prices.
Though the prices at the pump are still far higher than three years ago.........
And theres another problem, artificially high exchange rates make our goods and jobs less competitive and leave our economy open to flooding with cheap imports.
I would rather see factories in Britain providing jobs and British made products, than heaps of cheap imports, that fewer and fewer people can afford as they do not have a good job.
How many plastic kettles do we need?
How many cheap Tee shirts and just how many pairs of trainers?
People need to have good jobs and a balanced outlook on life and what they expect from it.
The media does not help, every other programme pushes expensive lifestyles and products which most people cannot realistically aspire to.
And then we have the become a millionaire style competitions.
Its fine for people to dream, but can't they have some real dreams of kinds of happiness that actually might come true?
Or which with a little hard work they could actually make real for themselves?
They say Money makes the world go round.
No it doesn't, people do, money is just window dressing.
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61#
Why did you not go for the higher rate that Barclays had to endure to get capital funds i.e.14% but if you had you would not, of course, have been able to sink the boot into the Gov.
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# 131
Different context though. I suspect your managers don't feel any common interest with you in saving jobs. My comment was really in that context, ie if something isn't done, everyone takes a 100% pay cut.
NR generally isn't a good example to support how to run a business. Bit of a basket case all round. It had great mortgage products, but no risk control etc. It's what comes from having banks run by marketeers. I have sympathy for you working there!
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I wonder how many of the Coupon Clippers on this Blog have actually worked for a living ?
It's all very well knocking the Public sector whilst collecting ones unearned interest, (and moaning how low a rate the working class pay to borrow your money).
But the Public Sector exist to do much needed jobs.
I think Thatcher cut all the fat away during her reign in Office.
It is worth remembering that the stimulation of demand in the economy is a valuable tool in reducing the effects of a recession.
Public Sector wages, like Non executive
Directors salaries, are spent in Private sector busineses.
So pay rises in the Public Sector lead to extra SALES in the Private sector and thus more jobs and profit, for the coupon clippers.
Now, I've clipped more than a few coupons in my time, but I am not a snob, and I appreciate the Public Sector for the essential contribution they make to the British way of life, and the structure of our Society.
The majority of Public Sector workers are on less than the average wage in the Private sector, but their pension is supposed to make up for that.
Generally the highly paid public servants are ex Private Company Directors !
But with the mess the Private Sector has made of Britains economy, perhaps that does not bode well !
I'm sure the penny pickers and coupon clippers will deride me for my appreciation of the dedicated British Public Sector, but I don't care.
I know real quality when I see it. Give them all a big pay rise Mr Brown, say 20 percent, give Britains High Street a boost!
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68#
I am so sorry for you when you describe yourself as 'lucky'. Love has obviously passed you by.
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As a thought, on any afternoon you can find private sector directors, managers, and businessmen enjoying a nice round of Golf.
But then the Public Sector is not given time off for Golf !
Four !
I say, I'm in the bunker !
Must be the fault of those Public sector wallahs, if they worked harder or were paid less I could spend more time practicing my swing !
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82#Auf wiedersehen pet!
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# 136
I see we have a return to inflation in your posts. You've slipped in a request for a 20% public sector rise, having previously "only" asked for 10%.
More importantly, there is a very fundamental flaw in your analysis of the impact of you proposed pay rise. I'll accept your assumption that all the rise would be spent. However, to give a pay rise to the public sector requires taking the private sector in order to pay for it. So, for every GBP 1 that your public sector friends spend, their private sector equivalents have to spend GBP 1 less, meaning no net increase in consumption.
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# 138
The public sector just takes more sick days. A lot more.
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136 Supercalmdown
Having worked in local government I certainly don't recognise your defensive view of it.
We are talking about a massive organisation employing millions of people.
Most are productive and necessary but probably about half are administrators managers and non productive staff.
I left to go into the private sector to get away from the incessant boredom of paper chasing and trying to find something to keep me busy.
Others were happy to sit on their bums and talk about the previous nights TV programmes or email all and sundry.
If you don't think there's plenty of scope for efficiency then you haven't worked there.
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136 - Nobody is saying that public sector workers don't work. What they are saying is that the fact they are low-paid in comparison like-for-like is by-and-large not true anymore.
My job is worth nearly 3K (20%) more if I did it in the public sector.(if only I get get in)
Like the rest of the private sector I don't get a pension scheme I have to make my own provision. Nor can I retire at 55. Again like most of the private sector I do not get graded pay.
The public sector think they are hard done by. There is absolutely nothing stopping a lot of them looking for the same or similar jobs in the private sector. Except pay, conditions and pensions. Obviously some jobs have to stay in the public sector - front line NHS, teachers, Police/Fire/Ambulance, doctors, nurses, social workers etc, but a huge amount of clerical at national & local could be privatised, along with management, civil service (even job centre staff), Probation staff, prison staff, NHS ancilliary staff, council staff etc etc.
And I'm sure, being as they reckon we in the private sector are better off, they will fully support it. I'm certain they'll look forward to our wage levels, sorting their own pensions, working till 65 and worrying about whether their company will survive the next 2 years.
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Hmmm, no, the longer it takes to give them a pay rise the higher it will have to be.
Twenty percent is about right in my opinion.
This time next year it would probably have to be thirty five percent to have an impact.
Thats what I'm talking about, to make an IMPACT on the Private Sector Sales levels, it would have to be a rebalancing rise.
If you give them five percent,or less, they will just save it, or repay debt or just pay their higher gas bills.
Only a substantial rise would enable them to undertake significant purchases.
The Private Sector would not lose, it would gain.
The amount of money required would be less than a tiny fraction of the money thrown at the Banks, with little success.
The Public sector people I have met have all been of the highest quality, I cannot comment on other peoples experience.
Now to clip some coupons !
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# 143
"...working till 65"
Love your optimism! Check your pension valuation when you get the next one. You'll be doing well if you still think you'll be able to retire at 65! :-)
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#122
NI numbers are not just for “national insurance”
The abolition of this impost, an income tax by another name, and amalgamation into income tax would make the system far simpler. It is only kept separate so New Labour can claim income tax was not raised when they upped NI contributions.
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#130
Not only will redundancies still take place but the redundancy pay will be calculated on the new lower salary. NEVER trust the bosses.
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re point 67
A salary of 48k is not enough to support a family etc.........
Thats got to be a joke , surely!!
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Well Virtualsilverlady (142) I have wored in many private sector organisations, in white collar and blue collar jobs, and also spent 30 years as a Civil Servant. The private sector is riddled with fraud, theft, and fiddling at all levels, falsifying time cards at shopfloor level, falsifying expenses at board level, physical theft of the company's assets, you name it. The people on the shop floor are doing the absolute minimum they can get away with, the managers pretend to work long hours, but in fact just waste their time boosting their own fragile egos and thinking up new ways to fiddle their expenses. In the public sector,dishonesty is much less of a problem, although treating sick leave as an extra leave allowance is fairly endemic. The main Public Sector problem is the absolute proliferation of unnecessary jobs, which some people work very hard at, but which could be abolished overnight with no effect on public services. A prime example is the National Insurance system. If some politician would just admit that NI is just income tax by another name, and increased income tax by the amount required to cover workers' NI, then about 10,000 jobs could be cut overnight, with no impact on Government Revenues, and a huge simplification of the tax/NI system as a bonus. Will any politician be brave enough to do it
? Absolutely not, and I'll tell you why. Because the Daily Mail, the Sun and some of the fine minds on this blog would be screaming blue murder at an "increase in basic rate tax". In other words the Government would be crucified for a change that saved a fortune and left everybody's take home pay unchanged. That is the real "English Disease"- a lethal combination of stupidity and avarice.
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Long before deflation was the buzzword, I thought that this was more likely than inflation to be the direction we were heading in. Now that its gaining credence I find myself worrying about inflation again.
The first 4 items in my recent supermarket shop were as follws: sausages+10%, tinned tuna +10%, soya milk -29% to compete with Tesco, following a 30% increase the previous week, tea cakes +25% following a similar incease a couple of months back. Its still hard to find petrol locally for below £0.90 and we're told rail fares are increasing above 5%. There's little sign that utility bills are going to decline and the government is talking council tax rises down to below a hefty 5%. Some retail goods may be cheaper but this is almost all discretionary spending, and we've reached the point where our 'fixed' bills don't leave much for discretionary spending. This will be even more true if wages fall. The one item that will have to fall as fixed costs go forever upwards, is the price of housing. Its not just a question of credit availabliity. Buyers will just not be able to commit such high proportions of their income.
My most frequent item of disctetionary spending is an occasional Financial Times. The price has just increased by 30%, after a similar increase last year, despite that paper devoting much time to deflation in recent weeks.
We should all listen to the German Finance Minister.
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Re note 150
My appologies to the FT. the price increased £0.30, from £1.50 to £1.80, which is 20% not 30%. Still a nasty hike!
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I will take a pay cut when the incompetents and greed merchants who have caused, and been allowed to cause this finacial mess are prosecuted and put behind bars, where they belong!
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I no longer support the Labour party even though I once stood for local elections, partly because of Labour's near addiction to 'politically correct' solutions and the overbearing nature of their state intervention.
However I strongly believe in fairness and if the workforce at Corus is to take a pay cut then the whole workforce including the management must be involved... NOT just a paycut for the shopfloor!!
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I work for one of Corus main competitors within the UK market. Why should i HAVE to pay for a company that could ultimately put me out of a job? Do you feel that this is fair?
I have paid my taxes all of my working life and in all fairness still do not understand the need and appropriateness of some of them, however like a good law abiding citizen I have paid them. Now this has come along and in all fairness I now feel like breaking the law to make a stand.
I shouldn't have to feel this way.
We talk about the fact that we are in a democratic society, where each of us has a say...where is it and who to! No one seems to listen to us anymore.
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i would like to know who the BBC poled when they said that GB was the better man to get us out of this finacial crises. It must of been labour members, where ever you go on the internet the vast majority of people not just here in the uk but around the world say that GB is wrong.
I see german and french ministers are asking for plans to be drawn up for a sangette to be opened in dover for british refugee,s fleeing the uk. for main land europe.
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# 155
BBC conducted the poll internally ;-)
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I work for corus, and the general consensus is that we would be willing to take a pay cut, which hopefully will help.
The only problem is that management or some managers are not willing to take a pay cut.
At the moment, managers and office staff are being forced to take two weeks holiday over the festive period.It has been said that one manager is not happy at using his holidays over this period.
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As usual the workforce take the hit and the managers seem to get paid handsomely.
I've yet to see any really large head counts of 'failed' bank managers coming down from above. We, the tax payer, have provided the money and it really is business as usual at the top.
I would be amazed if management of any company followed the workforce in taking a cut. And of course, a 10% cut in their salary will not affect them as much as a 10% cut in those paid less. Sorry but I've yet to see any evidence that a pay cut saves jobs.
As for pensions, I've paid in for many years for mine. 6% and now 8% of my salary. With hindsight, I wouldn't touch any pension plan/scheme with a barge pole. I have no control over that money. Its the reason I'm paying 8% now, I never realised, until too late, that I am funding the present set of pensioners, not mine. Now I just hang in there. As I'm over 55yrs I have thought about just stopping work, claiming my pension early, yes I would take a hit on it, and get on out of the country. Unfortunately Flash Gordon 'I saved the world' Brown has made that a bit risky with the pound slumping.
Oh, and where might I head for? The real power house of the world..... the Far East. They are still talking 6-8% growth rates there. And no pay cuts :)
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Clearly workers can only accept a 10% across the board pay cut if managers do so as well. In fact this may be self financing as directors pension commitments will be much lower.
Any idea that the pay cuts are temporary is of course ludicrous.
Is there any evidence that a company in difficulty has ever been successful in saving itself by a modest (10%) pay cut?
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158. At 06:51am on 12 Dec 2008, 69bertie wrote
Interesting comment.
I hope yours, and those of very many people like you that I know of, are read by leaders in the financial industry, regulators, and politicians of all persuasions. It ought to be a matter of profound concern that you feel the way you do about pensions.
The fact is you've been mis-served by the financial services industry for years, and the FSA and others supposedly there to protect you have, in fact, been far more bothered about protecting the firms they regulate and the government's tax base. If you feel like you've been shafted, it's because you have been shafted.
Incidentally, I've spent a good chunk of my career in fund management (at senior levels). There have been too many mis-selling scandals for it all to have been bad luck. The system of regulation was simply flawed from the moment the industry was deregulated in the late-1980s. It remains flawed, and riddled with conflicts of interest. This itself is hugely ironic. Financial services firms are required by the regulator to identify conflicts of interest, then document the controls in place to mitigate them. It's a pity government and FSA haven't been subject to the same rules. You (and lots more like you) would then have been better informed about who the system was really protecting.
I like to think most of us in the industry are actually pretty ethical. Even if we are, though, it's not clear to me we've delivered much of value to you, the ultimate consumer. Firstly, what is it you want? I suspect your aims are pretty simple to express. I'm guessing you'd like your savings kept safe, and to grow a bit faster than inflation. Meeting that second objective isn't as easy as you might think, but nevertheless there are techniques that make it possible to achieve.
Most financial products have been overpriced, and don't deliver what you want with sufficient consistency. It's actually key to get the asset allocation right (ie how much goes into equities, bonds etc). 90% of return is driven by this, and only 10% from choosing the right people to manage your money. However, few people in defined contribution pensions are getting the right advice, with sufficiently frequent reviews, to get the asset allocation right. Consequently, like you, they're disappointed with performance, and feel let down.
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Pay cuts for the workforce?. Do they mean those on the shop floor only or will this include top management as well + no bonuses?
Ha!, I live in dream land.
This could work if EVERYONE took a pay cut.
The other option would be for compulsory redundancies. If that is the case, I would say those within 2 years of retirement age( not necessarily 65 ) would be asked to take redundancy to save the rest, then those with no morgage. Doiesnt help the fact that they may not get another job easily, but those are the options open to the unions.
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Supercalmdown
Your posts demonstrate are so breathtakingly lacking in logic that I can't make my mind up if they are just wind ups or if you are in fact Gordon Brown.
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As i said above i currently work for corus. We were called into a meeting with management this afternoon, and were informed that they would be changing our shift patterns. They then told us that we were being forced to take a 15 percent pay cut as the result of this shift change.
But guess what??, management said that they were'nt going to take a paycut.
Now for me they don't realise that if the company closes plants down as a result of the downturn, then they too will end up as one of the rising number of unemployed people.
No wonder the people on the shopfloor are disillusioned with the company.
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Robert
Please can you enlighten me as to how a depreciating pound is going to be good for
GB Ltd when 75% of our GDP is financial services and 18% is manufacturing where most of the raw material for our exports have to be imported?
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Question is - can people survive on 70% pay cuts given the majority of the population have large loans and bills to pay?
Even those at JCB are struggling to make ends meet with a 20% cut in pay. I'm afraid I have to agree with others here - this is simply creating another problem and delaying the inevitable.
Still Gordon will be happy - people facing major financial hardship on reduced pay but still employed and hence not increasing the jobless total.
Another fine mess to come, sadly with very severe consequences for those involved.
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The current economic situation is a classic example OF PARADOX OF THRIFT. When people are worried about money they spend less this in return reduces demand which then cause some peoplle to lose their jobs. This further reduces demand and cause more peolple to lose their jobs. A self created downward spiral.
What is needed is to get people to start spending more. One way is for the government to create more jobs even if they are not very useful particuarly low paid jobs ,because people on low incomes tend to spend more of their income and they therefore create more demand which helps everone.
THIS IS CLASSIC ECONOMICS WHY HAS NO ONE EVEN MENTION THE PARADOX OF THRIFT? Keynes fan
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Economics is all about confidence. I find it amazing that the head of Barclays Bank which in many peoples eyes caused the economic prolems we are now facing has the bad judgement to start saying that the economy will not get better for 2 years.
EVEN IF HE THINKS THAT HE SHOULD KEEP HIS MOUTH SHUT IT. IS A VERY NEGATIVE THING TO SAY AND COULD BECOME A SELF FUFILLING PROPECY IF ENOUGH PEOPLE BELIEVE IT.
Keynes Fan
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