Thursday, October 01, 2009

Simple Economics

I’ve been listening to The Frontline and all the Radio station debates on the possible pay cuts in the public sector. As you would expect from our Unions, their number one answer is to strike rather than look at the overall picture.

The debate on The Frontline on Monday was good but it done nothing other than open up an us-and-them debate between private and public sectors with each outlining exactly what they’ve lost. However, I do despise when the public sector mention they have had an X% pay decrease and talk as if no-one else has had the same decreases. In my view, when these debates are going on no-one should mention pay decreases that have affected everyone – such as the 2% tax levy and the PRSI levy. Then talk about what else you’ve had reduced.

The public sector also are bitching about their pensions as if they have a god given right to have one in the first place. It’s great that they had it but why should my taxes go towards someone else’s retirement. One man on The Frontline mentioned about his friend in Siemens getting a 10% company donation to his pension. I’ve never seen anyone get 10% in the companies I worked for or heard any of my friends in other companies getting it. In fact, in most private sector companies they will assist you in setting up a pension but might not donate anything or you have to be a minimum of 1 year in the company before you are entitled to a pension. And even then it’s a raising scale starting at around 3% and moving up to around 6% as long as you match it. In the public sector, do you get one straight away? If so, that’s no right.

Personally, I think the only way out of the mess is to start treating every single section of the public sector as a business – let’s call the overall company FFCo. At the moment, FFCo do not make enough money to make up what they are spending. In any normal circumstances, this would mean administration or closure for that company. You can’t spend what you don’t have, a factor that the employees of FFCo don’t seem to understand.

FFCo make their money from people working in PrivateCo. The more people working in PrivateCo the more money FFCo make. Until late last year, FFCo made lots of money from PrivateCo but did not invest wisely assuming PrivateCo would continue to have vast employees making them money. On the back of this, FFCo made deals with UnionCo to give pay rises to FFCo staff for no reason other than that they felt they deserved them. We have yet to see reasons for pay rises such as meeting, or indeed exceeding, set objectives as happens in PrivateCo. Maybe giving good ideas to their part of FFC0, applying for roles, increasing productivity in their jobs or any other the other reason that PrivateCo workers are measured against? Is it right that some FFCo people giving out about not getting the 3.5% pay rise are in the same job for 30 years? Where are the career aspirations? Where’s the proof you’re entitled to a pay rise? Can you justify why you need to get more money for doing the same job and meeting the same targets year after year? Matching inflation is not a reason. PrivateCo workers are not judged on inflation but rather on performance, attitude, ability and many other attributes. In one job I had, I got 2 pay-rises in 5 years - one for promotion, one for performance related work as I helped the company keep vital contracts happy. If the contract went, I went. Simple economics – if there was no job then why have someone on the books?

I don’t think that the frontline staff in FFCo should suffer as people in FFCo think will happen. On The Frontline, it only seemed to talk to the FFCo frontline workers. Where were the consultants who work less than 35 hours per week and Jabba The Hut gave big wages to 2 years ago? Where are the admin staff that merged as part of the HSE and were not let-go? How could FFCo employ several people to do the same job when the work wasn’t there?

Something needs to happen in FFCo or else it will fold and people in PrivateCo will also suffer. Striking is not the answer. In order to keep afloat, I know a company that done the following:
  • They assessed their staff and it was unfortunate, but some had to go as they had no current work for them and nothing incoming to put them on.
  • They reduced some staffs working hours to what was affordable.
  • The company cut all company pension contributions to 1% until we are out of the recession. Once things are better, it will be restored to pre-recession levels.

I think the above is perfectly acceptable. Employees can still put in as much as they can to their fund but the company can’t afford to keep up their payments. Again simple economics – money out does not exceed money coming in. If people didn’t accept the company would have to close or else make more people redundant.

One last point I would like to make before outlining my solution to the problem is this. FFCo workers work a 35-hour week. PrivateCo workers work a 40-hour week. When the recent ERSI report was released, did it adjust for this? Earning €30k for 35-hours means a higher wage than €30k for 40-hours.

To help ease the overall pain and keep FFCo in business, I feel the following are something’s that FFCo needs to do:

  • Reduce pension contributions down for everybody in FFCo down to 1%. Make a deal for it to be reviewed on a 6 or 9 month basis. Once the country is out of recession AND making money start to increase again over a period of time. All new staff in FFCo should not get a pension by default but rather only after 1 year.
  • Increase FFCo workers from 35 to 40 hours per week in line with PrivateCo. No extra pay for this. This is a form of benchmarking as well.
  • We can’t reduce the Frontline staff in hospitals, schools, special needs assistants, fire service, paramedics, etc. We need these areas to be staffed correctly to ensure the country remains safe and in health. But, maybe look at rotas, staffing etc. Could there be some efficiency here?
  • Look at the admin staff in FFCo. In order to keep people of the live-register full time, reduce some working hours. When the HSE merged how were people not let go? We can’t afford full-time dole payments but we could endure some people on 3 days a week rather than 5 as the dole is less than wages.
  • Offer time-in-lieu instead of overtime.
  • Entice job-sharing with those staff that are close to retirement or would like more time off. I’m sure some FFCo employees would like to work less hours.
  • Review job objectives, targets, etc for all FFCo employees and these staff need proper reviews with their departments results made public. In a call-centre in PrivateCo, if more calls come in then employees will take more calls. In FFCo it appears that you are told you’ll have to wait longer for an answer. I’m not saying hugely increase targets but are they ever increased.
  • We can’t increase taxes or reduce wages anymore. FFCo not making contributions to your pension is NOT a reduction in wages.
  • The child benefit should be means tested based on your net income AFTER you have paid everything per month. Not on your gross salaries added together. You should be asked to show 12 month evidence of your mortgage payments, loans, monthly donation to charities and how much you need to live per month for food and bills. You should also have a realistic amount of money for savings. After that if you have more than XX amount you don’t get child benefit.
  • Reduce VAT by to 1% lower than the previous version. Encourage people to spend a bit more.
  • Banks won’t give a mortgage to people if they have loads of re-possessed houses on their books at their own cost. FFCo to set up a house-based Bank or set up a dept within each bank we’ll call BankCo. People are in serious debt at the moment with some struggling to make payments. Anyone can apply – with all necessary evidence (letters stating they have been made redundant or on reduced hours, banks statements, proof of loans and mortgage etc – to have their mortgage transferred to BankCo. BankCo reduces the mortgage payments they pay each month to what is affordable (judged and agreed by BankCo and the mortgage payers) but the amount of interest currently being paid is still paid to the main bank. This means the main bank still makes money, people keep their houses and will deduce rental assistance payments being made to those out of work and kicked from their homes and now renting. Your home can still repossessed I f you don’t make the payments you agreed to. Once the recession slows down and you are back on your feet your mortgage is moved from BankCo to the previous holder with the previous payments happening again. Just to note, the length of your mortgage is not reduced so at some stage you will have to pay what you were unable to pay during the recession.
  • Finally, chase those people who have got or wasted taxpayers’ money such as FAS, etc., and received redundancy. The mismanagement of FAS is tantamount to gross negligence or gross misconduct with our money. They should be fired with no handshakes. They take what they have right now and leave.

These are just some of my views on the situation. I’ll leave with one item that is really bugging me. People like Peter McLoone and weirdy-beardy Jack O’Connor keep going on about the Unions helping the ordinary people on the frontline keep their jobs. We need to stop concentrating on your Joe Soap FFCo employee and chase the developers and bankers that brought the country to its knees. The same people, of which, some are your members? Why should we trust Unions whose members are also responsible? The same FAS company which McLoone was a member off and sat idly by watching the ‘due-process’ take place when he could have stopped millions being wasted by intervening earlier?

No comments: