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The market and high incomes September 30, 2009

Posted by Tomboktu in Economics, Social Democracy, Taxation Policy, The Left.
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I think – but would be happy to be corrected – that one of the weaknesses with the Left is a shortage of ambitious and feasible policy ideas to change a key source of inequality in Western economies: the scale of the inequality in the income that those who are in employment receive for their labour.

Too often it appears that those who of us describe themselves as egalitarians have accepted that the ideal of ‘the redistribution of wealth’ boils down to developing policies to implement a version of that other cliché on what the Left is about: ‘tax and spend’. This does not mean that all tax and spend proposals are unradical. For example, the proposal for a basic income – an income unconditionally granted to all on an individual basis, without means test or work requirement – has been around for some time but is little implemented, and I suspect one of the reasons is that it is seen as a step too far for many. (If my memory is correct, it was a policy backed by Young Fine Gael about 25 years ago when Chris O’Malley was at the helm of the party’s youth wing.) Or another example: The US economist John Roemer has suggested “the creation of two kinds of money: one used for the purchase of goods and the other, referred to as ‘coupons’, for buying shares in companies.” The radical element of his proposal is that all citizens are given coupons through which they derive ownership rights in companies, including dividends and voting for the board, but cannot sell those coupons for ‘ordinary’ money. (This last is one of a number of proposals explored in the Real Utopias Project at the University of Wisconsin. Some of other books from the RU project have other suggestions that I would classify as tax and spend.) And nor does my worry with the extent of the focus on tax and spend policies mean that I think they should be abandoned. You only have to read the article by Brendan Hayes, the ‘refusnik’ on the Commission on Taxation, in the September issue of The Union Post to see why they are sorely needed.

However, the problem that I see with relying only on ‘tax and spend’ policies is that they do not deal with what happens inside the market. Some of them – like investment to combat educational disadvantage or Roemer’s coupons – are designed to give everybody an equal chance as they enter the labour market, but leave the big divergences that occur over the course of different people’s working lives untouched. Other tax and spend policies, like increased social welfare or the basic income, are an attempt to reduce the size of the differences that arise from market processes on an ongoing basis (although no social welfare proposal I have ever heard of would give a sustained income that is anything like that enjoyed by even middle managers, never mind senior executives).

There are two reasons why what happens inside the market should be scrutinised by egalitarians. The first is empirical: the divergence in salaries and other pay for work since the 1970s is the root of the increased inequality in western economies. The second is ideological and, for me, the more important: if we do not examine the inequalities in the market, we give them a credence and contribute to the view that they are somehow ‘normal’, that the natural order of things is for huge inequalities to exist.

Of course, it is not true to say that the only approaches to dealing with economic inequality have been versions of tax and spend. To illustrate: two Irish groupings on the Left have set out policy objectives that go deeper than tax and spend. John Baker and his colleagues at UCD (in Equality: From Theory to Action) have identified the reduction in the inequalities in pay as central to achieving an egalitarian society. And Mary Murphy (a former Labour member of Dublin City Council) and her colleagues in an ad hoc group named Is Feidir Linn (which doesn’t quite have the rhetorical pizzazz of Barak Obama’s original ‘Yes we can’) have gone further and named a specific numerical outcome to be aimed for:

Highest income earners should have no more than ten times the income of the lowest earners.

However, a problem, as I see it, is that all of the discussion is a long way from giving us the content of practical proposals that a policy maker from the Left could table in, say, talks on forming the next government or in negotiations on the programme of the next European Commission.

A comprehensive approach would require looking at the entire range of incomes and how they arise, but my particular interest is the high end of the income scale, and how it has pulled away from the average in the last thirty to forty years. (And for the purposes of this post, I deal only the pay of business executives: it would take too much space to deal with the pay elite of sports-people, rock stars, and ‘celebrity’ broadcasters.).

While I would dearly love to see ideas of the UCD team and Is Feidir Linn further developed, I am glad that they have not rushed ahead with more specific proposals that are poorly grounded, a virtue that cannot be attributed to the British think-tank Compass to justify its campaign for a Commission on High Pay. The Chair of Compass, Neal Lawson, said at the launch of their campaign in August

It’s time the government took action on excessive pay, it’s absolutely right that we now reign in the bonus bandits that created the economic crisis.

The more substantial briefing paper that Compass published expands on this as a key reason for establishing a High Pay Commission:

There is now a clear public interest in exploring the link between high pay, excessive risk taking and the stability of the national economy. That is why Compass is calling for the establishment of a High Pay Commission so that the threat of meltdown and the reality of recession are never repeated because of excessive rewards.

Somebody needs to tell Compass – whose tagline is “Direction for the Democratic Left” – that the logic of this is not particularly of the Left. Applying Compass’s reasoning, if the bandits had not created the crisis, then the level of their pay should not be an issue. Or, could it be that Compass thinks that if those who had created the crisis had not been highly paid, there would be no need to examine their behaviour – that it is OK if medium or low paid workers create global chaos. (For fairness, I should point out that others who provided quotations for Compass’s press statement did offer sounder rationales for examining high pay.)

A second – and potentially much more significant – possible source of change on high executive pay that I have seen discussed recently is an institution I would not have thought of as being notable for its Left stance: the US Supreme Court. Even more surprising is that the intellectual basis is an argument made by Richard Posner, a prominent US scholar and federal judge who would be described as being on the political Right  (albeit he hasn’t become a turncoat:  his rationale is not in the slightest bit egalitarian). In a dissenting opinion in a case called Jones v Harris, he says

executive compensation in large publicly traded firms often is excessive because of the feeble incentives of boards of directors to police compensation.

And after a slew of academic papers to support that point, Posner goes on:

Directors are often CEOs of other companies and naturally think that CEOs should be well paid. And often they are picked by the CEO. Compensation consulting firms, which provide cover for generous compensation packages voted by boards of directors, have a conflict of interest because they are paid not only for their compensation advice but for other services to the firm—services for which they are hired by the officers whose compensation they advised on.

That seems to me to be a pretty good definition of ‘crony capitalism’, a term I associate with Joe Higgins (in the sense, of course, that he uses that term to attack the business elite).

The subsequent appeal in Jones v Harris now means that, as the New York Times put it ‘Supreme Court to Hear Case on Executive Pay’. (Both the jurisprudence and what might be called the judicial politics of Posner’s dissent are also interesting although they are not relevant to my discussion. Links to some of the discussion of those topics can be found here, here and here.) The importance of Posner’s dissent is that it has moved a well-established critique to executive compensation out of the relative backwater of academia into a legal-political sphere, and within that sphere an arena with some bite.

The question is whether egalitarians can provide responses to that critique, or is sophisticated analysis of that section of the labour market the preserve of the Right?

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Comments»

1. Garibaldy - October 1, 2009

Great piece Tomboktu. I may be about to prove your point about the failure of the left to grasp the point about markets, but do you see a place here for job creation by the state in this debate? It seems to me that state-owned industries are the sort of place we ought to be able to look to for decent average wages, and control of managerial/executive pay. It’s something that we need to get back onto the agenda – the idea of the state using its resources to create quality and sustainable jobs that benefit society as a whole.

Clearly though there can be agitation on the question of super-pay short of that, and it is absolutely something we need to tackle.

BTW you have inspired me to go to Wiki for a definition of crony capitalism

http://en.wikipedia.org/wiki/Crony_capitalism

I particularly like Chomsky saying there is no need for the use of the word crony.

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Tomboktu - October 1, 2009

You may be right in your opening words ;)

I think job creation would be a different debate from the issue I have in mind.

You suggest that “state-owned industries are the sort of place we ought to be able to look to for decent average wages, and control of managerial/executive pay”. I think that would not achieve the outcome we would want: state owned companies with those characteristics operating in parallel to privately owned ones would not change much (if anything). People who would want to be massively rich would simply choose to work outside the state-owned companies that applied wage restraint. I cannot see any mechanism by which the presence of income-moderate the state-owned companies would influence the levels in the privately owned companies. Indeed, I understand that salary levels in the broader public sector have been increased at a rate that is greater than the increases given to middle and lower grades in order to follow those in the private sector – and I would assume that is even more the case in the commerical semi-states, even if the salaries there are not within the remit of the Review Body on Higher Remuneration.

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Garibaldy - October 1, 2009

Well basically I was suggesting that the significant presence of state-owned companies would push private ones out, reducing their importance. That used to be a standard view on the left. Just wondering how much if it is still around. Beyond The WP of course ;)

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Tomboktu - October 1, 2009

Well basically I was suggesting that the significant presence of state-owned companies would push private ones out, reducing their importance.

What mechanisms would result in private companies being pushed out? Is it that the state would “load the game”? Is it that people who wanted high salaries in private companies would become social pariahs and end up being outcast from society? [Actually, would that be much different from the current situation where the super-rich opt out of the mainstream? Their kids don't go to normal schools because they can pay the fees for private; they don't wait in accident and emergency because they get seen immediately in the private hospital; and they aren't members of a political party and don't need to vote because if they need something done, they lift the phone and talk to Brian/Gordon/Bertie/Tony.]

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Garibaldy - October 1, 2009

I have no problem with the state loading the game. I wasn’t saying that it would solve the problem immediately, but just that the presence of state companies seemed to me to be an important element in ensuring that the market worked more efficiently for society as a whole.

As for tackling wages within private companies. The only way I can see for controlling that is through legislation, which would require a huge sea change in our culture on a scale perhaps greater than a return to the idea of the pre-eminence of the state in the economy. The current attack on bonuses is not the same as an assault on high wages.

On private schools and the rest. You’ll not be shocked to hear I would to see all education provided by a secular state system.

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Tomboktu - October 2, 2009

tackling wages within private companies. The only way I can see for controlling that is through legislation, which would require a huge sea change in our culture

That is why I think that the ‘Jones v Harris’ case in the USA is so interesting. We now have a respected and prominent judge in the US federal system, and from the Right, making the case for control of executive salaries. Even if the US Supreme Court does not go down his line of argument in this particular case, Posner’s dissent opens a crack that can be used to shift culture there.

My own undeveloped initial thought (well, it’s more a hope than a thought) is that the financial crisis might provide the spark for engendering support for a pay equivalent of a Competition Act. I hope to explore the issues that I think would be involved some more on CLR in the coming months.

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2. WorldbyStorm - October 1, 2009

I genuinely believe that the Public Sector can become an exemplar in this. As was pointed out by Proposition Joe yesterday even the Labour proposal of a €200,000 cut off point seems too high (albeit in the context of a third income tax band abouve €100k). But this sort of enquiry above is precisely the way to go on working through the way in which leftists approach this issue. I hadn’t realised the Compass approach was so thin.

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Proposition Joe - October 1, 2009

albeit in the context of a third income tax band above €100k

Of course this Labour proposal for a 48% tax rate on income over 100k has been completely over-taken by events.

The marginal rate on income over 75k is now a full 50% – comprised of 41% PAYE, 4% income levy and 5% health levy. So can high earners expect a net 2% tax cut under Labour?

Call me a cynic, but I have to wonder why Labour haven’t updated this policy a full 6 months after the April budget. Could it be that they don’t want to scare the well-paid horses? Or are they more interested in optical illusion than implementable policy?

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WorldbyStorm - October 1, 2009

Er… hold on a second. At what point did they say they’d reverse the levies?

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Tomboktu - October 1, 2009

I genuinely believe that the Public Sector can become an exemplar in this.

I am doubtful if that would be the case, but it would be interesting if you could flesh out why you think this.

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3. Proposition Joe - October 1, 2009

At what point did they say they’d reverse the levies?

Well seeing as the levies were only doubled from 4.5% to 9% after the Labour policy was announced, and then only as a stop-gap to avoid the technical difficulties around increasing rates in the middle of a tax year, I think you’re on fairly weak ground there WbS.

But lets imagine for a second they really do mean 48% in addition to the levies (that they didn’t know about when formulating the policy).

So for someone on 100k, we’d be talking about a marginal tax rate of approximately 60% (that being 48% PAYE, 4% income levy, 5% health levy, plus 4% PRSI on the first 75k). For a public servant on that salary, it would be closer to 65% if you count the pension levy.

What’s not to like about that, says you.

Well I wonder have the Labour party retained any folk memory from the ’82-’87 administration, or has that all been rectified minitruth-stylee since the Stickies took over? :)

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4. WorldbyStorm - October 1, 2009

Hold on, on the one hand you’re complaining about salaries in the public sector over 100k (and I share that sense of complaint to no small degree). But now you’re concerned about 65% effective rate of tax? Surely not.

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Proposition Joe - October 1, 2009

WbS, the point was that if we learned anything about economics in the 80s, it was that very high marginal tax rates bring with them all sorts of distortions and disincentives, often turning out to be counter-productive in terms of total yield.

Amoung the self-employed, the problem will tend to manifest as tax evasion.

Amoung the salary-men in the private sector, the problem will tend to manifest as a difficulty in attracting specialist skills from abroad.

Now despite being immune to tax evasion and mostly recruiting insiders to the plumest gigs, the public service wouldn’t escape these distortions completely. We’d likely see a drop in participation, in the form of reduced competition for senior promotions, some brain-drainage for those with skills in demand abroad, and perhaps a rise in job-sharing & career breaks at the higher echelons. With such a steep tax gradient, two principal officers both working half-time would incur a much higher net cost to the state than a single PO working full-time. Would a HSE-employed medical consultant be more likely to head to Australia if (a) their salary were reduced from 240k to 200k with a ~50% tax take, or (b) maintained at the 240k but with a 65% chunk gone at the margin? I’d venture that the psycology of it would make (b) seem like the worse deal, even if the net outcome was identical.

OK I’m streching the point a tad with the above line of reasoning, and in any case I don’t want to get the violins out for very well paid higher public servants. The point was simply that very high tax rates tend to have intended negative side-effects, regardless of the sector.I don’t know where the tipping point would be for these distortions, but I suspect there ain’t a great deal of head-room over current marginal rates at the top end. We’d be better off forcing ultra-high earners to actually fulfill their current tax obligations, by closing off the vast majority of the 111 income tax emeptions.

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WorldbyStorm - October 1, 2009

Hold on again though. I’ve heard that line of argument and I’m not hugely convinced. By the same token if we’ve learned anything from the last fifteen years it’s that dependence upon lower than average EU tax rates is a sure fire recipe for fiscal problems. But even that aside, the PS is the most captive audience Revenue could have. And you’re the man, IIRC that doesn’t think any PS salary should be over, what was it, €140k?

But how come your negative effects don’t kick in when we have further wage reductions in the PS? I can’t think of a single thing that would more rapidly disincentivise a worker than to see their wage packet drop.

All that said, I absolutely agree with you as regards your final paragraph, and I don’t think it’s beyond the wit of men or women to deal with the issues you reference in para’s 2 and 3.

This could be the start of a beautiful friendship ;)

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Tim - October 2, 2009

Back to the Laffer Curve again, then :)

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5. Proposition Joe - October 1, 2009

s/intended/unintended/

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6. WorldbyStorm - October 1, 2009

Sorry, I should ask what upper limit on PS wages you’d put in?

If any.

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Proposition Joe - October 1, 2009

Well, I don’t recall advocating any particular salary cap for the public service. And now that I think about it, I suspect a cap would be of very little use, other than as a demonstration effect.

The problem is, if the cap is set too high (à la the Labour proposal), then its all optics but little in the way of appreciable savings.

On the other hand to make the sort of savings we really need, the cap would probably have to be set surprisingly low, maybe even below 100k.

Now that’s still a princely sum for anyone, but you get into all manner of compression effects. There really has to be some sort of significant “brain surgeon” premium in order to incentivize them along the arduous slog through decades of training. That premium probably doesn’t have to be as high as it is currently, but still not a great idea to have the exact same money available to head-masters and head-surgeons. Similarly if supreme court justices and parliamentary draughtsmen were on the same pay, the brightest and the best would start to view the 9-to-5 low-stress wig-less option in a completely different light.

So rather than a cap, I reckon a benchmarking-to-European-norms type of exercise would be likely to deal with pay inflation in the upper echelons with less distortion effects.

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CMK - October 2, 2009

Re “a benchmarking-to-European-norms” for public sector pay. Sound idea, in principle. But for it to work you’d need to benchmark property prices/rents; food; general consumer goods; massively increase social transfers to the European average etc, etc. Moreover, you’d need to benchmark debts (primarily mortgages) taken out by PS employees during the so-called ‘boom’ to ensure that a future reduced pay level can service those debts while still allowing PS employees keep the recommended two-thirds of take home pay for other, non-mortgage expenditure. The only way to conduct that particular excersise is to write off a chunk of people’s mortgage: at a populist level that would be enthusiastically endorsed, but it would cause real trouble with our current rulers i.e. the international bondholders (not the collection of dolts who occupy the seats in the Dáil at a given time).

As I said, a benchmarking to European norms(in both public and private sector pay) sounds good on paper but it would be a recipe for real social trouble if it didn’t incorporate some element that would massively transfer wealth and allowances to ordinary workers. As you and I, and everyone else here knows, that ain’t going to happen anytime soon, or ever, under our current system of capitalist economic organisations and power relations.

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WorldbyStorm - October 2, 2009

Be that as it may Prop Joe, I’ve no particular problem with €100k, but I’m presuming that Labour is looking at this with at least half an eye to the problem you allude to in terms of negative outcomes by capping too low and then by trying to make up the monies on the tax side. Seems sensible to me.

But I’m a bit puzzled that you criticise Labour for instituting a cap at a figure then argue strenuously that any such cap should be much lower and then argue that there should be no cap at all (since you seem to believe that tax+cap won’t do the biz, although then you seem to argue that the amounts will be penurious) but we should go a different path entirely. Wouldn’t it have been easier to simply say benchmarking from the off?

BTW you’re the person on p.ie formerly known as Patslatt? No?

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7. EamonnCork - October 2, 2009

You are, of course, making the presumption that most people are motivated almost entirely by money. I wonder if that’s true.

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8. Tim - October 2, 2009

CMK – are you advocating a Yes vote on Lisbon then???

“Inequality” is such a pointless gauge of anything – what has how wealthy someone is got to do with how wealthy others aren’t? The status of the poor has no bearing on the status of the rich.
As someone stated, those earning 100k are faced with handing over a huge percentage of their income to the state – what kind of society do we live in when we think those kind of taxes are justified?
I am certainly NOT in that category, incidentally, but I would have no desire to be in it if I had to surrender so much of my income.

On another note, it must be said that cronyism is not supported by free-market thinking and is certainly not capitalism

Resentment towards high earners is nothing new, but why then ignore “celebrities”, sports stars and movie actors? If people are stupid enough to pay them exhorbitant salaries for a bit of escapism, let them.
The point is, too, that it’s money belonging to Capitalists that goes to pay CEO’s salaries – not yours and mine. In fact, they pay a lot of taxes!

So it goes back to good old fashioned resentment. Be honest about it, don’t cloak it in rhetoric.

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9. Tomboktu - October 2, 2009

EamonnCork: “You are, of course, making the presumption that most people are motivated almost entirely by money. I wonder if that’s true.

I’m not sure if the ‘you’ refers to me or somebody in the branch discussion on tax bands and tax rates, but no matter, you raise a relevant point for the topic I am exploring.

As it happens, I don’t know many people are motivated by money, and I am certain that not all of them are motivated by money – or at least money per se. And that includes those at the top end of the income range: for example, if Michael O’Leary’s primary motivation was the money, he’d be a tax exile like Denis O’Brien is.

I heard a pair of programmes on BBC Radio 4 two months ago on the issue of corporate pay and the bonus culture [links below]. One thing that struck me was the following extract from an interview with an investment banker (near the start of the first programme):

After a while, the absolute number becomes less important than the relative number. Two million pounds may sound like a fantastic sum of money, until you hear that someone who sits two rows of desks away from you had three million pounds and suddenly you’re unhappy.

One of the questions I hope to get around to exploring is the extent to which executive pay reflects what the CEOs, CFOs, COOs, vice presidents, etc. are worth as against reflecting status and rank.

Imagine for a moment that the numbers on the amounts that these high fliers earn were not sums of money but were some form of score or mark. A characteristic of the ‘space’ of those scores is that there is no upper bound (more accurately, the upper bound is do far away from the values of real scores that are currently awarded that it is not relevant as an upper bound). That contrasts with another widely understood scoring scheme which reflects (or is used as) a form of assigning status: marks in college exams: no matter how well you do in your finals, you cannot get more that 100 marks.

I have an additional nugget of information from my college experiences which I wonder if there is a lesson to be gleaned from. My first degree is in maths and physics, and the marking scheme on the exams meant that it was possible to get percentage scores all the way up to 100%. I know one of my bright classmates did pick up a mark in the low 90s in one of his maths papers in third year. Some years later when I went back to do a postgrad in the social sciences, I was surprised to discover that marks over 80% were not awarded. I wonder if the business executives are operating in some form of an extended elite space of the social science 80%–100%

One of the questions I hope to explore is whether it would be in theory possible to make the pay structure in a market more like a college marking scheme. And if so, the big (and probably extremely debatable) question would be the feasibility to bring about such a change.

___
Those links: The programmes were called ‘The Money Grab’ and links to both audio files and transcripts are available at the following pages.
Part 1, 1 August 2009: http://news.bbc.co.uk/2/hi/programmes/moneybox/8174126.stm
Part 2, 8 August 2009: http://news.bbc.co.uk/2/hi/programmes/moneybox/8186038.stm

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10. Proposition Joe - October 2, 2009

BTW you’re the person on p.ie formerly known as Patslatt? No?

Nope.

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WorldbyStorm - October 2, 2009

My mistake… :)

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11. Crocodile - October 2, 2009

It is possible, of course, not to be motivated primarily by money, yet to expect one’s remuneration to reflect the value of one’s work to society. Some years ago the nurses quite rightly decided that the time for speaking of their job as a ‘vocation’ had passed, because it just provided an excuse for their employers to underpay them and portray any resistance as a betrayal of their ‘vocation’.
The ‘European norms’ version of benchmarking misses the point -addressed above by CMK – that prices and conditions in one society differ greatly from those in another. An Irish teacher – degree, postgraduate qualification – could only meaningfully be benchmarked against other Irish professionals: lawyers, accountants etc. That was the reason that the ASTI rejected the benchmarking process of a few years ago.
Now you might say that there’s no society in which state-employed teachers could hope to earn as much as members of other professionals. Try, though, Finland, in which the differential is much less, not because teachers are very highly paid but because a medical or law degree doesn’t ensure the kind of lifelong high earnings that they can do here. The status of the teacher is as high as that of, say, the GP.There’s a lot of sense in what the millionaires on the programmes Tombuktu heard were saying: the absolute amount of our remuneration is less important, to most people, than the perceived justice (or otherwise) of it.

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Proposition Joe - October 3, 2009

On the high quality of Finnish education …

I’ve heard that the trick is to make teaching hard to get into, but easy to get out of.

The former point confers status within one’s peer group (and also gives Mammy some quality bragging rights!) weheras the latter allows people who realize that they’re not suited to teaching to move over seemlessly into the wider Finish economy.

Whereas we have exactly the opposite set-up here. The HDip is relatively easy to get into, but there is very little mobility out of the profession for those who find teaching not to their liking and/or aptitude. So we end up with many underperforming teachers trapped in a job they hate, as they can’t countenance walking away from the excellent pension, nor have they many other employment options in any case.

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WorldbyStorm - October 3, 2009

What evidence do you have for that statement? I’m really curious because I’ve know more than a few people who left teaching precisely because they couldn’t cut it and/or they found more profitable lines of work. And realistically, as I’m almost certain you know, the number of teaching jobs has been effectively frozen for most of the last five years. Prior to that as many many teachers will tell you entry to full time positions has been limited with a large number existing on part time contracts…

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12. Proposition Joe - October 3, 2009

Re “a benchmarking-to-European-norms” for public sector pay. Sound idea, in principle. But for it to work you’d need to benchmark property prices/rents; food; general consumer goods;

Of course private sector workers don’t exist in some sort of alternate universe, so surely they incur exactly the same cost levels?

So to accomodate the differences in cost-of-living across Europe, simply benchmark according to the relative position of private and public sector workers in each country.

If we find for example that the public sector premium is typically 20%, then we can conclude that PS wages are not massively out-of-whack here. If on the other hand, the typical delta between private and public is more like 5%, then we could conclude that some rebalancing is indeed required.

An yeah, I know, we could just resolve the imbalance by bringing up private sector wages. But y’all know that’s not going to happen.

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13. Crocodile - October 3, 2009

http://www.ynetnews.com/articles/0,7340,L-3478376,00.html

Interesting article here, Prop Joe. Seems the single most important factor in determining student performance is, well.. go on, guess!

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Proposition Joe - October 3, 2009

Croc, one always has to be careful about disentangling causes and effects.

Do Finnish teachers perform well because they’re well paid, or are they well rewarded in recognition of their excellent performance?

The answer to this question is important in our own context. Teaching salaries made a massive jump in the early-to-mid noughties, with a 14% benchmarking award in addition to the annual 4-ish-% increase under the Program for Whatever and Something-else, plus a big increase in the number of allowance-carrying A & B posts.

Did teacher performance actually improve comensurately? Does anyone actaully know? Do any of the negotiators actually care, given that the increases were largely decoupled from any performance indicators.

I can see how trading off increases for measurable improvements would work. I could see how special allowances for very highly qualified new entrants would work. But across-the-board increases for the incumbants, or extra allowances handed out on seniority instead of merit, would have little impact on performance.

Similarly, one could imagine how cuts could also be structured so as to minimize the impact on performance and/or the quality of recruit.

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14. Crocodile - October 3, 2009

I know a lot of teachers, PJ, and they don’t recognise the picture you paint. Nobody got 14% in the first round of benchmarking; everyone got 0% in the second round.
The ‘massive’ jump in salaries to which you refer required no improvement in performance, because there was enormous unrewarded increase in productivity during the nineties.
That’s the problem with Irish public service remuneration: it’s almost always in catch-up mode. The current year is an exception, so it leads to howls of protest from the private sector. Where, as letters to the editor frequently ask, were the demands for parity during the nineties?
When ( if?) the economy starts to recover, we’ll be in for more interesting industrial relations times, as the filleting of public services has to be reversed in order to catch up, again, with an expanding private sector. The next decade could be a replay of 1994-2004.

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Proposition Joe - October 3, 2009

Nobody got 14% in the first round of benchmarking

Sorry, slip of the keyboard, the correct figure is 13%.

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15. Proposition Joe - October 4, 2009

What evidence do you have for that statement?

Purely anecdotal. Which is to say, akin to your own anecdotal counter-evidence.

With maybe a soupçon of my own preconceptions thrown in ;)

Prior to that as many many teachers will tell you entry to full time positions has been limited with a large number existing on part time contracts…

This I have indeed heard many times from those in perma-temp limbo. And I wonder why almost always they blame their predicament on some artificial limitation on the number of permanent post that’s been imposed by the big-meanie department.

Once you scratch the surface a bit and delve into their sequence of contracts, you almost always hear a variation on a theme …

“Well I got into that school initially because Miss X went on career break, but then she decided to come back two years early, but luckily Mr. Y was on long term stress-and-anxiety leave so I picked up some of his hours, but then the Xanax started working (darn miracle psychotropics!), tho’ fortunately Mrs. Z got herself elected as a TD and I got in as her sub …”

The fact is that much of the requirement for perma-temps is driven by the extreme flexibility demanded by their own more long-serving colleagues.

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Crocodile - October 4, 2009

Be careful in talking about ‘extreme flexibility’, PJ, because you were advocating benchmarking against international norms a few posts ago. We were – to use your favoured anecdotal evidence – talking to an Aussie primary teacher over the summer. She was half way through the six months fully paid leave she’s entitled to on ten years’ service – and on return to Melbourne she’d be getting a big pay rise, a bit like the dreaded increments, eh?
BTW, the article on Finnish teachers I referred you to above doesn’t even mention the single most attractive feature of their system: the absence of nitpicking, distracting, bureaucracy-sustaining inspections, and the concomitant timewasting on form-filling and box-ticking that they entail.

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Proposition Joe - October 4, 2009

Croc, I doubt that Aussie incentive is any way typical of the European norms I spoke about earlier. Our Antipodean cousins are in a special position in that they need to attract and retain English-speaking professionals from the old world while at the same time avoiding the loss of too many of their own foot-loose natives.

But the point wasn’t so much that the option to take a career break is necessarily a massive perk (which I believe it is, but that’s bye-the-bye), but more that such perks carry a massive cost.

And that massive cost is largely borne by new joiners to the profession. In effective we have a massive transfer of financial security from the new joiner stuck on temporary contracts for years, to their more senior colleague working through a mid-life crisis by water-colouring their way across Tuscany.

From the outside one could argue, well if that’s the way teachers choose to organize their affairs, so be it. Shure won’t the new-joiners get their go at banging out a novel when hit the big 5-0?

That’s all well and good, but the inability to move on with one’s life during the crucial years of household formation must act as a large disincentive keeping some of the brightest and best out of teaching.

To say nothing of the obvious inequity. Not wanting to speak ill of the recent departed, but … Tony Gregory sat on his permanent teaching job for almost 30 years of Oireachtas leave, while a sucession of subbies toiled away at the bottom of the payscale, allowing him to pocket the uplift to his higher notional salary (justified of course by his long record of non-teaching experience).

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WorldbyStorm - October 4, 2009

Man, I’ve got to hand it to you… everything, and I mean everything, is reworked in your head into the most malign light as regards PS workers. It’s quite an achievement. But it’s not entirely convincing.

No mention of class sizes, not a word about understaffing and underinvestment in the education system across generations. Nope, it’s all the fault of themmuns.

There’s a lot I’d find fault with in the education system as it’s currently structured, particularly at second level. I think holiday’s should be somewhat shorter, two months for the Summer most certainly. I think pay scales probably go to high overall and there would be question marks in my mind about A and B posts and the payments for same. But the idea of flexibility (and btw you don’t mention maternity leave… hmmm) being a bad thing seems to me to be very wide of the mark. I think if one wants an energised workforce its a good thing, and it’s also an excellent way to sort wheat from chaff in terms of those who shouldn’t be teaching getting a taste of the outside world again.

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16. Crocodile - October 4, 2009

‘everything, and I mean everything, is reworked in your head into the most malign light as regards PS workers.’

Oh, I don’t know, WbyS. you’ve probably noticed that there’s been a succession of natural disasters in the Pacific rim area over the last week or so. I think PJ and Alastair have missed a trick there. Surely there’s some anecdotal evidence that tsunamis are caused primarily by over-generous pension arrangements in the Irish public service? To your keyboards, gentlemen!

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Proposition Joe - October 4, 2009

Ah lads, don’t be ganging up on me :)

Seriously though, the instinct to circle-the-wagons in the face of any criticism is the biggest Achilles of the public service advocates.

The net effect is simply to provide cover for those who are taking the Mick, at the expense of those (invariably younger, more productive, better qualified) public servants who are on the receiving end of the inequities within the system.

A case in point: despite the fact the only a handful of teachers take uncertified sick leave in the double digits, the unions insist that the outlandish entitlement to 31 days a year must remain and to suggest otherwise is an attack on all teachers.

In fact they do the vast majority of teachers (who take only 0-2 sick-days a year) a major disservice by tarring them with the same brush as their malingering colleagues. Especially those teachers on temporary contracts who daren’t take any sickies at all unless they’re literally at death’s door, given that they’ll have to re-apply for their own jobs at the end of the year.

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WorldbyStorm - October 4, 2009

Do unions do that though? Firstly you clearly aren’t aware that the VEC has a different policy on uncertified sick days only allowing 7 per annum and no more than two consecutively without a cert, and I’ve yet to hear of the TUI lobbying for more. I think that’s about right frankly. I think and I’ve said it before that 31 is a nonsense and all kudos to the VEC/TUI in that instance.

(here’s a post I made earlier http://cedarlounge.wordpress.com/2009/07/22/more-on-mccarthy/ )

Re the issue of politicians sitting on teaching jobs, I don’t know about Tony, but I agree that is unsustainable particularly given the nature of political pensions.

However, it strikes me that we’re talking about a tiny number concerned.

BTW, where’s the circling of wagons. In a previous post I agreed with you that some issues needed to be dealt with. I do so here as well. I think this is a very free frank and fair exchange of views, I’m just pointing out that you’re casting the worst possible light and … it has to be said… pointing to rather extreme examples. Neither crocodile or myself have dismissed everything you’ve said, indeed we’ve agreed at various points along the way.

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17. Proposition Joe - October 4, 2009

WbS we could nit-pick all day long whether the entitlement is 30 or 31 or 7 days for various categories of teacher.

Fair ’nuff though on the lack of wagon-circling on this blog.

The real point I guess is that the unions and other PS advocates score major PR own-goals by not being seen to have a reasonable and grown-up attitude towards such entitlements (which of course are abused only by a tiny minority).

Another case in point: a few months ago, the Tribune revealed the following advice from the ASTI newsletter:

A medical certificate of illness is required if a teacher on Department salary is absent for more than four consecutive school days, e.g., a teacher who is absent only on a Thursday and Friday, and the following Monday and Tuesday, does not require a certificate

If this wasn’t intended as a recipe for “gaming the system”, then it could have been phrased an awful lot better. Of course the vast majority of teachers aren’t going to run off and book a long-long weekend away safe in the knowledge they won’t need a cert despite taking 4 sickies. Call me a cynic, but I’d suspect a lot of Tribune readers would have gone away with the impression that such behaviour was being condoned by the union.

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WorldbyStorm - October 4, 2009

It’s not nit-picking. It’s basic factual information. You can’t use a blanket term like ‘teachers have this or that entitlement’ without engaging with the reality that not all teachers have entitlement y.

Nor, and I have to say this, is it clear that unions are as bad as you paint them, although I have to admit to a degree of antipathy on my part to the ASTI for their approach in the early 2000s. Again, you’ll get no disagreement from me that 31 days is wrong.

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18. Tomboktu - November 21, 2009

In the faint expectation that somebody watching here might be interested, the US Supreme Court heard arguments in the Jones v Harris case a fortnight ago. Some commentary can be found here and here

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19. Cedar Lounge Revolution Post in Top 20 on 3 Quarks Daily competition… « The Cedar Lounge Revolution - December 14, 2009

[...] by WorldbyStorm in CLR empirebuilding. trackback Congratulations to Tomboktu for having a post on “The Market and High Incomes” voted into the Top 20 semi-finalists for a 3quarksdaily competition for best political [...]

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20. Pension tracing service - January 12, 2014

I am not sure where you are getting your information,
but good topic. I needs to spend some time learning more or understanding more.
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