Bank of England economist says people need to accept they are poorer

[Justin Smith]

Bank of England economist says people need to accept they are poorer

Absolutely, partly Brexit, partly Ukraine, and, possibly even more significantly, we cannot just pay up to 11 million people to sit unproductively on their ****e at home for months on end and think we are just going to go back to where we were before.

We are indeed significantly poorer, and if people don't just accept it, as opposed to keep striving (or should that be striking) for their wages to keep up with inflation, it will take years to get over this then we will end up in even deeper economic misery.

 

[estwig]

I'm having none of it, I'm not going to let some idiot politicians make me poorer!

Enquires have slowed so I'm upping my marketing spend, once that starts working, I'll up my prices to mitigate the additional marketing costs.

 

[IanSuth]

Bank of England economist says people need to accept they are poorer

Absolutely, partly Brexit, partly Ukraine, and, possibly even more significantly, we cannot just pay up to 11 million people to sit unproductively on their ****e at home for months on end and think we are just going to go back to where we were before.

We are indeed significantly poorer, and if people don't just accept it, as opposed to keep striving (or should that be striking) for their wages to keep up with inflation, it will take years to get over this then we will end up in even deeper economic misery.

But people striving to up there wages is the very essence of free market capitalism.

If their skill/labour is in short supply then the market will drive wages up - if it is in surplus then wages fall.

Economics depends upon perfect information (as in line 1 page 1 of most economics text books is a line saying something like "assume everyone knows all the information needed to make a rational decision") , collective bargaining is a method of righting the fact that otherwise there is a power and information disparity between worker and employer.

You just as well should say "employers need to realise as we now have a shortage of labour willing to work at the wages you are paying you will have to raise wages".

Although it does have some inflationary impact £1 extra pay does not create £1 extra sale cost in a product so it is an ever decreasing effect not an escalator, this issue will not be solved in 1 year by no one taking pay rises - that will just depress demand in the economy. Better to accept it will be a multi year solution and keep the economy moving

 

[JEREMY HAWKE]

He is right we are just at the bottom of a wave in the financial doldrums at this present juncture
We all know where we are going to end up if we keep raising prices and workers demand pay rises.

Forget the cost of living that's just the tip of the ice berg Its the cost of doing business that is pushing inflation up as this gets passed on
Some people in this country need to be told straight
We cant always drive a Cadillac and smoke a cigar.
Sometime we have to get the bus and chew a tooth pick

 

[Justin Smith]

But people striving to up there wages is the very essence of free market capitalism.

I agree with this provided it isn't by using industrial muscle to inconvenience millions of people who have no part in the dispute(s).
It's why, on the one hand, truck drivers all got massive wage rises a couple of years ago, and on the other, why train drivers can only get rises by going on strike.

 

[IanSuth]

I agree with this provided it isn't by using industrial muscle to inconvenience millions of people who have no part in the dispute(s).
It's why, on the one hand, truck drivers all got massive wage rises a couple of years ago, and on the other, why train drivers can only get rises by going on strike.

But what is different (and i am playing devils advocate a bit) between collective bargaining shutting an industry down for a while as the only way to get wage rises vs nr monopolistic employers using their might to keep wages low

And for the purposes of this argument the govt is a monopolistic employer as a lot of the employees could not earn similar money by leaving their job as there is no direct comparable private sector job to walk into

 

[IanSuth]

As an aside about truckers as i mentioned during the dispute the govt has shot itself in the foot with them

Go back 20 yrs loads of people got hgv licences whilst serving in the forces, when they came out they could earn a decent wage as a trucker (i play rugby with a ex welsh guard tanker driver)

Over the years several things have happened

1. A lot of transport is outsources - companies try and pay as little as possible for a fixed price to get goods to market rather than run their own operation
2. Those are long contracts with limited renegotiation of fees
3. The forces do this as well even outsourcing the transport of tanks https://www.ftxlog.com/careers/
"When not required for HET tasking, Operators work through third party agencies driving HGV for clients near to their home.
All of our Operators are required to be Army Sponsored Reservists and are affiliated to 19 Tank Transporter Squadron RLC, based in Bulford. Unlike normal Reservists, all SR training commitment is met as part of the FTX job"
4. When there is a shortage of drivers they want more money
5. Those big transport firms rely on agency drivers to have an agile workforce so they can flex supply to match demand
6. They are on near fixed term contracts so if the demand goes up and supply down they can not get agency drivers for a rate that allows them to make money on the contract
7. If the penalty terms in the contract arent huge there comes a point it is more economic to default than supply
This is what happened with the fuel shortages a while back - they started with a dispute over supplying some Esso stations as the drivers wanted more
8. In the past army drivers were called in to cover critical industries as we had loads and there were reservists aplenty with hgv licences - ooops see 3

So who should have given in in that case to keep things going - Esso paying more to the logistics firm, the logistics firm taking the hit to pay more to agency drivers or the agency drivers just taking less even though they could work elsewhere for more ?

 

[Justin Smith]

But what is different (and i am playing devils advocate a bit) between collective bargaining shutting an industry down for a while as the only way to get wage rises vs nr monopolistic employers using their might to keep wages low
And for the purposes of this argument the govt is a monopolistic employer as a lot of the employees could not earn similar money by leaving their job as there is no direct comparable private sector job to walk into

If we live in a free market then wages should be set by the market, and not by workers who just happen to have the ability to cause significant inconvenience to many millions of people.

>>monopolistic employers<<

By definition in a free market they cannot exist, surely ?

 

[IanSuth]

If we live in a free market then wages should be set by the market, and not by workers who just happen to have the ability to cause significant inconvenience to many millions of people.

>>monopolistic employers<<

By definition in a free market they cannot exist, surely ?

No there are natural monopolies especially if you consider location.

Take as an extreme example for instance catholic priests - they are all employed by the church - there is no competition, they can't go and work for a mosque can they

The NHS is similar in certain disciplines with the proviso that due to how it came into being Dr's are allowed to do freelance work on the side - basically they can flex the % of their time they are willing to spend on Public and Private without breaching their contract. However a phlebotomist is pretty tied to who they can work for therefore there is a natural monopoly within a locality.

Even in some industries if there is a single large employer in an area who employs certain specialities - those people can't just jump ship so the only way the free market works is if they join forces to equal the negotiating power of the employer by collective action.

Because specialisms take time to learn and people have external influences (partners, children in school, cost of moving etc etc) the free market for labour is already heavily distorted in favour of the employer anyway.

 

[IanSuth]

Here is an OECD article

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Large companies with monopoly power can boost their profits by imposing high prices on consumers. But large companies may also be able to suppress wages if workers have few alternative employment options within reasonable commuting distance, i.e. if local employment is highly concentrated. The resulting redistribution of income from workers to company owners hurts workers and reduces overall economic efficiency, as companies paying low wages generally employ fewer workers and curtail output. In many OECD countries, industry sales have become more concentrated while the share of wages in total income has declined raising the question whether increased sales concentration has gone together with increased labour market concentration and wage-setting power.