Wednesday, 2 March 2011

Research indicates reducing JLC rates will cost Exchequer and depress consumer demand

Research published last week by TASC indicates that any moves to reduce Joint Labour Committee rates will involve significant direct and indirect costs to the Exchequer. The research is contained in TASC’s Submission to the Independent Review of ERO and REA Wage Setting Mechanisms. Comments welcome.


Rory O'Farrell said...

Regarding the research by Neumark and Wascher (2008), I think it is interesting that, even though they find a link between minimum wages and employment, they find that the elasticity is below 1.

In simple English, this means that even if there is a link, low paid workers still benefit. This is as the increased wage more than compensates for spells of unemployment, and that minimum wages represent a shift of income from employers to low wage workers.

Given that there is plenty of slack in the Irish economy, and our problems are mainly due to a shortage of demand, the effect of shifting income to the lower paid should have an even greater effect in Ireland in terms of boosting demand, and therefore employment.

Patrick said...

I love that your rigour in this line:
"The empirical evidence on the employment effect of wage floors is ambiguous"
(Note we actually aren't talking about the wage floor but a sectoral floor)

Is followed by:
"It is anticipated that reducing the wages of low income earners will depress aggregate demand and therefore economic growth."
... anticipated? Doesn't sound like you applied the same standard of analysis.

Good olde fashion - Policy based research making.