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August 07, 2009


Longman Oz

Michael, clearly Jim O'Leary had his Fascabix that morning. However, you dealt with the point well.

I am a curious amateur about one thing please. Accepting your figures on wages as a percentage of GDP, how important is this percentage, in your view?

To play devil's advocate, I am thinking about the fact that wages seem to have grown at a slightly slower pace than the overall economy. However, with the economy now undergoing serious contraction, does it not hold then that wages should fall at or around a similar rate?

Of course, given that wages are falling in the private sector, this is really a loaded question about the public sector!

On a different matter, the one huge thing that I seem to notice missing from this debate over cutting public expenditure is how to extract better value per euro spent. To my mind, that is what most anecdotal stories about "government waste" boil down to. For example, where are the proposals about possible cost synergies that can be achieved between government departments?


Its all about sustaining the cuts into the future. This is the very essence of reducing public sector wages and welfare payments. Allowing them to have an impact in the years to come which will facilitate in closing the ' yawning gap' and increasing the competitiveness of the Irish economy over the planned fiscal adjustment from 2009-2013. Another feature of these cuts will be to reduce the debt servicing costs the government are currently facing due to excessive current expenditure. (1.3% points higher than Germany)
The point made about reduction in private sector wages is one well made. The benchmarking exercise of the 90's (of which Jim was a member but resigned from) was fundamentally flawed. Public sector wages have been disproportionately high compared to their private sector counterparts for some time causing a major structural misalignment. It is about time the necessary steps to re-align these two sectors is taking place.

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