Notes on the Front

I told ya.  Open season on public sector workers – the media is full of it: commentary, vox-pops, interviews that pass for enlightened discussion on the issues of the day.  It's almost Orwellian – ignorance is knowledge, and that sort of thing.  Because now, thrashing out in the darkness, we are lining up in our sights anything that moves.  And in the process, the debate about economic recovery is, first, degraded and then ignored altogether. 

The latest sacrificial victims are the ESB workers.  Sean O'Rourke was in flying form, interviewing Minister John Gormley and everyone's favourite Man of the Right, Leo Varadkar on the News at One.

RTE: The Minister (Eamon Ryan) just sat back and allowed the ESB to grant a wage increase to its workers who are already the highest paid in the country on an average basis a wage increase of 3.5%. How could you possibly justify that?

Minister: I think that pay rise is not justifiable. And it’s not a case of him sitting back.

RTE: What are you going to do about that?

O'Rouke had some ideas – sack the ESB board for granting the wage increase, ring the ESB management to say, hey, we're in the middle of negotiations with social partners so hold off, take back the wage increase – do something for god's sake there are over 300,000 unemployed!

Our man Leo chimed in, saying that had the Government taken Fine Gael's advice last year to suspend the national wage agreement, ESB workers wouldn't have gotten the wage increase.  Tainaste Mary Coughlan talked about the wage increase sending the wrong signals.  Even Philip Lane over at Irisheconomy.ie chimed in with a suggestion:

A good example is the ESB. It would be very useful to see wage correction in this sector, which will help to reduce input costs for many businesses.

Wow – wrong signals, unemployment, fiscal crisis, lower business costs, national wage agreement; you might be forgiven for asking – What in the world was the ESB thinking?  For me, I wonder what RTE interviewers, politicians and some economists are thinking.  For they don't seem to have a clue.

First, the EB is not covered under the pubic sector wage deal for the simple reason that it is not part of the public sector. They are not paid out of the Exchequer. The recent negotiations that collapsed were all about cutting public sector pay.  So what did those negotiations have to do with the ESB and all other enterprises outside the public sector?  Nothing.  What would have been the purpose of the Minister contacting the ESB board and asking them to 'hold off until the negotiations were completed''?  Nothing.

Even had the Government taken Leo's and Fine Gael's advice – to suspend the wage agreement last year – it would have had no impact on the ESB or any other public/private enterprise because the Opposition party was referring to the public sector.

Second, that ol' 'sending the wrong signals' argument: let's try to deconstruct this.  It sends out a wrong signal to grant a pay increase that was agreed only a few months in an enterprise that is profitable.  Therefore, the right signal  to send is for profitable enterprises who have entered into an agreement with their workforce is to, first, break that agreement and, second, freeze or even take back pay increases even though they can afford it.  Therefore, the logic is that no one anywhere should get an increase – public or private, profitable or not – regardless of any agreement they have signed up to.  Hmmm.  That deflationary policy is just what we need at a time of collapsing consumption and declining economic activity.

Third, if only we could slash ESB workers' wages we could have cheaper electricity.  This betrays a profound ignorance of how prices are set in the electricity sector.  They are not 'market-driven' – they are set by bureaucratic dictat.  Even Fine Gael has copped this.  In their private members' motion debated this week they included the following line:

' – emphasises the fact that the regulator is required to set prices at a level that will not only take account of the cost of generation, transmission and supply but also at a level that will encourage new entrants into the market in an effort to promote competition and in doing so is keeping energy prices artificially high;'

Correct.  The ESB unions have been trying to get this very simple fact into the national debate for a long time - that electricity prices here are artificially high as an inducement to private investors to enter the market.  The price we pay for electricity reflects a subsidy to private electricity companies.  How much of a subsidy?  The ATGWU (now UNITE) suggested two years ago that it was 30 percent.  Recently, ESB management confirmed this figure. 

The fact is that, given the Regulator's policy is to maintain high artificial energy prices, the ESB could enslave it's entire staff and force them to work for porridge and it would have no effect on energy prices.  But let's pretend that it would for a moment.  What would a 'wage correction' (translation: wage cut) of 10 percent on prices mean?  1.6 percent.  A whole 1.6 percent.  What insight – ignore the 30 percent and go for the 1.6 percent. 

But the real knee-slapper, the coup de grace if you will, is that the ESB wage increases will benefit the Exchequer more, and reduce the deficit further, than if they were retained by the ESB.  Why?  Because the ESB will face a 12.5 percent tax rate, while employees' income is taxed at between 20 percent and 41 percent, not counting PRSI and levies, not counting any spending taxes that result from that increase.  The logic of Sean's questioning is that we should reduce demand, reduce tax revenue and increase the deicit. 

So, we have ignorance over what exactly is the public sector, what effect across the board cutting or freezing wages would have on the economy and the budget, how much those wage cuts would impact on prices; and even how prices are set – at least in the electricity sector. 

Most of all, it betrays a fundamental ignorance of the problems facing the economy: namely, lack of activity.  You can cut and slash all you want – if economic activity continues to decline (and part of that decline results from such cutting and slashing) you will fall further and further into debt.

What might have been more interesting questions to ask the Minister would be:

• 'Why do you prevent a successful internationally competitive company from competing in our home market?'

• Why don't you let the ESB to invest into the economy?

• Why don't you let the ESB lead the green revolution – in off-shore wind, tidal, ocean, geothermal; why don't you let the company lead the R&D, pilot-projects with domestic companies and in strategic alliances with foreign companies, commercialisation and bringing the products to market?  Why don't you get behind the one company that can actually start exporting energy to the British and continental market within the next decade?  Why don't you let an Irish company compete in foreign markets?

• Why don't you grow the green economy instead of talking about it?

This might have lead us into how many jobs we could create (the Labour Party estimates that three to five times as many jobs can be created from renewable energy as opposed to fossil fuels), how much wealth we could create, how much skills we could inject into the workforce, how much savings could be made from reduced carbon expenditure (those damn Kyoto penalties) – we could have had a discussion on growth and the wealth that flows form that.

Instead, we get this interview.

No wonder the national debate is so banal at times.