http://www.guardian.co.uk/business/2011 ... ecades-obr


I have said for ages that this crisis will take decades to resolve, and even longer if they go into austerity. Look at Ireland. The population has aged rapidly as a result of the young emigrating en masse. I suspect that life in Ireland will be bad for far longer than here, unless they default, then it will improve within a year.

Sod it. Money doesn't exist, just change it's value again. Make £1 = £1billion and I'll give the Government £150 to pay it off.

So by defaulting on their debts, thus making it cripplingly expensive to borrow any money its going to improve how?

Look at Argentina after they defaulted it cost them one quarter of recession and then the GDP rose by 60% over the next decade. The problem is the debt burden. It is the same as a person going bankrupt. Sure they have to live within their means but it is much easier without any debts to pay back as well.

I would question why an organisation with the word "Responsibility" in its title would be doing something as silly as trying to predict economic outcomes 5 decades in advance. They should be the Office of Budget Daydreaming, or the Random Numbers Bureau.

If a similar dept had issued a similar report in 1811, predicting events up until 1861, they would have been wrong in every single detail. Ditto 1911 - 61. Economics is not a science for predicting the future, it is a branch of history that can help explain what has already happened, and nothing more.

It also ignores fifty years of government intervention. I a, sure that they would have increased taxes by then. The problem is that tax rates might have come come down, but they have not boosted the economy as well as governments lead us to believe. Some have done very well but most have not had a real pay rise for nearly a decade.

Real pay raises are funded by productivity increases, anyone who isn't increasing their productivity shouldn't be expecting one. Other things which cause them (high employment, low inflation, cheap energy) can't be relied upon.

Your grandad might have got a bit more than inflation every year for decades while doing the same job in the same way for 30 years, but to assume that you will get through life the same way is to think like the philosophical inductive chicken http://epanechnikov.wordpress.com/2011/ ... induction/

Which is also the exact problem that afflicts economists when they use old data to predict future events without any adequate understanding of the massive array of new things that will invalidate their predictions.

Well the US has had substantial increases in productivity yet they have not had any increases in median wages for more than 30 years in real terms. All the gains have ended up in the banks and bosses pay. That is starting to happen here. So do not expect a pay rise just because you have been more productive. It is starting to affect those higher and higher up the income scale.

Yeah? Tell it to the financial sector. They came up with the wonderful idea of 'guaranteed bonuses'.

Incidentally, I did some checking and d'you know those statistics the more.. blue-tinged newspapers were touting recently that public sector pay is now more or less equal to private sector pay? Funny thing. It was done after the 'nationalisation' of several banks during the crash. Do you know what they did children? Can you guess? Yes, that's right. They counted all the highly paid investment bankers, and hedge fund managers, all the way up to the CEO's with their multimillion pound paychecks as public sector employees! Therefore raising the average (because if you add one Fred Goodwin to about 1,000 civil service office workers you boost the average salary at a drop) and making public sector workers a much easier target. Result!

Jon

Any company - even *GASP* one in the amazing topsy-turvey wonderland that is financial services - can only afford to offer guaranteed bonuses if the company is getting something in return. If wages in any sector - including *SWOON* the fabulous alternative universe you speak of - are to keep rising, productivity must also rise.

I admire your fiercely held convictions, but some things are written in stone. Pay raises depend upon some form of justification, and on the employer continuing to be able to pay them.

As for the rest of that, you will probably find a larger, and ultimately more important effect, comes from the number of the lowest paid among the public sector who are outsourced to private companies. But there's a (presumably smaller) reverse effect applied by the large number of local council chief execs, finance directors, marketing chaps and so on who count as private sector employees thanks to their habit of claiming their pension early (with a handsome top up applied at taxpayer expense) and then selling themselves back into the sector as private consultants. Thus moving highly paid jobs artificially our of the public sector.

Actually wages could have grown the last decade quite easily. The lack of productivity was not at issue. Even in the US since 2007 where productivity has gone up 17% wages have only gone up 1% and all the gains from productivity have gone to a very few people. The same is happening here. Look at profits. Companies doing well but wages are not increasing because there is no need for them to increase with so many unemployed. So the profits have been going to the banks in higher charges and bonuses in the bigger companies, not to shareholders.

The whole point about the furore over guaranteed bonuses was that the companies couldn't afford to pay them - they'd effectively gone bust and owed the government billions of pounds. But they paid them anyway because they were guaranteed. They claimed they legally couldn't not pay them. That's what the word 'guaranteed' means, yes? Otherwise they're just 'bonuses'. I've got no objection to bonuses, I've worked with them myself. To a large degree my problem with guaranteed bonuses wasn't that they were paid, but that they were contracted in the first place. If there's any better example of business governance gone haywire than a guaranteed bonus, I can't immediately think of it.


In this fabulous alternative universe, we have inflation. Therefore people are going to expect to get paid more to do the same job every year because, essentially, we tend to apply inflation to the value of 'labour' (in the loosest sense) just as we do the cost of goods. If the population did allow only for what you might describe as purely performance related pay increases, then your model would be fine. Sadly, the world is a more complex place. Applying a simplistic model to a complex system is something which tends not to work in general. So stating that pay rises should always linked to productivity... well, there's a heck of a lot of evidence to the contrary, frankly.


Only death and taxes! And I'm not too sure about one of those...


Not really. Not when you have guaranteed bonuses and contracted cost of living increases just as examples. If you're paid a salary of some sort (i.e. you're not self-employed in some form) there's a very good chance that your rate of pay change (be it positive or negative) is affected by factors entirely other than your personal performance. As a personal example, it doesn't matter a jot this year how much my productivity may increase, I'm not getting a pay rise. Now if the justification for a pay raise or lack of it is primarily not related to a person's own performance, then that's when people tend to get uppity.


Or, in some cases, in the employer not being able to fund them but being able to convince the government to fund them instead.


I suspect to a large degree you are correct in so far as what you say is a perfect illustration of the somewhat blurry boundary between public and private sectors. Therefore you can manipulate the figures by defining exactly what is 'public sector' to fit the result you want. Which is exactly the trick the newspapers pulled. Lies, damn lies & etc.

Jon

We were talking about real pay rises (which excludes inflation).

Guaranteed bonuses are commonly used to recruit people who get a large part of their income from commission, it's been around for years, extends way beyond financial services, and is usually a perfectly sensible idea in industries that have to compete for good sales guys etc.

I wasn't saying that you are paid some fixed percentage of your productivity every year (unless you are one of those sales guys or in some other commission based profession), but everyone is ultimately rewarded in that manner over time. You perform a function within your company, it is valued and you are paid accordingly.

In any given period of time this will be skewed by other market conditions - your ability to bid up your value in good times, the company's ability or need to threaten your position during bad times and so on. These are cyclical events and over time should average out unless you are spectacularly unskilled and replaceable. Over the course of your career - if you stay in the same job and do little to increase your productivity*, there is little reason to gift you greater than inflation pay rises, and if there is little reason, you are unlikely to get them.


* note that productivity gains aren't necessarily yours to provide, and don't necessarily relate to your personal performance. For the most part they come from new investment that you have nothing to do with in hardware / software etc, some of which is liable to make you redundant. If you perform a vital role for your organisation, your individual productivity is neither here nor there, because any attempt to measure it is a fiction based on averages and assumptions about divvying them out.

Righto.


Their ubiquity isn't really the issue, the issue is you proposed the premise that increases in pay are/should be based upon the improved financial wellbeing of the payer, if I read you right - i.e. if the company makes extra profit or it's share value improves, the employees will be be paid a bonus or given a rise. The payment of guaranteed bonuses in the financial sector shortly after the credit crunch, during which the payer's financial wellbeing went to hell in handcart, shows that isn't always the case. As does the situation currently in the public sector, wherein however more productive a part or section may become, nobody in it is getting a penny more and some of them may well lose their jobs anyway. Your model doesn't hold in the real world because it's a model bases on a closed system - money in, money out. In the real world, pretty much no organisation is a closed system.


Well if you can't make an absolute measure, how can you prove your premise? If it's impossible to prove an individual's increase in pay is directly related to overall businesses productivity, how can you show that any increase or decrease in total pay is related to increased overall business productivity, given total pay is simply the sum of individual pay? That's logically... difficult.

Jon

Anyone reading that article should also digest this:

http://www.bbc.co.uk/news/business-14137442