Irish Times Letter – Do Wage Cuts Boost Jobs?

Madam, – The Duffy-Walsh review of employment regulation orders and registered employment agreements was a comprehensive study and supportive of wider European research on the interactive effects of sectoral based minimum wages, competitiveness and employment. Most of this research concludes that cutting minimum wages and abolishing wage-setting institutions has zero impact on employment creation. It simply serves to increase the profit of employers who rarely, if ever, reinvest this into employment expansion. The only outcome is an increase in earnings inequality, as occurred in the UK. It is for this reason that Dan O’Brien is categorically wrong when he states that these institutions are “archaic rules that hinder employment creation” (Opinion, June 17th).

The idea that removing institutions of collective bargaining will improve or increase employment is based on the assumption of “perfectly competitive labour markets”. These do not exist. Currently, 80 per cent of employees in the eurozone have their pay and conditions set by collective bargaining, not the market.

In highly competitive export economies such as Sweden, Austria, Finland or Netherlands, more than 90 per cent of employees have their wages set by collective negotiation between trade unions and employers not the market. If the economic crisis has taught us anything it is to be highly sceptical of ideological market-based arguments in formulating public policy. – Yours, etc,


Guest PhD at the Amsterdam Institute for Labour Studies,

University of Amsterdam,

The Netherlands.

3 responses to “Irish Times Letter – Do Wage Cuts Boost Jobs?

  1. For today’s letter to the Times, did you mean Stephen O’Byrnes (it says Kinsella in the print edition!)

  2. Hey …Jeez, I never noticed that, yes, meant to be Stephen O’Byrne

  3. Looks like an email to the Corrections and Calrifications editor is in order!

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