One year on, and the Republic’s tax take is heading for half it’s expenditure…

Here’s one reason why 46 leading economists are so freaked by the Government’s proposed NAMA legislation:

“Nama has unfolded against the slow but steady deterioration in the State’s finances. We now look to be on course for a Government deficit of close to €30 billion. In short, this means that for every €1 the State spends, it takes in tax only 50 cent. To close this gap in State expenditure would require the implementation of more then five times the identified savings of the McCarthy report.

“It is also clear that while world economic conditions might well begin to improve in 2010, this will not easily translate into improved conditions here. A significant structural deficit remains in place in the Irish State finances with as yet little in the way of solid policies implemented to close this.”

I suppose the short form of that argument is that the state has not got the spends to be helping out an ad hoc group of bank shareholders and developers, for a set of commitments we still don’t know the full extent of

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  • Mack

    We need to bring in a regular property tax to replace Stamp Duty – that’s part of fixing the structural deficit, but is political dynamite and it looks like FF have chickened out of implementing it this year (after it was recommended in the Commision on Taxation report).

    http://www.ronanlyons.com/2009/06/15/a-property-tax-in-ireland-yes-we-can/

    At the same time I think they should istitute another benchmarking round, to be performed in the open with clear kind lines on how to structure public sector pay. In some areas we are paying way, way over the odds. Often to the detriment of public sector workers – e.g. teachers who find it incredibly difficult to acquire their first permanent position because of intense competition..

  • Mack

    To clarify the above (and sorry for picking on teachers, it’s just one area I know reasonably well) – teachers start on around €39,000 in Ireland (once all add-ons have been included) – this compares with around £20,427 in Scotland. However, it is next to impossible for a graduate teacher to find permanent employment – such is the competition for roles.

    If salaries were reduced until they reached a level at which say 70% of graduates were able to find a permanent job coming out of college, the cost to the exechequer could be reduced. Perhaps the life-time earnings of a teacher would be reduced too (slightly – they’d get on the salary scale much earlier), but the quid-pro-quo would be increased job security early on..

  • kensei

    Surely there is an argument though Mack, that high salaries and high competition is a good thing? That will attract a lot of people into teaching that elsewhere would have went for other areas.

    I think the highly regarded Nordic models have fairly intense competition for teaching places, though it’s not necessarily a money thing IRC.

    Those figures are terrifying, though. It amazes me the tax base can shrink like that ins uch a short space of time.

  • fair_deal

    Mack

    Maybe I’m failing to grasp something but are you arguing that the cost of a teacher salary has led to a limiting the number of teacher positions to a level below what is needed? Therefore creating a bad situation or are you just complaining that its hard for teaching graduates to get jobs?

    There is something rattling around my head that there was research that argued the strength of the NI system is partly based on an over-supply of teachers leading to heightened competition for jobs, is that correct

  • Paddy Matthews

    If salaries were reduced until they reached a level at which say 70% of graduates were able to find a permanent job coming out of college, the cost to the exechequer could be reduced.

    Well, if you cut all salaries by 40% or so, it would indeed reduce the cost to the exchequer, but the difficulty in obtaining permanent positions has more to do with the number of vacancies and the (increasing) pupil-teacher ratio.

    I wouldn’t worry too much, Mack. Once the US, UK and European economies start to pick up again, most of those newly qualified teachers (along with most of their age group) will have left the country, most likely never to return. After all, we can’t all live on a small island, as the father of our illustrious finance minister told us back in the eighties.

  • Mack

    Kensei, Fair Deal –

    Even during the property/ credit boom it was incredibly difficult for grad teachers to get permanent employment. I think this had less to do with a lack of positions and more to do with a large number of graduates figuring out they could earn more money with a teaching qualification and going off to study to become teachers after a disappointing period in another field. Certainly around half of the teachers / aspiring teachers I know have taken that route.

    There is no delicate way of putting this – NI is an economic backwater. The British state pays for a standard of living far above that which could be sustained by economic activity there. So it isn’t surprising that teaching is a good job their attracting many of the best graduates. In the south, which does have a large and advanced private economy, paying graduate teachers salaries that are massively higher than those for graduates in the private sector is nuts. We can keep some level of competition, and still pay decent wages – but if starting salaries where say €25-30k, I still think they’d attract good candidates.

    By way of comparison, someone starting out my own field – software engineering would be paid around €30,000 p.a. In my opinion it’s one with higher natural barriers to entry – large swathes of the population could never master it (even otherwise highly intelligent individuals), no matter how hard they tried. So I suspect the starting salary levels are too high (you’ll get more for teaching 1st year students to use a computer than you will helping Google develop their search engine or Microsoft develop the next version of Windows in Dublin!!!). They’re too high – both for the state (as per Mick’s post) and for those who have genuine calling to teaching (who will spend perhaps the best part of a decade struggling to find permanent work).

  • Mack

    Paddy –

    I wouldn’t worry too much, Mack. Once the US, UK and European economies start to pick up again, most of those newly qualified teachers (along with most of their age group) will have left the country, most likely never to return.

    That’s hardly a good outcome, now is it?

    Well, if you cut all salaries by 40% or so

    You could evaluate it on a case by case basis. And with lower salaries more graduates could be employed.

    Do you think it sustainable to pay a computers / maths teacher in a secondary school a wage 30-40% higher than Google will pay it’s software developers in Dublin? (Bearing in mind that they have publicly complained about the difficulty in hiring Irish software engineers here). If our best and brightest go into protected sector jobs at the expense of those in the sectors driving our exports / capital gains taxes etc. Where will that leave us?

  • Mack

    Paddy –

    and the (increasing) pupil-teacher ratio.

    We’re going the wrong way on services. We need to cut costs not services. By the way, so far this year I’ve had a 10% pay cut (3% reinstated). On top of this the Employers pension contribution has been almost halved and a range of other benefits slashed. We’ve had one round of redundancies so far, with another bigger one coming up. The purposes of the cuts are to save jobs. The company I work for can’t afford it. It looks to me like the state can’t afford it.

    We can’t go back to the bad old days of emigration. We shouldn’t be exporting our best and brightest. We just need to figure out a way through this crises and help create and sustain jobs here..

  • Kloot

    Are Google hiring in Ireland? I’ve been sitting on my arse in London for six months. What are they building? I thought the Dublin office was just sales/admin for AdSense

  • kensei

    Mack

    Mack

    By way of comparison, someone starting out my own field – software engineering would be paid around €30,000 p.a. In my opinion it’s one with higher natural barriers to entry – large swathes of the population could never master it (even otherwise highly intelligent individuals), no matter how hard they tried.

    Utter nonsense and just a touch arrogant, Mack. Computer Science is 99% perspiration. I was constantly amazed at the amount of people on my course that complained they couldn’t do programming; well if you are not prepared to sit and work and try differnet things, then no, you’ll not be able to do it. I never saw a hard working person fail at it, though. And lots of jobs in IT do not require hardcore programming or architecting skills.

    So I suspect the starting salary levels are too high (you’ll get more for teaching 1st year students to use a computer than you will helping Google develop their search engine or Microsoft develop the next version of Windows in Dublin!!!). They’re too high – both for the state (as per Mick’s post) and for those who have genuine calling to teaching (who will spend perhaps the best part of a decade struggling to find permanent work).

    I don’t care if someone has a genuine calling – who’s the best for the job? This is the type of nonsense that leads to demoralisation in jobs like teaching and nursing. Pay well and attract competition, so you get the best people and the profession is expected. Maybe fiften years down the line those first years are making the next Google, because they have been properly inspired.

    They may well be pauing too much, but your argument is precisely backwards on this one.

  • Mack

    Kloot –

    Yep. There’s a software development centre in Dublin (EU hq – so lots of functions there) – they’ve been hiring like mad the last couple of years.

    http://www.google.ie/support/jobs/bin/answer.py?answer=146823

    http://www.google.ie/support/jobs/bin/answer.py?answer=34883

  • Mack

    Utter nonsense and just a touch arrogant, Mack.

    It’s not arrogant and maybe I’d accept it could be rephrased too lot’s of people won’t be capable of putting in the required effort of learning a new way of thinking. But it’s a simple fact, lots of people fail / drop out.

    And for the types of jobs I’m comparing it too – very, very few a truly capable of getting it. Those other IT jobs you refer to tend to start off on lower salaries again..

    They may well be pauing too much, but your argument is precisely backwards on this one.

    Not really Kensei, they’re paying levels that are generating a huge excess of demand over supply. My argument is they could reduce pay levels such that supply and demand are better balanced.

    I don’t care if someone has a genuine calling – who’s the best for the job?

    Yes. Point is it doesn’t matter today, you _won’t_ get a job! At least the software engineers at Google or Microsoft will! They earn less than a teacher starting out, but they’ll be 21 when they get that salary. The teacher will be 31. The software engineer at 31 will be earning more again still. But the lure is still there, and the inability to hire more workers because the cost per worker is still there..

  • Mack

    Just to clarify. If you

    1. Reduce teacher salaries
    2. Use some of the money saved to create more permanent posts
    3. Bringing supply and demand into balance
    4. Grad teachers able to get permament jobs earlier (paid hols, no time on dole, on the salary scale at a younger age)
    5. Reduced cost to exchequer
    6. Only a small reduction (if any) in life-time earnings for the teacher..

  • Mack

    Kensei –

    Over 25% of all Comp Sci Undergrads in the south fail to complete their studies.

    http://www.timeshighereducation.co.uk/story.asp?storyCode=157977&sectioncode=26

    And you know as well as I do, that of those that do only a minority will become software engineers, and of those that do a similar number again (say 25%) will fail to make the grade.

  • kensei

    Mack

    It’s not arrogant and maybe I’d accept it could be rephrased too lot’s of people won’t be capable of putting in the required effort of learning a new way of thinking. But it’s a simple fact, lots of people fail / drop out.

    I don’t count laziness as a lack of capability.

    And for the types of jobs I’m comparing it too – very, very few a truly capable of getting it. Those other IT jobs you refer to tend to start off on lower salaries again.

    Dunno. I started in QE on the same salary as the Development dudes. Salary beyond that will depend on ability, typically. But software development covers a lot of ground – from relatively straightforward to mind bendingly hard. Even QE covers a lot of different ground.

    Not really Kensei, they’re paying levels that are generating a huge excess of demand over supply. My argument is they could reduce pay levels such that supply and demand are better balanced.

    And I don’y necessarily think lower demand is a good thing; it’s important, people should really want those jobs.

    Yes. Point is it doesn’t matter today, you _won’t_ get a job! At least the software engineers at Google or Microsoft will! They earn less than a teacher starting out, but they’ll be 21 when they get that salary. The teacher will be 31. The software engineer at 31 will be earning more again still. But the lure is still there, and the inability to hire more workers because the cost per worker is still there..

    Okay, I’m missing step 2. I’d wonder how much money you’d really save if you start creating more positions though, it isn’t simply the salary that is a cost. But perhaps there is a better balance to be found. But I remain generally opposed to devaluing teaching. And arrogance.

  • Mack

    Kensei –

    Okay, I’m missing step 2. I’d wonder how much money you’d really save if you start creating more positions though, it isn’t simply the salary that is a cost. But perhaps there is a better balance to be found.

    Thought you were a Keynesian? 😉

    Marginal propensity to consume, less people on the dole etc. In effect you’d be taking some money off higher earners with a job and redistributing it to those without. In addition you’d be pushing some of the cost (of meeting teacher salaries into the future, and hopefully happier times, as new grad teachers cost less than experienced teachers). But, I guess it would be very unfair to those who’ve just spent 10 years struggling to get a permanent position..

    I don’t count laziness as a lack of capability.

    It really is though. How many people want to achieve something – but find it incredibly difficult to deliver on it (whether it’s giving up smoking, getting fit / losing weight, or picking up a new skill)? You may have an innate ability to do it, but if you can’t execute on it for what ever reason, you still can’t do it..

    But I remain generally opposed to devaluing teaching. And arrogance.

    I was only using teaching and software as I am reasonably familar with both. There are other imbalances throughout the Irish public sector, along with people who are paid a pittance..

  • Mack

    And, in general I think QA Engineering probably comes in second after Software Engineering in terms of starting salaries, maybe slightly lower in my experience, but might be around the 28-29k mark too, and the career paths tend to merge at management level and on business analyst tracks. Tech support, IT support work tend to start at much lower salaries – and those are also career paths for comp sci graduates (highest rate of drop out in UK universities too – http://www.computing.co.uk/computing/news/2195437/undergraduates-uk-highest).

  • John East Belfast

    If I was an ROI citisen I would start seriously considering membership of the EU.

    You need to be able to take control of your own Fiscal and Border policy.
    In terms of monetary policy I would also leave the Euro and align with Sterling.

    The ROI has got all it can from Europe and its entire Business model needs to change – it doesnt have the flexibility to do that within the EU straight jacket.

    FDI will increasingly dry up as such investment will head to the other lower cost European Union countries that will be the future recipients of EU Aid.

    The ROI should concentrate on being an offshore tax haven – especially for UK ex Pats wanting to retire to within commuting distance of home. That is another reason to align with Sterling so that UK ex pats and retirees can seamlessly transfer their assets and pensions off shore.

    It can then re-build its own incentive packages for high value and high tech inward investment and control its own immigration policies on who it wants to work there.

    More of the same medicine within the EU will not cure the current ills.

    Mack

    “NI is an economic backwater. The British state pays for a standard of living far above that which could be sustained by economic activity there”

    NI is part of the Bristish State and doesnt have to develop a level of economic activity that would be contrary to the overall economic stability of the British State itself. Unlike the ROI which does.

  • elvis parker

    JEB wouldnt it simply make more sense for the Republic to re-join the UK.
    Home Rule for Dublin anyone?

  • Driftwood

    When the IMF arrive, wouldn’t it be more convenient to treat both Ireland and the UK as 1 basketcase entity?

    submit word here: bill

  • Mack

    Alan Ahearne Strikes Back –

    http://www.irishtimes.com/newspaper/ireland/2009/0826/1224253267244.html

    “General government deficit of close to €30 billion.” This is wrong and terribly sloppy. The GGD is projected to be €18 billion for 2009 and the consensus view is that it will not exceed €20 billion. The sloppy and at times misleading use of inaccurate numbers by some commentators has been a disturbing, and indeed sometimes damaging, feature of the economic and financial debate in this country.

  • Comrade Stalin

    Mack,

    You’re right that NI is a backwater that the British exchequer pours money into to keep afloat (although this is probably true of other regions of the UK – even large NI-sized regions within England). However, this data we’re getting now showing that Ireland is raising only half as much tax as it is spending suggests that Ireland is something much worse – a country that has spent the last ten years fooling itself about it’s own levels of productivity, with the help of the banks. Ireland will have to rediscover austerity – fast.

    On the subject of teachers, I think it’s right that they should be paid well, but I don’t personally think I could stick it. I hear so many stories of teachers burning out half way through their careers, and it’s not surprising given the pressures that they are under and the proportion of wee bastards that they have to teach. I quite like the idea of teaching, but it would have to be to people who are there because they want to be there.

    The subject of software engineering is a more tricky one. I do not think it is that hard, it’s less about raw intelligence/IQ and more like a knack. I think good software engineers see a picture in their head of how a system hangs together, how the components of it interact, and as they’re designing and writing their code they are refactoring it in their minds and on the screen until it is right. To me, software engineering done right is just like building a bridge or a road.

    Unfortunately a hell of a lot of people coming out of software engineering and computer science courses at university have the grades, but they do not have the abovementioned knack. The code they produce suggests they do not see a series of interconnected components in their head, but instead a big wodge that they sort of fiddle with to get working, so you end up with a behemoth that is held together with duck tape. The universities are partially to blame for this; instead of teaching essential software engineering techniques that are indispensible – like revision control, code editing IDEs, debugging, static analysis, software instrumentation etc (QUB does not mention revision control through its entire undergrad course, and I doubt UU does either), they teach theoretical stuff like formal methods, image processing algorithms, etc. Theory is necessary but the important thing is that these courses are not intended to equip people with the skills to become good software designers.

    And I wouldn’t hold Microsoft up as an example of a world class software engineering centre, although I do accept that it is important that the most successful businesses in the world are locating in Ireland. While Microsoft put out good software, they also put out a lot of bad; Vista is an example of the peak of the badness (although Office 2007 is pretty bad too (“I know, let’s keep the basic functionality the same but change all the menus so that everyone has to re-learn how to use it again!”). It tries to do to much, tries to be all things to all people, and I think this is due to the commercial/consumer pressures that drive it. Intel, on the other hand, is the real jewel in the crown in outsourced technology in Ireland. Intel, at the moment, is almost single handedly driving forward the performance and speed of computers.

  • Mack

    Comrade Stalin –

    I don’t disagree with what you’ve written – I brought up barriers to entry in software engineering to highlight that it’s not an easy discipline to hire competent graduates in and hence not one where graduate pay would be very low. But yet, the salary scale of teachers starts off between 30-40% higher.

    My point about NI was only to point out that it might make sense in NI for teachers wages to be well above the graduate norm, as NI doesn’t have a particularl strong private economy – but it doesn’t make sense in Ireland.

    However, this data we’re getting now showing that Ireland is raising only half as much tax as it is spending suggests that Ireland is something much worse – a country that has spent the last ten years fooling itself about it’s own levels of productivity, with the help of the banks.

    Well, yes. My point exactly.

    NB – Alan Ahearne – special economic advisor to finance minister Brian Lenihan claims the deficit is substantially less..

  • Mack

    Oh aye – and a large portion of the deficit is cyclical – increased social security because of high unemployment, collapse in transactional tax revenues – capital gains, VAT, Vehicle Registration Tax, Stamp Duty on homes and the lack of things like an annual property tax (common elsewhere).


    While things are bad, they’d not be quite as bad as the 50% stat makes them appear at first blush, given the low debt to gdp ratio we started with – if it weren’t for the banks. Which of course really makes things much worse…

  • tom

    Mack,
    Regarding you’re point on teacher salaries.
    Here’s a developers job advertised today…

    Title:
    C++ Experts, Quality required
    Date last updated by recruiter:
    28/08/2009
    Location: Dublin City Centre
    Job type:Permanent full time
    Salary: €75000 – 85000
    Additional benefits:
    Flexitime
    Paid Holidays
    Canteen
    Gym
    Parking
    Share options
    Pension
    Relocation package
    Negotiable
    Bonus
    Quinn Healthcare
    See Description
    Life Assurance
    Permanent Health Insurance
    Hibernian Health Cover
    Travel Allowance
    Flexi Start
    Role(s):
    That best describe this job
    Programmer
    Software Developer
    Minimum experience required:
    7 – 8 Years
    Qualifications:
    Third Level Degree

    No primary school teacher will ever reach that level of salary unless they get promoted to principle. In fact I know one school principle who earns less than that IT salary. Also it takes 20 years for a teacher to reach the top of their pay scale.

    I’ve seen plenty of IT jobs pegged around the €60K to €80K level for people with experience at around the 5 – 10 year mark. I guarantee you, you won’t find any code cutters (writing python, java, c, pearl, C++, unix scripting in HA environments etc) earning that sort of money in the civil service.

    Rgds,
    Tom

  • tom

    Here’s another one…

    Senior Unix / Linux Systems Administrator €65k
    Date last updated by recruiter:
    28/08/2009
    Location: Dublin West
    Job type: Permanent full time
    Salary: €65000 – 75000
    Role(s): That best describe this job
    Systems Administrator
    Systems Engineer
    Minimum experience required: 4 – 5 Years
    Qualifications: Third Level Degree

    €75K after 5 years managing a pile of linux boxes (all be it at a high level).
    God dam after all these pension levies a I think I’ll have seriously consider dusting off the CV.

  • Mack

    Tom –

    If only! Looks like I work for the wrong company.

    Trust me, those would be pretty spectacular salaries (esp. for the experience levels listed). There a slight danger in taking spectacular salaries that exist as one offs (or are used in ads to attract applicants) as being representative. In my experience those salaries aren’t (in fact the only people I know for sure earning at that level are software architects).

    This salary survey puts salaries for developers as being between €28k-€50k, which is more realistic.

    Senior developers / Team leads at €50-70k – which would put those jobs off the salary scale (for someone with only 5 years experience!).

    Bear in mind unpaid overtime, defined contribution pensions, lack of job security, standard hols etc. I’m not saying it’s a bad job – and in fairness I think they should start the salary scale at a lower level and extend it further.

    http://www.brightwater.ie/documents/SalarySurRevised09.pdf

  • Mack

    and in fairness I think they should start the salary scale at a lower level and extend it further (for teachers)…

  • Mack

    Even with the salary survey – I’d guess actual salaries are lower, depends on their methodology – but companies always have to offer more to attract applicants and if they’re getting data only from companies that are hiring (or using only from their own data) it would almost certainly be skewed a lot higher than the salaries actually being earnt by workers not changing jobs..

    The other thing to bear in mind is that during a downturn it’s not unknown for agencies to post bogus ads to attract candidates, who they then try and milk for leads. Also in my experience the company tends to offer less than the agency promises (so it’s cost free for them to promise spectacular salaries). Both those ads were posted by agencies. Would be interesting if there were similar ads posted up by actual companies hiring..

    The odd thing is for most people I’ve asked in the industry, their income is falling one way or another – including my own (the brightwater survey backs that up too).