Part Of The Problem

Inflation is the reason why your salary buys less today than it did ten years ago. Call it the cost of living, if you like. Petrol for your automobile costs more, but you are only making the same wage as last year, so your cost of living is higher and something has to give. You aren't living as well as you were before; you do without a few luxuries like dining out or a weekly trip to the cinema.

Jack O'Connor, president of Ireland's biggest trade union, is alarmed about rising inflation, pegged at the seventh highest rate in the EU. Union members, with wage agreements in place for years to come, would lose out if their cost of living went up while wages held steady. That's not what the union is all about. As far as Mr. O'Connor is concerned, it's time that the previously agreed wage rates are visited again. Sounds like he's about to ask for pay increases for all the union members, to keep their wages in line with inflation.

He's upset about the ever rising interest rate on home mortgages, which is under the control of the European Central Bank. As for the cost of a house, the Government doesn't control the price of buildable land, but that's how the free market economy works. If I have a prime piece of real estate, and you want it bad enough, I can get my price and you'll pay through the nose. Now, if you want it really badly, but you can't afford it, you're out of luck. Mr. O'Connor would like Government to step in, to meddle with the market, so that his union members can buy houses where they would like to live, even if they are getting priced out of the current market. If you are the owner of a house that is going up in value, and thinking of making a comfortable profit when you sell it later, those are not the sorts of words you'd like to hear.

In the end, Mr. O'Connor is going to lobby for pay rises, appeasing his membership with a promise of more money. Manufacturing businesses, already stressed by competition from Eastern Europe and Asia, will increasingly pull up stakes and relocate their factories where the workers come cheap. Jobs in Ireland are already being lost to foreign wage competition, and raising worker salaries will escalate the rush abroad.

As workers lose their jobs, their homes will be lost and a flood of available housing will depress housing prices. Homes will indeed become more affordable under Mr. O'Connor's plan, but his union members will still not be able to buy because they won't have jobs. With the loss of manufacturing and related industries, the Exchequer will face reduced tax income, and the social housing program will have to be scaled back, along with everything else.

What does help to reduce wage inflation is increased productivity. That means the union worker has to produce more in the same amount of time, without getting more money for it. Fewer vacation days, longer hours, that sort of thing all help to increase productivity. Paying the worker more to do the same will only raise costs, and that generates more inflation.

Telling workers that they should be paid more, since it costs more to live, is fine if a man is trying to keep his lofty position. As a practical solution, it's nothing more than adding to the existing problem. Socialism doesn't work, as has been proved time and time again. The free market builds wealth, but it builds wealth on the backs of the lowest paid workers. Life's a bitch, isn't it.