Finding facts in Fantasy Land

Michael Taft03/01/2010

Michael Taft: One of my New Year’s resolutions was to spend less time on countering the arguments of the orthodoxy and develop positive analysis and proposals from a progressive perspective. For if you tried to even counter a fraction of the economic misinformation spread about, you’d never have time to work on alternatives. That was my resolution. But then I read Stephen O’Byrne’s piece in the Irish Times. My resolution went the way of stopping smoking, exercising more, and other noble aspirations.

Stephen exhorts the trade union movement specifically to live in the land of facts, not the land of fantasy. Always wise counsel. Too bad Stephen didn’t take it to heart before he penned his latest opinion piece. In it he argues:

‘Querying the affordability of the second highest (minimum wage) rate in Europe evokes howls from trade unions, but are we not are entitled to wonder how, say, our tourism industry can compete with the UK when our minimum wage is €2-plus per hour higher?’

Oh, of course, we are entitled to wonder (and if we stop, there’s always the Small Firms Association to do all the wondering we need). Let’s take a look at the hospitality sector and see how Irish costs compare with the rest of Europe, based on Eurostat data from 2006, a year in which our minimum wage was also the second highest in the EU.

First thing we notice is that average personnel costs in the Irish hotel and restaurant sector are below the EU-15 average: 3 percent below average. And this includes very poor countries such as Greece and Portugal. When we compare ourselves to our own peer group – the non-Mediterranean countries – we find that Irish labour costs in the hospitality sector are 6 percent below the average of other EU countries.

Another way of looking at this issue is to measure labour costs as a proportion of turnover. Again, in comparing ourselves with our peer group we find that labour costs make up less of turnover – 28.6 percent - than the average of other EU countries – 29.7 percent.

Yet, Stephen is concerned. How can we compete with UK tourism? Well, we’re competing ok. In the first quarter of 2000, Ireland had less than 5 percent of the UK’s level of tourist traffic (measured by Eurostat as all tourist nights). In the first quarter of this year that proportion increased to 8 percent, with more tourist nights per capita than the UK. If anything, tourist traffic is increasing, not decreasing, when compared with the UK.

Stephen finishes his article with this:

‘We need critical analysis, not hackneyed class rhetoric.’

Too bad he didn’t start with it.

Posted in: EconomicsInvestmentLabour market

Tagged with: tourismWagesCompetitiveness

Michael Taft     @notesonthefront


Michael Taft is an economic analyst and trade unionist. He is author of the Notes of the Front blog and a member of the TASC Economists’ Network.



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