Politics Salaries and Pensions in the Eurozone

[Reinaert]

Maybe we needs to bring back tariffs to protect our industries from chinas low wages, or slave wages as I call them.

You are right.
The Chinese people are slaves, used by the (hidden fascist) communist government of China. Worldwide (fascist) capitalistic companies are making huge profits by exploiting millions of people for their own greed.

Hey.. I am a Christian, and I simply say that trade with totalitarian fascist and communist countries is very bad!

Some members of this forum don't like that..
And they want me banned...

In Europe we have still a free expression of opinions though..
Wuhaaaaaaa...

 

[Maciamo]

While Greece's minimum wage before the crisis reached about 700 € and now it got to just under the 600 €, Ireland's minimum wage was at 1200 € only to be cut in the current year for about 80 €. But if you go in any supermarket or any department store, the prices of the goods do not differ much.

I wouldn't put too much thought into minimal wages. Many European countries don't have any (including all Nordic countries, Germany, Austria, Switzerland and Italy). Those who do are quite arbitrary and do not necessarily reflect the cost of life or GDP per capita. According to Google's public data, here are the minimum monthly wages in the eurozone.

Luxembourg : €1,724.81 per month
Ireland : €1,461.85 per month
Belgium : €1,440.67 per month (or €1,387.5 under 21 years old)
Netherlands : €1,416 per month
UK : €1,169.49 per month
Greece : €862.82 per month
Spain : €738.85 per month
Slovenia : €734.15 per month
Portugal : €554.17 per month
Slovakia : €307.7 per month
Estonia : €278.02 per month


Life isn't more expensive in Ireland or Belgium than in the UK, yet the British government decided to set a fairly low minimum wage for its workers. Likewise Greece has a lower GDP per capita and considerably lower average salaries than Spain, yet the Greek minimum wage is higher.

And this is not just between Greece and Ireland. I have travelled in many European countries, mainly in the Eurozone, and the prices do not differ much; the wages though do. How can anyone justify that Europeans must be paid differently for doing exactly the same job? Why must an Irish that works in a check out in a super market earn more than a Greek, and a Greek more than a Slovakian one? Why since we have the same currency, and a common market, common prices for most goods we still have unequal wages? And not just the wages but our pensions too! An Irish pensioner is earning about 800 € per month, while a pensioner in Greece about 300 or 400 € at best.

The main explanation is that housing cost varies a lot between countries like Ireland and Greece. Food and manufactured goods are part of a worldwide market and a global distribution network, which explains why the price of an iPhone, clothes in global chains, or breakfast cereals of a same brand won't vary much from one country to another. Local produce will vary more because of discrepancies in local wages. But in the end what drives salaries up is the price of real estate. That's why a job in London usually won't pay the same as a similar position in, say, Lancashire or Cornwall, even though its the same country.

Salaries are high in Ireland because nearly half of the country's population lives in Dublin's metropolitan area, where housing is very expensive. Greece is much more decentralised, with lots of people living in sparsely populated rural areas. Population density drives real prices up, which has for effect to increase wages. Salaries in Paris are often twice higher than in other parts of France. In Japan, Tokyoites enjoy nearly three times the GDP per capita of rural prefectures. Yet Parisians and Tokyoites spend so much money on accommodation that they often end up with less disposable income than people in smaller cities (unless they are willing to commute long hours to cheaper suburbs). It's not a matter or country, system or education; eventually a great deal of the wage gaps depend on population density and real estate.

 

[Maciamo]

Discrabing what's economy you missed the most important part: production, production, production. Greece doesn't produce much, so it doesn't have much to share among citizens, in form of wages. Money is just the equivalent of the production part of the economy.
Nobody cheats Greeks off money, making it a poorer country. Greece doesn't produce as much as Germany or Ireland, therefore it is poorer in comparison.
But it is just in the eye of beholder. When you compare Greece to Albania, Greece is a rich country. Well, it looks like Albania is producing even less. And this is the trick: production, production, production.

You make it sound like the secondary sector (industry) is the most important for a country's wealth. But this is far from true. Coming from the former Communist block, you should know that putting undue emphasis on industrial production doesn't necessarily make people richer.

Nowadays, most of the world's industrial production is located in China. Most of the raw materials beside petrol (e.g. metals, coal, wood) come from just a few countries (Brazil, Australia, Indonesia, China). Many rich countries produce very little on their territory and have few natural resources. Ireland, Denmark or Benelux countries fit in this category.

This is also true for agriculture and stockbreeding on an industrial scale, like in the USA, Australia or Brazil. This doesn't apply to small-scale farmers like in Europe or Japan.

Countries extremely rich in natural resources or having plenty of cheap land for farming, can indeed make a lot of money. But it is usually made by just a few people controlling the companies who exploit those resources. This is the case of Russia, China, Brazil, OPEC countries, but also (to a lower extent) Australia, Canada and the USA. If you subtracted the income of the few billionaires who make their fortunes in farming, mining and petrol in these countries, the GDP per capita would be considerably lower.

My point is that nowadays, at the age of giant corporation and globalisation, wherever the primary and secondary sectors make a lot of money, they only benefit to a few people, and what you call "production" is almost irrelevant for the average citizen's wealth. In developed countries, about 70-75% of the population works in the tertiary sector, where there is no "production", just services, commerce, transport, tourism, government, education, and so on. Most of the people working in the secondary sector are low-paid workers.

 

[Maciamo]

ok we think outside the box and we start producing green cars....will the germans buy cars from greece..?? where sould we sell them..??

there was a model produced for the Athens olympic games....from the greek automobil company elbo (www.elbo.gr)... they created with the funding of private greek investors an electric car...back in 2004...what ever happened to it...?? it never went in mass production....you people do not understand how politics and the market work...it is ruthless and dominated by rich greedy nations that do not easily allow smaller countries to take a share of the market....whatever happened to zastava , dacia and yugo cars....?? they were either forced to close or were bought by larger european companies...didn't the romanians know how to make cars...?? of course they did, they have been making them for decades...where is dacia now then...?? and why elbo the greek automobile company is not allow to produce mass car production and is limited to produce buses for the internal market only...??

This is a good example of the uselessness of the secondary sector ("production" in itself) without the tertiary sector to support it. Cars aren't going to sell themselves on their own. The most important part in selling a product is to promote it through marketing and to have a solid distribution network. The company's image, reputation, and services like good customer support, guarantees, and so on, also help.

It requires a tremendous amount of money and effort to start a big international company from scratch. If a country is poor and local entrepreneurs lack the funds to start big, they must either find foreign investors (Ireland made its wealth on foreign investment, thanks to its good relations with the USA), or work hard, hand-in-hand with the government, recruit the best minds in the country and be patient until they succeed (that's what Japan, Taiwan and Korea did, but I don't think many other countries have the diligence, organisation and ambition required to do the same).

 

[LeBrok]

You make it sound like the secondary sector (industry) is the most important for a country's wealth. But this is far from true. Coming from the former Communist block, you should know that putting undue emphasis on industrial production doesn't necessarily make people richer.

If I sounded like this then my apologies. I didn't mean the heavy or just industry. When I said product and production I meant everything people and businesses consume/buy, from bread, shoes, furniture, skin cream to computer programs, cars, gasoline and houses.

The problem with Communist block production and industry was that there was not much production at all. Organization sucked, management didn't care and wasn't qualified, logistics were a laughing stock. Stores were empty, basic products rationed, you couldn't even get a toilet paper for god sake.
Everybody from citizens to party members new that we should produce more to make our lives better, but the system sucked, and the dream was never realized. And it was before Hong Kong, Taiwan and China took manufacturing away, lol.
Also it turned that economy is not about money. When I was a child ordinary folks made a 1 000 zloty a month. When I was 23 and left Poland, everybody was making 1 million zloty a month. Everybody was a millionaire! And still you couldn't buy a toilet paper. If you were lucky to get a roll, you paid 10 000 a roll.
This is when I learnt that good economy and prosperity for a country has nothing to do with amount of money people make, but how much they produce. If you don't produce, you don't have..., well, you only have money and mostly of toilet paper value and quality. :grin:

The socialistic ideas are not bad ones. If I knew life only from books, possibly I would be a communist. But at the end the real life shows us what works what doesn't, and I embrace the real life the most.

 

[LeBrok]

But in the end what drives salaries up is the price of real estate.

I'm sorry Maciamo but you have it backwards, unless one is a real estate agent.
Notice that in places where real estate prices are going sharply up there is ongoing economic boom. It means that local people are making more money and have a surplus to buy houses or apartments, opposite to renting. Real estate is considered buy most people, not only a product but also an investment. Buying a car is not an investment but buying a house is. In good economies people make more money and they invest savings in real estate. Then you have your own house to live in or rent it to make an income on your investment. This sharp demand pushes the prices up. That actually encourages more people to invest, even from other cites or countries to benefit too. Often it leads to a bubble like in States or in Spain recently. But as long as there isn't overproduction or too much speculation, the real estate prices keep rising during economic boom. It all points to bigger incomes and demands pushing real estate prices up, and not vice versa.
We also know what happens if demand goes away, recession,people not buying and prices of houses go down. Supply and demand, at least in free market economies.
I've seen couple of these cycles first hand in Calgary, my city in Canada.

Beside this, I mostly agree on your points.

 

[Maciamo]

I'm sorry Maciamo but you have it backwards, unless one is a real estate agent.
Notice that in places where real estate prices are going sharply up there is ongoing economic boom. It means that local people are making more money and have a surplus to buy houses or apartments, opposite to renting.

Look at big, fast-growing metropolises like Moscow or Shanghai. The average population isn't rich, but real estate prices have skyrocketed due to the inflow of people from the countryside. Lack of supply (in this case housing) drives prices up. In real estate, lack of space has the same effect. That's why big cities are always more expensive than small cities, which are in turn more expensive than the countryside (inside the same economy, and comparing neighbourhoods of similar socio-economic standing).

Sometimes real estate prices soar for other reasons, like speculation, as seen recently in the USA, Britain, Ireland and Spain. But that's also due to the lack of supply compared to the demand. When everybody wants to buy (even if they need to borrow heavily, not just because they have money), the natural outcome is a bubble of prices. The state of the economy and the wealth of citizens has little to do with it. Salaries just need to adjust over time so that people can still live in a city with inflated real estate prices. The effect might also be that poorer people move out and richer people move in the city. If not poorer people get poorer and end up in slums. This is what has happened throughout history in big cities in developing countries (in Europe as late as the industrial 19th century and early 20th century).

 

[LeBrok]

I agree with your reasons influencing real estate prices.
There is only one, though major, argument that divides our opinion. I still claim that the main reason that effects price movement is economy and wealth of citizens.

- the successful cities have economies better that surrounding villages.
- all rise in Real Estate prices start with improving economy of a country or a region.
- you don't find many ,if any, investor and speculators in economically depressed regions or cities.
- demand and speculation is always higher in economically vibrant cities or regions
- if economy is good people make more money therefore they can afford buying house or apartment, investing versus renting.
- look that in improving economies people spend more money on better homes, higher standards, bigger apartments, than they used to before economy was good. This also influences higher prices, for better standard of living. New, though more expensive homes, have better insulation - energy efficiency, more power outlets, more bathrooms, nicer decor, bigger space, more high tech appliances. Ordinary citizens these days in good economies live in standard of living of rich people 50 years ago. This influence the prices as well.

I agree that speculation, especially in today's borderless market, lifts the real estate prices higher than if they only have been influenced by local economy.

Obviously there are contrary examples in areas where people love to retire. Usually there is not much production going on there, but the money rich people bring in move the housing prices up in these ares.

In many cases it's not too obvious or transparent, but the main thing moving real estate prices is the local economy.

 

[Marianne]

Just to give you some feedback:

The ticket price for using the bus in Athens (at the rest of Greece it's more expensive) has gone from 1euro to 1.5. The price of 1lt of milk is around 2 euros (it depens on the supermarket or minimarket that sells it). Gasoline price is 1.7euros/litre and last year it was 1euro/litre. Bread is now sold 1.5-2.5 euros per 0.5kilo (depending on the bread) while a year ago it was 1-1.5 euros. And the list goes on and on.

So in Greece we have a reduction in salaries around 20-30% and a 40-60% increase in everyday goods the last year... So how Greeks are supposed to live? Go figure...

 

[LeBrok]

It really sucks Marianne, I feel your pain.

 

[Marianne]

I hope we will get out of this situation soon, but I see the government making mistakes on how they are handling the situation.

The IMF is asking us to increase the annual income so what our government does is increasing VAT. The problem is that since they have already decreased the salaries, people are not buying as much and by increasing VAT people buy even less. This leads to decreased income for the state. They expected to get around 700mil euros extra by increasing VAT but what they got was barely 500. The only reason we managed to reach the goal IMF set for us this year was demanding from businesses to pay more taxes for the last 5 years, and that barely covered the difference.

Now they found out that the National Bus and Metro company has a huge dept and instead of trying to figure out how all that money disappeared illegally, they decided to increase the ticket from 1euro to 1.5. At the moment it is more expensive to take the bus than using your car to cover the same distance within the city. So much for green growth and clean environment...

They keep increasing the taxes in order to get fast the money they need to satisfy the IMF and this is fine for a few months as long as they have a plan for the future to promote growth and increase income but they don't.

People are buying less and less and this leads to small businesses closing and people becoming unemployed which makes them buy even less. They should give businesses incentives to not fire people, they should reduce the taxes they pay and encourage people to start new companies but I don't see any of these happening.

I really hope they have a plan because I don't see Greeks being patient for long...