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Pay cuts are not a panacea nor even a help

Paul Sweeney @ progressive-economy@tasc
24 February 2009

The remarkable barrage of calls for pay cuts, from both orthodox economists and the “pop economists”, as the the solution to (most of) our economic problems, in the mainstream media, without any alternative views, demonstrates that real solutions to our immense economic problems are further away than we thought. It demonstrates a very limited view of the complexity of competitiveness and the focus on one element of cost competitiveness is misguided.

Competitiveness is very complex covering costs, quality of infrastructure, services, public services, credit etc (see for example, NCC report contents which gives an overview of some issues around the subject on page 7). The list of “12 pillars of competitiveness” in the World Economic Forum’s World Competitiveness Report (page 3 of Chapter 1) can be found here. Some economists have even posted charts with rising costs and labour costs as THE indicator of overall competitiveness!  Link to article

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