07 May 2009

The Wisdom of Gorz

Yesterday's post and my expressions of dissatisfaction with current direction of the Green Party elicited quite a few direct responses to me via email and in person (shame on you all for not using the comments field!). Most folks were of the opinion that Patrica McKenna really should have left the party sooner, but were split on whether this was a good or bad thing for the Party as a whole.

I've replied to everyone individually, but thought it worthwhile reposting a paragraph or two from one of my responses below:
"While not a huge fan of Patrica myself, and less so of her occasionally counterproductive argumentative manner, she was one of the few prominent voices in the Party speaking out on issues of social justice, issues that used to be a cornerstone of the Party.

My main concern with our time in Government so far is that publicly we seem to have been pigeonholed into only talking about populist Green (with a capital G) issues - carbon tax, lightbulbs, cycling, etc, and our Ministers seem similarly to be trapped into only discussing areas directly connected to their portfolio, or the value of the Green economy. Issues like the Corrib pipeline, Tara bypass, use of Shannon by US Military and Rendition flights were all important during the election, but seem to have fallen by the wayside during our time in Government. Similarly my own personal opposition to the Lisbon Treaty is not a Eurosceptic one, rather it is based on concerns over its poor and unenforceable implementation of The Charter of Fundamental Rights, and the lack of any significant protection or enforcement of workers' rights contained therein; Ireland belongs at the heart of Europe, but should use/have used its power as the only nation to put the Reform Treaty to a popular vote to push for true reform that protects the rights of every EU citizen, not just those of transnational businesses.

For me the Greens have always been a big tent party, taking in a diverse group of views from the centre-right to the far left, all united by a common belief in the importance of environmental and ecological action above all else. Internal debate is good, and we should be able to continue to support a wide range of opinions. However coming into an election is never the time to hold such a debate, but I hope following a successful election campaign we can as a Party take some time to have further honest, open and frank conversations about how wide a platform we want to have as a party, and how best to use or position and influence in Government."
One could argue that in this time of global crises it is the economy that is first and foremost on everyone's minds, and that other issues will understandably have to moved to the back burner. Hillary Clinton recently signaled this exact sentiment when questioned about putting pressure on China over its Human Rights record.

Accepting that argument for the moment, and as we approach the local and EU elections it is definitely worth looking at the Green New Deal, published by the Greens at this year's conference in Wexford. It offers a fairly comprehensive package of investment and incentives to stimulate the growth of a substantial Green sector in Ireland, creating 10,000 jobs this year alone. This is certainly commendable, but I believe that given the scale of the crises before us, with predictions of 16% unemployment by next year, the Green economy alone can never be the answer to our problems.

Given the fact that the Government's traditional tax and cut methodology has failed to stem the tide of recession, a radical new approach needs to be adopted, and it is here that the Greens could exert a positive influence by extending Green economic theories beyond the bounds of the Green Economy. I am, of course, referring once again to the work of Andre Gorz, the French ecological socialist, economic philosopher, and all round champion of the oppressed working and middle classes.

If one applied a Gorzian approach to our current economic crises, immediate benefits could be realised. Let me start with a basic premise that I think few would disagree with: It is better for the economy to have people employed, than unemployed. An unemployed person currently costs the state around €200/week in dole, excluding medical cards, rent allowance etc. They also cost the state indirectly in unearned taxable income, and loss of capital directly injected into the economy.

Let us examine a hypothetical case of a small business that employees 4 workers each earning the average industrial salary of €33,000. The company needs to make immediate savings of (coincidentally) €33k, and so is faced with one of three options, either make one worker redundant, reduce the hours and salary of all four workers by 25%, or reduce the hours and salary of two workers by 50%. Assuming all four workers are equally productive, the fairest solution would appear to be to spread the cuts between all four. A reduction of 25% in hours would lead to a reduction of €158.75 per week, but still leave an annual taxable income of €24,750*. As all workers are still employed the Government is saved €200/week in Unemployment payments.

However when one examines the breakout of tax and PRSI payments in each of the three scenarios, something unusual starts to appear:
Option a) 3 Full Time, 1 Unemployed
3 x Full Time Salary of €33,000, Total Tax Liability: €5975.84
(Tax €2,940, Health Insurance €1320, Income levy €660, PRSI €1055.84)
Total income to Government: €17,927.52
1 x Unemployment Assistance: €10,608
Net income to Government: €7,319.52
Disposable income available to economy: €91,680

Option b) Four workers all on 75% time
4 x 75% Time Salary of €24,750, Total Tax Liability: €2,510.84
(Tax €1,290, Health Insurance €0, Income levy €495, PRSI €725.84)
Total income to Government: €10,043.36
Disposable income available to economy: €88,956

Option c) 2 Full Time, 2 workers on 50% time
2 x Full Time Salary of €33,000, Total Tax Liability: €5975.84
2 x 50% Time Salary of €16,500, Total Tax Liability: €330
(Tax €0, Health Insurance €0, Income levy €330, PRSI €0)
Total income to Government: €12,611.68
Disposable income available to economy: €87,048
While the Exchequer would loose €7,884.16 in tax over the course of a year if the company put all four workers on 75% time rather than making one worker redundant, given that the current Unemployment Assistance is around €204/week, or €10,608/year, it would actually save €2,723.84 if all four workers stayed in part-time employment, and €5,292.16 if two workers went part-time and two remained full-time.

Obviously this is only considering the direct tax payable by workers; three FT workers and 1 unemployed worker would between them have €91,680 of net income, four workers on 75% time would have €88,956, whilst two FT and two half-time workers would have €87,048 between them. Given the fact in April of this year alone VAT takings were down 60% over last year, the importance of workers having available income and a willingness to spend it cannot be overstated. When tax revenues and available disposable income are both considered, it would appear that the ideal solution is in fact c) reducing two workers to 50% time while keeping two workers on Full Time.

Ideal for everyone that is except the two workers who have suddenly lost 50% of their income, each of whom reckons the other guy deserved to be fired instead.

In the April Supplementary Budget the Government closed the "Back to Work" allowance as of 1st May this year. If you had been unemployed for 2 or more years, the allowance allowed you to continue to claim between 75% and 25% of your unemployment benefit on a descending scale for up to three years after finding employment. This scheme encouraged folks to retrain or upskill, move into different industries, and consider lower-paid or part-time work in these new industries, with the scheme in effect serving as a financial cushion while one served an apprenticeship in a new field.

Learning from the scenario above, why not introduce a fixed Supplementary Income Benefit to those who voluntarily went part-time and/or job shared? This benefit, less than the current Unemployment Assistance, would be an incentive for workers to collectively bargain for the introduction of part-time or job-share programs, rather than risk all-out redundancy. Although their income would drop below Full-time wages, it would still be substantially better than Unemployment assistance alone. Workers that had more leisure time would be healthier and happier (provided a reasonable standard of living was maintained), and this would have the added benefit of workers having more time and inclination to spend money on leisure activities.

Of course introducing such a Benefit would negate some of the savings made to the government by keeping all workers in this scenario employed, so extra revenue would need to be raised to cover its costs. While not as bold a step as the introduction of the Supplementary Income Benefit, new revenue raising measures would have to move away from the current status-quo of everyone pays equally to one stemming from a position that those in society who can afford to pay the most, should pay the most. In addition to the introduction of a third tax bracket (as in the UK) of 50% for incomes over €150,000, the creation of a new Luxury Tax on the purchase of items whose price was judged to be grossly above norms for that product could also help fund this Supplementary Income Benefit. For example, if an average TV, say a 19" Flatscreen, costs €303, and is taxed at 21.5% VAT, then a 40" HD Flatscreen that costs €1,398 should have a luxury rate of VAT, say 30%, applied because it is four times the price of a normal TV. In this way the wealthiest in society who have a disproportionate amount of the total wealth in the country, shoulder a larger burden; for those on above €150,000/year, paying an additional few percent will not affect their lifestyle to the same degree that it would for someone on €33K.

Thus, thanks to the wisdom of Gorz, everybody stays employed, more money comes into the economy, tax revenues rise and the division of income in the nation is spread a little more equitably. All of this and we haven't even had to touch the Corporate Tax rate.

These are the type of bold ideas that the Greens need to be pushing. They need to halt their current slide into a single issue party, and begin to exert influence in Government on a wider range of issues. They should not be looking at the Green Economy in isolation to the wider landscape, rather they should be discussing innovative moves that impact all aspects of the economy. But more than this, and unlike Hilary Clinton, they should not be willing to sacrifice their morals and values on the alter of the all powerful Economy. It is in these dark times that their role as the conscience of the Government is most important, they should be fighting to prevent cuts to overseas aid and Education, take action to stem the tide of racism that the recession is fostering, and speak out as the voice of the worker in this Government.

For if they don't do it, no-one else around the Cabinet table will.

* All tax calculations are approximate, and have been made using the handy Tax calculator (2009 Supplementary Budget Edition) at Hook Head. Take it all with a large grain of salt.

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