Editor’s Note
In the capitalist system, employers extract surplus value from their workers in the form of profit. That surplus is the value created by employees in excess of what it costs the employer to pay them. Karl Marx was among the first to identify this ‘exploitation’ and railed against it, leading to communist experiments in Russia and China. Under communism, there was no profit reward for owners of capital and assets, as everything was owned by the state. Except for Cuba, communism has been consigned to the dustbin of history, after it was realised that economic growth and national prosperity is generated by a small number of individuals who are driven to accumulate surplus value in their own interest.
For the owner of any business, the ideal scenario is to pay staff as little as possible. The lower the salary overhead, the cheaper the product or service produced by the firm, which boosts sales and profit. That was why when China embraced capitalism, American manufacturers moved their factories from their homeland to Shenzhen. That sort of shift was mirrored in Ireland too after EU enlargement to the east, with multiple low margin manufacturers upping sticks.
Over time, capitalist employers have become much more fettered by the state. In Ireland, it is illegal to reach agreement with an individual to work for below the National Minimum Wage. Certain sectors of the economy have wage levels set by ministerial regulations. Employees benefit from an abundance of statutory entitlements and protections. On the way soon is the latest entitlement, statutory sick pay, paid for by the employer. Employers are even taxed for employing people, in the form of 11.05% employer PRSI.
The employer also has to compete with the state’s welfare regime, which raises the floor at which people decide it’s worthwhile to work. The Pandemic Unemployment Payment has been a huge disincentive to labour force participation. At the top rate, a PUP recipient received €140 a month less than a person working full-time for the minimum wage. Small wonder that in early September there were 11,700 construction workers claiming PUP, 27,500 people who formerly toiled in hotels and restaurants, 22,400 shop workers, 7,100 hair and beauty salon staff, and 8,200 factory workers.
The PUP rates were finally cut by €50 on September 14, with students removed from the scheme a week earlier. Further €50 cuts to the three PUP rates are planned for 16 November and 8 February 2022. Those cuts are coming far too late for the thousands of service sector employers who are currently desperate to hire staff – so that they can make a profit.