Tag: pay

The blame for the global economic crisis has been placed on many different people, but one area that has been severely criticised for the extent of the financial crisis is banking and financial regulation (or a lack thereof). One thing that has been repeated is that we must learn from our mistakes and therefore tighten financial regulation on a global scale. The Institute for Public Policy Research (IPPR) says the ‘rapid return to the City’s bonus culture shows that real reform has been “very limited”’. France in particular is arguing for tighter financial regulation, including curbing bankers’ bonuses to avoid a repeat of last year’s meltdown. However, it is meeting resistance from the UK and USA. Indeed, some banks appear to have extended their bonus culture.

As the banking sector slowly begins to recover, there is concern that few changes have been made to ensure that there is no repeat of the recent crisis. Banks have been warned that they should not resume taking risks, as they did before, as future bailouts by the government (and hence the taxpayer) will not keep happening. The European Union has now unveiled plans for new ‘super-regulators’, but only time will tell whether they will be a success.

EU unveils new ‘super-regulators’ BBC News (23/9/09)
EU proposes new Financial-Market supervision system The Wall Street Journal, Adam Cohen and Charles Forelle (24/9/09)
FSA head launches fresh attack on ‘swollen’ system ShareCast (24/9/09)
Bank crisis lessons ‘not learned’ BBC News (15/9/09)
US, UK resisting French drive for regulation AFP (22/9/09)
European System of Financial Supervisors (ESFS): Frequently Asked Questions Mondovisione (23/9/09)
Tighter grip on economy needed BBC News (13/9/09)
Turner warns against regulation overkill Money Marketing (23/9/09)
EU calls for European Banking, Securities Regulators Bloomberg (24/9/09)
EU financial watchdog to rely on moral authority The Associated Press (23/9/09)
Obama issues warning to bankers (including video) BBC News (14/9/09)

Questions

  1. What are the advantages and disadvantages of tighter regulation of the financial sector for (a) the UK and (b) the global economy? What forms should such regulation take?
  2. What are the arguments for and against imposing a statutory capital adequacy ratio on banks that is substantially higher than the ratios with which banks have been operating in recent years?
  3. In what ways was a lack of financial regulation responsible for the financial crisis?
  4. Why is the continuation and possibly growth of the bonus culture a potentially dangerous issue for any future crisis?
  5. The articles talk about ‘lessons being learned’. What lessons are they referring to?
  6. The financial crisis has affected everyone in some way. What has been the impact on taxpayers?

Everybody relies on post, whether it is bills, cards or packages, and everyone is annoyed when something goes missing, which has becoming an increasingly common occurrence. Over the past few weeks, a country already suffering from the economic downturn has also been suffering from a lack of post, as workers throughout the Royal Mail have been striking over pay and job cuts. Postal workers are now to vote on a national strike, although the Communication Workers Union (CWU) has said they will call it off if the Royal Mail agrees to stop all redundancies.

And it’s not just individuals who are suffering. Businesses have also been affected, as packages go missing and costs begin to rise. However, there is good news for one firm, the DX Group. DX Mail is the only independent mail operator in the UK which doesn’t rely on the Royal Mail for any part of its service. If the disputes continue, it could see a significant boost to its sales.

Consider the following articles and think about the effect this strike may have on businesses and the economy and then have a go at the questions.

Postal workers to vote on strike BBC News (17/9/09)
The DX: Keeping Business Mail moving during strike Hellmail (30/8/09)
Mail Privatisation to ‘go ahead’ BBC News (11/6/09)
Threat of strikes underlines TUC warning over spending cuts Times Online (14/9/09)
Postal strikes drive customers to Royal Mail’s rivals Guardian (18/9/09)
Postal workers strike in Swindon BBC News (16/9/09)
Royal Mail denies mail backlog BBC News (11/9/09)
Postal strike over job cutbacks The Herald (Plymouth) (5/9/09)
Managers and unions fail to sort out Royal Mail modernisation Guardian (17/9/09)

Questions

  1. In what ways is a postal strike likely to cost businesses?
  2. What other options are there for postal workers apart from strikes? Consider the advantages and disadvantages of each.
  3. How does a trade union affect wages and employment when an industry becomes unionised? What happens if a trade union is facing a monopsonist employer of labour?
  4. What is this dispute about and what do you think is the best way to resolve it for all concerned?
  5. Why in pay negotiations is a trade union more effective than each individual asking for higher pay?

One of the biggest consequences of the recession has been a rise in unemployment. As the economy fell deeper into recession, unemployment began to soar and some believe that it could reach 3.5 million and remain high for the next decade.

But while many employees have lost their jobs or had they pay frozen, some of the biggest earners have received substantial pay rises! The bosses of the FTSE 100 companies have seen their average pay increase by 10% and have shared pay rises of more than £1 billion in the past year.

So as the economy plunged into recession and companies lost much of their value, we still saw an increase in the pay gap in the UK. The following articles look at the pay situation of some of the top bosses.

10% pay rise for the top bosses This is Money, Ryan Kisiel (14/9/09)
Guardian Executive Pay Survey 2009: Should pay be capped? Guardian (14/9/09)
What they make: The highest paid Chief Executives in Digital Media Guardian (20/3/09)
Executive pay jumps despite recession: Report Associated Press (14/9/09)
Unemployment could reach 3.5m and remain high for a decade, CIPD warns Telegraph, Martin Beckford (14/9/09

Questions

  1. How are wages determined in the labour market?
  2. Why do different people receive different wages? What should happen if two people receive different wages for doing the same job?
  3. What are the different (a) types (b) causes of inequality?
  4. Would a maximum price work if it was applied to wages?
  5. Discuss the advantages and disadvantages of different wages. If everyone was paid the same, would everyone be better off?