THERE was a staggering 4,500 candidates sitting the exams for teaching jobs that have dominated the news in the last ten days. What is astonishing is that all these graduates were competing for fewer than a hundred teaching jobs. There were some 185 vacancies, half of which would be given to graduates on the infamous waiting list.
If we looked at the issue from an economic point of view, it is blatantly obvious there is an excess supply of labour and in a market economy this should lead to a fall in wages. Even if a public school teacher’s starting salary was reduced by 50 per cent, there would still be at least a thousand applicants for a hundred vacancies in public schools because teaching offers enviable fringe benefits such as a short working day, more than four months of holidays, high job security and a generous state pension on retirement.
The employer, in this case the state, is in a very strong position because the jobs on offer are extremely attractive. In theory, it could introduce a longer working day for half the existing salary and still have ten applicants for every vacancy. In practice, though, there are the powerful unions, which cause huge distortions to the labour market by imposing wages that have nothing to do with supply and demand. The politicians would not dare change anything, not even for new appointees, for fear of alienating unions.
The same wage distortion exists at the banks, ruled by an ultra-powerful union that bank bosses have been terrified of confronting. In the past, 20 vacancies at a bank would also attract a few thousand applicants, because of the high wages imposed by the union and a host of fringe benefits. Instead of lowering entry-level wages, in line with supply and demand, misguided bank bosses, like politicians, bowed to the demands of the union boss, who also secured unheard-of powers, including a say in promotions and new appointments.
This was in the past, but the banks are now stuck with huge payrolls – with messengers on €40,000 plus a year and workers unwilling to serve the public after 2.30pm – they can do nothing about, because any attempt to change things would lead to strikes. Again, the old bank bosses ignored supply and demand, refused to exploit the strong position they were in as employers everyone wanted to work for and allowed the union to run riot. Today’s bank bosses have to deal with the consequences of this gross mismanagement now that banks are not the robust organisations they once were.
The market distortions caused by ignoring the forces of supply and demand, at some point, have to be dealt with unforeseeable consequences.