We have had a economical boom , that have not seen wage taking off as in 1999 or 1989.
"For the whole of 2007, the average year-on-year increase in earnings was 3.4%. Real earnings last year went up by 0.9%"
"For the whole of 2007, the average year-on-year increase in earnings was 3.4%. Real earnings last year went up by 0.9%"
And why is that? Globalization forces in action. So either you hire cheap labour from abroad or you delocalize part of your production thus having a choice in case of hiring difficulties.
Union don't have the leverage they used to have as now the main economy driver is global not very much local. Although I wouldn't be surprised to see healthcare wage soaring in the year to come, putting pressure in the Nordic wealthcare model. Basically cost will rise as the government will slowly cut the cost on wealthcare system.
Now it's up to the global economy ex Japan, US, Baltics, Europe...well let's say it's all about Chinese and Indian Consumers. Should they stop consuming, less money will fall into European pockets ...
What about Housing price...well with anemic wage growth, I wonder where the rescue is coming from... maybe people should start playing Lotto or check wether there is petrol or gold in its own yard..never know...
7 comments:
Housing Finland
Given the global view you may well be correct but from Bloomberg and Stats Finland
"Bloomberg. In Finland, 15,350 nurses withdrew a mass resignation on Nov. 22 after winning as much as 28 percent in wage increases over four years. Workers at state-owned liquor stores in Finland averted a strike by agreeing to a pay raise of 12.6 percent over two years."
"Stats Finland Aug 2008.
Wages and salaries sum grew by 8.5 per cent in April to June
The wages and salaries sum of the whole economy was 8.5 per cent greater in the past April to June period than in the corresponding period twelve months before. The rate of growth increased from the previous April to June period in which the year-on-year growth in the wages and salaries sum was 5.5 per cent.
The wages and salaries sum went up in all main industries. The growth was fastest in construction where the sum was 12.9 per cent greater in this April to June period than in the corresponding period twelve months earlier. Strong growth was recorded also in private health and social work (11.6 per cent), financial intermediation (10.8 per cent) and other services (10.4 per cent). The wages and salaries sum developed favourably in other industries as well. The increase in the wages and salaries sum was most moderate in manufacturing where it grew by 5.2 per cent during the most recent three-month period."
It sounds to me very similar to other periods since the 1970's
Regarding nurse, I already covered an article about that.
You have to remember that it is just a normalization in the case of nurse salaries, as they are still quite low for the amount of the work they do and its importance in the present and future.
With regard to the other sectors, no worry about that as it won't be sustainable as in the 70's. Let's look at construction workers, with construction permit falling at record pace, it will only point to massive layoff at some point, company such YIT, NCC, SRV will build less and will be less profitable (as valuated by the market participants on the stock market) and will start round of layoff..my guess it's for 2009-2010.
With regard to the other sectors, i have to say that's really bad for Finland to have salary raise based on some kind of agreement. So all, in a particular sector, have their salary raised...it looks to me like a communist system not a free market approach that reward the most valuable and competent...
This ultimately will push Finland competitiveness on its knee and won't attract as much foreign investment as it used to. Of course the government could try to counter balance that by lowering corporate tax...but still you will find cheaper tax and better growth in some other European country.
So indeed, it's not the 70's situation , the media here are quite good at distorting the information. I think we will have a absolutely the contrary: unemployement will stay stable over the year to come...not because people are not firing but simply because the employed population is plummeting (mass retirement, death).
"You have to remember that it is just a normalization in the case of nurse salaries, as they are still quite low for the amount of the work they do and its importance in the present and future."
I think you might find that many other parts of the economy have suffered from high inflation over the last few years and an inability to afford to live. One by one they will all demand sufficient money to live on. At this point in time Finland is a relatively rich country and can afford to pay them.
It is irrelevant if this additional money results in Finland becoming uncompetitive because these were the same kind of factors in play in former times such as the 1970's.
Just because the rich want to stay rich does not mean they have to remain rich at the expense of the less well off workers. Inflation is almost out of control and people are going to demand more money just to be able to live.
If Finland allowed housing to be cheaper by releasing more land then people would not need high wages. The rich cant have it to their advantage in every situation for ever and ever.
Finland seems to have all of the problems with housing that the UK has and yet it has a massive land area and relatively tiny population. I am not sure why the poorer have to be screwed at the expense of the better off *every* time even if it seems a fact of life.
"the employed population is plummeting (mass retirement, death)."
An argument for higher wages now and less need for housing later.
For example it appears there is a big shortage of workers for industrial type skilled jobs traditionally done by men?
In part the current "normalisations" we see around the world are that the workers get less and the bosses get more. There comes a point though when if you cant get credit you cannot have any kind of life at all.
Part of the current problem is that the system has created a condition where the poor are paying all they have to the rich and no more is there to be had.
That needs to be "normalised"
Lots of point I can either agree or argue...
"An argument for higher wages now and less need for housing later."
In the 70's probably, but not in todays world. The reason are globalization, delocalization and Advanced Information Communication Technology.
I think people that have issue with a mere 2.5% inflation (on average between 2000-2008) can be put into two category:
1- the people that bought an inflated asset they can barely afford on adjustable rate mortgages. People that have accumulated debt up to the point that any increase of interest rates or inflation make them poorer.
2- The already retired people that have no way to readjust their pension accordingly. The "poor" that have no possibility of wage bargain.
Regarding the land issue, you touch a vital point. I have certainly seen its importance and highlighted it in one article, review it, I think it could be significant: http://housingfinland.blogspot.com/2007/11/jan-vapaavuori-housing-minister-on.html
I guess to my understanding, a reform should be put in place in 2009. Same as the wood tax easing that saw lots of wood available in the market...the contrary a rise in unbuild land will see a sharp drop in the value of unbuild land.
Construction builders have large portfolio of unbuild land. If the construction sector deteriorate as planned, they will start to release them in order to get some cash..this has been observed in the US and currently in the UK.
But I agree one issue is the land price that has a ripple effect on the housing price. This has distorted the market as everybody knows that in Finland land is not problem so having expensive land price is pure speculation and has absolutely NO GROUND...whatever "bullshit" arguments some politicians (the one with big frames) or others (the one with small frames ;->)come with...
Again I totally disagree with this inflation fear...I would say that a new world order has started, the one of disinflation or asset disinflation, a deleveraging of household debt and credit. It will take time...
But again you agree with me that there are all manner of distortions in the way the land is priced but seem to want to blindly believe that the published inflation figures reflect the cost of living.
For anybody on an inflation adjusted cost of living payment such as a pensioner or other worker who has limited ability to bargain this inflation represents a theft of their life times earnt money.
You can argue that the inflation is only a tiny 2.5% but peoples experience in Europe is that it is much higher. So when we look at soaring property prices we also need to consider the real inflation as opposed to the unreal inflation that we are provided with by statistical methods that mean we cannot compare like for like with what we see in the shops.
All we can say is wow! things are getting expensive. And in reply our rulers tell us that inflation is very low. So who do you believe? Those who distort everything else you experience or your very own senses?
And as you say one group of big frame wearers say i am really worried about inflation and the other group of tiny frame wearers say that inflation is under control.
In an equitable system we would see exactly how they calculate these figures and show we are not being misled.
But the problem is that the borrower wants high inflation and does not care. It is the poor who get screwed.
Housing Finland
I apologise for being over the top and just going too far.
I appreciate what you are doing with the blog
Tending to get a bit too involved with all of this doom and gloom at the moment and i suppose it is not good for me.
The ECB doesn't target any asset...and it makes sense.
House price goes up and down, i think if you take a look at the return on investment on house, it's not that great...it's all depends when you buy, at Euphoria time or panic time.
All I can say is that buying a house is a burden for the next 20-30 years and limit what else you can do as most of you wage will go into servicing debt. (I wouldn't talk about renting as it's a quite complex subject as usually people forget lots of parameters...such as valuying risks, flexibility and opportunities among maintenance,real costs etc...).
Now with regard to "incorrect inflation" as you are saying..i was in that camp not long ago too. But since things have changed...
I would be worry about inflation when my deposit lose value as it is the case in the emerging market i.e India, China, Pakistan you name it...
In Europe you are getting rates at over 5% for a inflation at 4% (that is going down.)
I agree that in Finland, monopoly has been quite protected politicians and dominant position in almost all sectors, that is to say that competition is very weak. This is changing but at a very slow pace. Any way if orange price shoot up by 10% then just buy apple...or vice versa
Housing inflation is volatile and always follow a cycle a boom and bust cycle. As you know during Euphoria it's the best investment and when the panic comes nobody is buying and price readjust.
I think you are already seeing a change of attitude...Renting is being seen as safer and bring more choice and less burden (something different than in the 70's where you had rent price control which has been abolished).
Attitude are changing. First time buyer, Students will stay longer at home or share flat in order to reduce cost. Some people renting large flat will downgrade to smaller one and so on until they build some capital that affordability will come back again.
The market will readjust to first time buyer as it has always done, it will take time but this will happen indoubtedly.
Banks have to rebuild capital and the credit will slow...some call that the "minsky moment", and this is somehow what are currently witnessing.
Your comments are welcome and are often judicious.
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