Thursday 23 March 2017

Brendan O'Connor: The opportunity cost – and lost in the top-ups row

Giving top-ups to Kiely and Co meant less funds for disabled children

Brendan O'Connor

Brendan O'Connor

EQUATION: The opportunity cost to Dr Rhona Mahony for being the Master of Holles Street is more than €200k a year, or €1.4m over the seven-year term
EQUATION: The opportunity cost to Dr Rhona Mahony for being the Master of Holles Street is more than €200k a year, or €1.4m over the seven-year term
FUNDS: Paul Kiely's top-up was more than his salary

THERE is an economic concept that is central to the debate about salary top-ups. That is the notion of opportunity cost. The opportunity cost of a choice is the value of the best alternative forgone.

So if you could be making €100 a day working in one job but you choose to do voluntary work instead, then the opportunity cost for you of doing the charity work is the €100 a day you are forgoing. Equally, if you choose to spend a tenner on ice cream, but you could have bought life-saving medicine for yourself with that tenner, then the opportunity cost of the ice cream is fairly high. You get the idea? Scarce resources mean we make choices and we are constantly weighing up these choices. Will I go out tonight or will I stay in and buy a new dress or shirt tomorrow instead. Okay?

So plant that in your brain and now let's look at the big names who have emerged in the top-ups scandal. What you find is that while some of it is as grubby as it gets, all the top-up recipients should not be lumped in together.

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