Not only is the recommendation by ICTU for trade unions to seek pay increases of 3.1% in 2018 wildly unrealistic, it will create damaging expectations in the labour market. Moreover, to further suggest that employers should also compensate workers for government policy failures in housing and childcare demonstrates how out of touch trade unions are with the realities of businesses.
Ireland’s domestic firms, which provide the majority of employment in the State are most exposed to the impact of Brexit and are typically companies with low profit margins. At a time when the absence of a deal on Brexit has the potential to knock as much as 9% off Ireland’s GDP permanently, this is a time for responsible and sustainable wage growth. In addition, it is vital that Ireland remains an attractive location for mobile investment and wage growth must remain in line with that in competitor countries.
Ibec’s HR Update pay survey in October found that 75% of firms were planning on increasing basic pay in 2018. The median increase forecast was 2%. Significantly however, only 60% of firms with less than 50 employees were planning on increasing pay in 2018 compared to 66% in 2017. This may be due to greater risk and uncertainty faced by smaller firms as they are generally more reliant on the UK for exports. These firms are also witnessing increased costs in insurance, commercial rates, rents and other areas of their business at a time when there is limited price recovery in the domestic market. The consumer price level is essentially unchanged over the past decade.
Maeve McElwee, Ibec’s Director of Employer Relations warned that it is imperative that wage growth does not get out of line with productivity, eroding the correction in unit labour costs which supported indigenous exporters during the crisis. This is essential as we face into the challenges that Brexit will inevitably pose for many sectors of our economy.
Ireland‘s international competitiveness improved between 2009 and 2012. Since 2012, however, we have begun to see a gradual slide again on what is already a high cost base. Between 2005 and 2015 while average labour productivity per worker among indigenous exporters grew by 15.6% average wages grew by 23%.
Wednesday, 24 January 2018