Growth requires wage recovery

The next phase of growth won’t happen without pay rises in all sectors of the Irish economy, according to IMPACT general secretary Shay Cody. He said wage recovery was essential to improve reduced living standards and encourage domestic spending, which would create more jobs.

Shay was speaking after the finance minister announced economic growth of just over 3% this year. Minister Noonan said he expected something similar in 2015.

“This good news confirms that a modest recovery is really happening. But the next phase of growth is not going to happen at all, nor can current growth be sustained, unless we begin to see more widespread wage recovery. It’s the essential missing ingredient in Ireland’s fragile recovery. Continuing wage repression will stifle growth before it can take hold,” said Shay.

Shay said the role of wage growth in economic recovery was accepted in other EU states. The Bank of England expects real wage growth in the UK to resume next year before accelerating, while the European Central Bank has backed the Bundesbank’s encouragement of higher wage increases in Germany.

German trade unions have agreed above-average pay hikes in the past year after a decade of wage restraint. In April, 2.1 million German public servants agreed a 3% pay rise this year and a 2.4% increase in 2015.

Shay’s comments come as talk of improving incomes gathers momentum, with intense speculation about tax cuts in the budget and a growing debate about wage recovery. In a blog this week, Tom Healy of the trade union-backed Nevin Economic Research Unit revealed that the fall in Irish wages has continued into 2014 despite increasing employment and output.

Healy’s analysis of recent CSO figures, and OECD data published last week, also reveals low pay is still widespread and that average wages are falling in Ireland but rising elsewhere. These trends have gone largely unreported as media coverage focuses almost exclusively on the gap between average pay in the public and private sectors.

IMPACT has been in the national print and broadcast media responding to attacks on public service pay, most recently in the Sunday Business Post.