How should we answer “Ireland’s Call” to recovery?

by Noreen Moloney

People all over the country are gearing up for tomorrow’s match against France for the Six Nations title. Fresh off the back of a spectacular victory against Italy, there is a just tangible self-belief that this is Ireland’s year. No doubt, the quiet confidence mixes with the smell of fresh polish emanating from the IRFU trophy cabinet as someone dares to take out the duster.

In the same way, there’s a quiet confidence that our circumstances will improve as a bit of positivity begins to appear in the Irish economy. The departure of the troika last year, improving unemployment figures and positive government predictions on GDP have spurred expectations for the Irish economic recovery.

However, just as the media have talked up Munster/Leinster divisions over Joe Schmidt’s selection for the Irish team, something similar is brewing in the debate about Ireland’s path to economic recovery; pay rises versus tax cuts. The Sunday Times reported last weekend that the Taoiseach was willing to quash recent calls for pay rises from unions with tax concessions. However, Siptu’s president Jack O’Connor rubbished any rumour of negotiations taking place between unions and the government.

Unions such as Siptu and Unite have publicly vowed to pursue pay rises in profitable sectors. At the same time the government is cautious about pay rises and jobs minister Richard Bruton warned this week about the potential harming effect pay rises could have on Ireland’s competitiveness.

However, debating the merit of pay rises versus tax cuts is a bit like a barstool analysis of Schmidt’s selection tactics. Pay rises are already happening. Siptu has concluded 188 agreements across the manufacturing sector for at least a 2% increase. Mandate has secured pay increases for members in the retails sector averaging 2.5% for 40,000 members. Price Waterhouse Coopers also reports that 73% of companies will increase their employees’ pay this year, up from 62% last year.

There have been hiccups on the road to recovery as recent CSO figures show the economy contracted in 2013 by 0.3%. However economists argue this is not the start of economic decline and there are still grounds for wage increases

The debate should really focus on how to implement pay rises without harming the economy in combination with tax cuts. The concerns for the economy surrounding wage increases cannot be dismissed against the backdrop of large national debt. Yet equal measure needs to be given to the impact that tax cuts can have. Taxes and social transfers form the basis of the welfare system in Ireland and public services. Cutting taxes in turn cuts the funding for these services.

This is our chance to shape the future course of the economy and we will stand a better chance of moulding Ireland’s future if we avoid polarising the debate along ‘pay rise v tax cut’ lines. Getting the mix right, as Joe Schmidt knows only too well, can deliver a winning formula.