Central Bank lending rules fuelling wage war
Published 07/04/2016 | 02:30
Strict Central Bank mortgage rules are fuelling wage demands by lower paid workers, unions and business leaders have warned.
The clampdown on lending is contributing to a clamour for higher pay, which could escalate into a summer of industrial unrest.
A survey by the Irish Independent reveals starting salaries for many State workers, which were slashed by up to 10pc during the crisis years, mean they have no chance of buying a home.
Clerical assistants are working for pay rates that are more than €8,000 lower than colleagues who had been recruited before them. Gardaí earn €23,750 on attestation, and €25,726 in year one. A full-time firefighter in Dublin earns €22,976 a year, while a newly hired teacher's pay is €31,009.
Unions said regulations that have limited the amount that can be borrowed to 3.5 times gross annual income and increased the deposit needed to buy a home are already driving the clamour for pay rises.
The Garda Representative Association (GRA) revealed that one of its newly recruited members was recently offered a maximum mortgage of €67,000.
The banking official told him he could actually offer him a bigger personal loan.
After 19 years, a garda at the top of the pay scale will earn €46,793, which would still put the average mortgage out of reach based on the new criteria.
The average house price nationally is €191,194 and €358,333 in Dublin.
"Recently, I went to see a number of banks to perhaps secure my first mortgage as a first time buyer," said the recruit in a letter to the garda body.
"Are we now to apply for affordable/social/emergency housing? Can you advise how a new garda can get himself a home?" he asked.
The leader of the Irish Nurses and Midwives Organisation, Liam Doran, said the Central Bank rules crop up regularly in conversations with members.
"Of course, these Central Bank rules will drive pay claims. You don't have to be Einstein to work it out.
"If you were a nurse on €30,000 and your partner was on €30,000, you are supposed to save €45,000 for a deposit in Dublin, and then have money to pay the mortgage. It's self-evident that the rules and the rising costs of rent will inevitably feed into the demand for increased pay, as people have to live."
He called for an acceleration in the restoration of the €2bn pay cuts in the public sector ahead of the ending of the Lansdowne Road agreement in 2018.
His call was echoed by the country's largest union Siptu, while the general secretary of the Public Service Executive Union, Tom Geraghty, has also demanded that pay rises are fast-tracked before the deal that already restores up to €2,000 to public servants runs out.
Vice President of the GRA, Ciaran O'Neill, said the mortgage rules are "absolutely an issue" for new recruits and will drive demands for extra pay.
He said garda recruits range in age from 19 to 36, so many have young families and are trying to get on the property ladder. "They're looking at whether another job might pay them better," he said.
Business groups are also concerned about the impact of the Central Bank rules. Mark Fielding of the Irish Small and Medium Enterprise body (Isme) said the rules are already being used as a key argument when workers seek pay rises.
"There are three things we keep hearing," he said.
"First of all, they note that the minimum wage increased by 6pc. Secondly, they say that their salary amongst their comparators is higher elsewhere, and the third thing is mortgages and saving for a home."
Ibec said it did not have evidence to link the mortgage rules to wage expectations - but warned of a repeat of "past mistakes".
"The argument wages should be increased to make property more affordable suggests one of the most obvious lessons of the crisis has not been learnt," said Maeve McElwee of Ibec.
She said one of the big factors in the property collapse was unsustainable debt levels and wage inflation feeding through into a property bubble.
"Over the coming months we have a chance to further cut unemployment and attract back those who left during the crisis, but we must not repeat past mistakes in the housing sector. If costs spiral and we lose our competitive edge we will pay for it in jobs."
Garda recruits, who have left the force because they could not live on their pay, recently argued that they would earn more if they worked in Tesco.
Our survey reveals that starting pay in some sections of the public sector is not far off retail rates - ranging from around €10.50 to €11.95 an hour. But retail union Mandate said gardaí entering the sector were unlikely to get more than 30 hours' work a week.
But public sector pay rates at entry level are still lower than they were in 2010, when the 10pc pay cut was imposed by the Government. More than 6,000 teachers are on lower pay scales introduced in 2011 and 2012. Lower rates that were applied in 2011 were cut further the following year, when the top-up allowances paid to teachers were withdrawn.
And the number of public servants on family income supplement has grown from 2,976 in 2011 to 3,796 this year.