Not enough migrants arriving to keep pay down - Central Bank
THE number of people willing to move here to work is not going to hit levels seen during the last boom and will not keep wages down, economists at the Central Bank are forecasting.
The Department of Finance expects that another 50,000 jobs will be added this year, barring a hard Brexit, and predicts average wages will rise 3pc in 2019, 3.2pc in 2020 and 3.3pc the following year.
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While that message spells bad news for employers trying to address shortages in key areas, it is good news for those in work, as it implies that wages will continue to rise.
With a record 2.32 million people now in work and recent data showing that just 110,000 are classified as unemployed, pay has started to rise.
Wage gains averaged 2.8pc in 2018, up from just 0.8pc in 2017, according to Central Bank economists Stephen Byrne and Tara McIndoe-Calder.
In the past, migrants from the EU would have filled skills gaps in the economy as they did in the boom years when, in 2007, net migration here topped 100,000 people. By contrast, as the labour market here tightened through 2018, net migration was just 34,000, the economists wrote in an analysis published yesterday.
Rising job opportunities and wages in eastern Europe mean migrants are less tempted to come to Ireland, unless the pay gap is very big. "As such, attracting migrants may only occur at higher wage differentials, going forward, than seen in the 2004-07 period that coincided with the EU accession countries joining the pool of available EU migrants at relatively low wages," Mr Byrne and Ms McIndoe-Calder wrote.
"This implies that the wage-dampening effect of net inward migration may be subdued when compared to the pre-crisis period," they said.
There is also a risk that a rise in the number of workers coming here could put further pressure on infrastructure, especially in housing, which is in short supply in booming parts of the country.
Business group Ibec has highlighted the risk that labour shortages pose to local firms, suggesting they have emerged as a factor in the construction industry. Labour costs typically account for half of businesses' overall costs, and so they are highly sensitive to changing wage levels.
A separate Central Bank of Ireland research analysis, also published yesterday, highlighted the risks from a lack of housing.
"Ireland is likely to require significant inflows of workers from abroad over the coming years, provided the economy remains on a favourable growth trajectory," the report said.
"A continued focus on addressing housing supply shortages can help ensure that Ireland remains an attractive location for the migrants who will be needed to fill vacancies in the labour market."