Tuesday 23 July 2019

Surge in labour costs to hit Irish firms

Previous Central Statistics Office (CSO) data showed average weekly earnings rose to €734.60 in the final quarter of last year - up from €716.86 at the end of 2016. Stock image
Previous Central Statistics Office (CSO) data showed average weekly earnings rose to €734.60 in the final quarter of last year - up from €716.86 at the end of 2016. Stock image
Donal O'Donovan

Donal O'Donovan

Irish employers are facing a dramatic surge in labour costs as the economy returns to full employment.

The Central Bank's latest quarterly bulletin says wages will rise by 3.2pc this year and by a further 3.4pc in 2019.

That's dramatically higher than the modest pick-up in the average hourly earnings during the second half of last year.

Previous Central Statistics Office (CSO) data showed average weekly earnings rose to €734.60 in the final quarter of last year - up from €716.86 at the end of 2016.

Pay increases of 3.3pc on average this year and next would take the average to €783.72 by the end of next year.

With general inflation in the economy expected to remain modest over the same period, those rising wages will translate into higher real incomes and purchasing power for households - at least those with manageable accommodation costs.

However, it would heap pressure on employers.

Last month the head of the country's main employers' group, Ibec, said Ireland's competitiveness was being eroded in a more severe way than during the Celtic Tiger years, citing wage demands and in rents in particular.

However, the Central Bank data shows wage growth is dramatically uneven across the economy.

The lions' share of wage growth is being grabbed by higher skilled and specialised staff.

Figures for the end of 2017 show that workers classed as professional and scientific grabbed the biggest wage gains - approaching 6pc - followed by those in the technology sector.

The transport and storage and construction sectors saw wage declines.

The wider Central Bank quarterly bulletin forecast continued economic growth driven by domestic activity and international growth, with a positive contribution from both domestic demand and exports.

However, the volatile international climate - including the effects of Brexit, currency volatility and tax reforms outside Ireland - means national and private finances must be resilient to unexpected events, it said.

The Central Bank's Director of Economics and Statistics, Mark Cassidy, made what were described as "small upward revisions" to the projections for growth in 2018 and 2019.

The economy is now forecast to grow 4.8pc for this year and 4.2pc next year.

Unemployment is projected to fall to an average of 5.6pc this year, and to 4.8pc in 2019 - below what's regarded as full employment.

An extra 99,000 people will be in work by the end of 2019.

Separately, the number of professional job vacancies in Ireland increased by just under 2pc month-on-month in March, according to the Morgan McKinley Ireland Employment Monitor.

In its update, Morgan McKinley Ireland warned that as the labour supply tightens, policies need to be put in place to ensure that Ireland is able to capitalise on global opportunities arising from Brexit and "the cohort of international talent now looking at Ireland ... to ensure that we continue attracting and retaining talented people in Ireland".

"These policies continue to centre around housing, employment permits and education," it said.

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