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Two-tier economy developing as skills shortage pushes up wages

IRELAND is fast developing into a two-tier wage economy as gaps open up between professions which desperately need more skilled staff, and those which are struggling in the recession.

Some industries have started paying significantly more to new entrants since the downturn began – but there are many employers who are paying staff a great deal less.

The comparison of starting salaries at all levels from 2008 and 2013, commissioned by the Irish Independent, shows that in some cases the gap has widened by more than 40pc. In comparison with 2008, differences of €20,000 are not uncommon.


For growth industries like computer technology, science, and some financial services, there are often not enough staff to meet demand – driving up wages.

Some recruiters are paying up to 18pc more for selected positions now than they did in 2008. But in contrast, the professions hardest hit by recession are paying as much as 38pc less for new or replacement positions.

The survey by Brightwater shows that a software engineer working in a regional location would have started on €34,000 in 2008, but now the same position is paying €40,000, an increase of 18pc.

A payroll manager in a regional location will today start on €47,500 compared with €45,000 in 2008 – up 5.5pc.

In contrast a newly qualified Dublin-based accountant who started on €56,000 in 2008 is now starting on €48,500 – down 13.4pc – while a newly hired health and safety officer who would have started on €40,000 in 2008 is now starting on €30,000 – down 25pc.

The picture is reflective of the economy overall. And while the technology sector has also been increasing its direct share of employment, its influence has also been instrumental in cutting jobs in other sectors.

This is particularly true in areas like retail which have been impacted by the continued development of e-commerce.

Recent figures by the ESRI show that annual pay rates for those already in employment have more or less stayed the same since the recession kicked off – but they also indicate that employers have slashed their wage bills by drastically cutting the numbers employed.

The resulting large numbers of unemployed clamouring for jobs has pulled down wages for new positions in many stricken sectors, particularly in the lower skilled professions.

Economist Seamus McGuinness of the ESRI said: "What you're observing is the changing balance of supply at work in the labour market. Employers tend not to cut wages, but make adjustments in the numbers of hours worked, and they cut starting wages heavily.

"In areas where skills shortages are in effect, such as in the technology, chemical and optical sectors, wages have started increasing again.

"While areas in which there is a skills oversupply such as construction, retail and the service sectors are having higher numbers of applicants and therefore the wage rate is being driven down."

Economists are also concerned that the current changes will have a long-term effect, particularly on school and college leavers.

"Young people, as new entrants to the workforce, are most impacted and this starting disadvantage will probably continue to have an impact on their earnings in the longer term, even as the recovery resumes," said Mr McGuinness.

Irish Independent