Opinion Editorial

Monday 16 September 2019

We must not choke economic recovery

The fact that the Irish economy is now creating as many jobs as it is shedding is a welcome sign that the recovery in the export-led sectors is gradually feeding through into the domestic economy. The latest survey from KBC Bank and Chartered Accountants Ireland shows that the number of new jobs created matched the number of jobs lost in the first quarter of 2012. This is the first time this has happened since 2007.

And the good news is that Irish businesses expect the pace of the recovery to strengthen, with half of all businesses expecting an increase in activity this year and two-thirds of all companies expecting to recruit new staff at some point over the next three years.

Unfortunately, while welcome, the stabilisation in the jobs market comes after the net loss of 300,000 jobs, which has resulted in the numbers on the Live Register smashing through the 400,000 barrier and the unemployment rate soaring to over 14pc, one in seven of all workers.

There is also evidence that even those workers who have kept their jobs have only done so by accepting wage cuts. New figures from the EU's statistical agency Eurostat show that the average hourly cost of hiring an Irish worker, including employer's PRSI, has fallen from €28 in 2008 to €27.40 today.

While a fall of just over 2pc in average hourly labour costs might not seem like a lot, Ireland is still the only country in the eurozone to have actually reduced hiring costs since the economic downturn began. In fact, Irish hourly costs are now in line with the EU average.

With Ireland having regained its international competitiveness, the results are rapidly making themselves felt. The IDA is enjoying a vintage year attracting overseas investment projects to this country, with the announcement last week alone of 1,000 new multinational jobs.

There is, however, a delicate balance to be struck. While it was vital that Ireland recovered the international competitiveness that it lost during the Celtic Tiger era, further cuts in workers' wages run the risk of being counter-productive. This is because they suck spending power out of an already desperately weak domestic economy.

This is something that must be avoided at all costs. With growth confined so far to the export sectors and the domestic economy as measured by GNP forecast to shrink by a further 0.7pc in 2012 -- the fifth successive year in which the domestic economy will have contracted -- our economic recovery, such as it is, remains very finely balanced. Further wage cuts run the risk of choking off our economic recovery before it has even begun.

Irish Independent

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