Are wages the problem for the hospitality sector?
Posted on October 30, 2013 by Rory O'Farrell
On 30th October water restrictions will be imposed in Dublin and other parts of Leinster. It was reported in The Irish Times that there was 'real anger' amongst business owners as water restrictions are imposed from 8pm.
However the Restaurants Association of Ireland previously described itself as 'outraged by the Government's decision to restore Joint Labour Committees' that protect the pay and conditions of workers in the hospitality sector.
A look at the data shows that some of this anger is misdirected. Indicator 3.1b in the latest edition of the Quarterly Economic Facts show that in 2011 Irish labour costs in the food and accommodation sector were the third lowest of 15 Western European countries, below those of Spain. Labour costs include wages plus other costs to employers such as PRSI. These other costs tend to be far lower in Ireland. Therefore, compared to our peer countries labour costs are not an issue. In contrast, Irish public investment in 2012 (1.9% of GDP) was below the average rate of 15 Western European (2.2% of GDP) countries and only half that of the highest spending country (3.8% of GDP for Luxembourg). Public investment not only provides a short term stimulus to the economy, but increases productivity that allows higher wages to be paid.
Reducing wages is not a solution. There is not much point in hiring someone to clean the dishes when they can't even get the water to fill the sink.