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Employment, wages and economic recovery in the Republic of Ireland

Posted on May 21, 2015 by Daragh McCarthy

Construction
Employment, Wages and Economic Recovery in the Republic of Ireland

The headline figure in the Quarterly National Household Survey is a 2.2 per cent increase in employment in the year to the first quarter of 2015. Other notable figures include: 

  1. A 26.9 per cent annual decline in part-time underemployment—indicating that people in part-time jobs looking for extra paid hours are finding it easier to take up additional work.
  2. A sustained bounce in employment in the construction sector. The annual increase in employment to quarter one 2015 was 18.8 per cent; there are now 121,800 people employment in the sector compared with a high of 276,200 in the second quarter of 2007.
  3. Driven by the recovery in the construction sector, the skilled trades is occupational group with the highest growth in employment for males; up 12.7 comparing the first three months of 2015 compared with the same period in 2014. Caring, leisure and other services, up 10.4 per cent in the same reference period, was the occupational category with the largest growth for females in employment.
  4. The decline in labour market participation in several regions is notable, though it's unclear how much of this is due to demographic changes. Employment in the west of Ireland appears to be on a different trajectory to other regions.

The Earnings Hours and Employment Costs Survey is due to be released next Tuesday. The scope and rate of recovery in wages will be watched carefully over the coming months with employees in many sectors yet to see an increase in earnings to accompany the improved economic outlook. The years immediately preceding the crisis saw median wage growth of between 4.5% and 6.1% across the labour market (Dorris, O'Neill and Sweetman, 2013). Wage adjustments were a part of the response to the recession with aggregate real weekly wages decreasing; the annual change in inflation was consitently higher than the annual change in average weekly wages ( as shown by Figure 3.3a in the latest Quarterly Economic Facts).

The response to the downturn in the labour market in the public and private sector varied. In the public sector gross spending on pay and pensions declined by 11.7 per cent from a peak expenditure of approximately €20 billion in 2009. This reduction was primarily driven by pays cuts and a 9.6 per cent reduction on the overall number of people working in the public sector (excluding commercial semi-state companies) between 2008 and 2014. The level of strain experienced by different sectors of the economy, and the response of private employers to the challenges posed, varied considerably over the course of the downturn. Jobs losses were more severe in the private sector; there are still 154,800 less jobs in the construction sector compared with the middle of 2007, for example. In terms of wages, employers diverged widely in their response to the economic collapse. The proportion of workers experiencing wage cuts more than doubled with the onset of the economic crisis. In total, 47 per cent of private sector workers took a pay cut at some point between 2009 and 2012. Others accepted a pay freeze, while many employees in certain occupations and sectors received pay rises over the same period.

The continued improvement in employment is further evidence of an economic revival. A reduction in the number of workers categorised as part-time underemployed suggests more paid hours are available to those workers that want them and will boost weekly pay for many households (all things being equal). However, the prevalance of low pay in the Republic of Ireland is stark: 30 per cent of employees (approximately 400,000 people) earn below the Eurostat low pay threshold of €12.20 per hour (see Quarterly Economic Observer, Spring 2015). Sustaining the economic revival will largely depend on getting more people into employment and seeing moderate wage growth across a broader range of sectors in the economy, particularly areas—retail and hospitality, for instance—where low pay is widespread. 

Posted in: JobsWages

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