Low Pay Commission must benchmark our national minimum wage rates against other similar sized EU countries
Fine Gael Dublin MEP, Brian Hayes, is speaking today (Monday) at a major banking conference on competitiveness – ‘FIBI International Banking Conference 2015: Strategically Positioning IFS’ – in Dublin’s Marker Hotel.
“If the Irish economy is to grow and prosper it must be competitive. Wages, non payroll costs, productivity, and taxes are all important elements of a competitive economy.
“By 2008 average prices in Ireland were 30% above the EU average and Ireland was the second most expensive country in Europe; only Denmark was more expensive. The economy got caught in a vicious spiral of rising prices, rising wages and rising house prices. We were chasing our own tail. Public sector Benchmarking was an exercise in self delusion.
“It took place in a Celtic Tiger fantasy world, disconnected from reality, recklessly disregarding what was happening in other countries.
“It is very interesting to compare German and Irish wage growth in the decade to 2008. During that decade public sector wages in Ireland rose on average by 110%; in Germany they rose by 13%. During the same period private sector wages in Ireland rose by 62%; in Germany they rose by 12%. During that decade however consumer prices and housing costs remained subdued in Germany while Ireland experienced high levels of inflation and rapidly rising housing costs.
“Benchmarking can serve a very useful purpose if done correctly. If we are to stay competitive then we need to benchmark ourselves against our EU partners and against our competitors around the world. A rigorous benchmarking exercise of this nature comparing pay and conditions in the public and private sector in Ireland with other countries in Europe and around the world can serve a very useful purpose. I believe that the low pay commission look at minimum wage rates in the rest of the eurozone.
“In Germany which has only been recently introduced is €8.50. In Ireland the minimum wage is €8.65. We should also be prepared to benchmark Ireland against similar well run countries around the world; Norway, Singapore, New Zealand, Israel. It might also be useful to benchmark Ireland against the State of Massachusetts for instance.
“Restoring competitiveness is never easy. Consumer prices and wages have remained static for several years and our competitiveness ranking has improved. Unit labour costs have fallen. A weaker euro has also given us a welcome competitive edge in two key markets, the UK and the US and of course. A weaker euro is also giving a boost to tourist numbers from the same two countries.
“Even though consumer prices have remained static in recent years, according to the most recent figures, Ireland is still the fifth most expensive country in the EU, with prices 20% above the EU average.
[Denmark, Sweden, Finland, Luxembourg are more expensive].
“Rising housing costs generate strong pressure on wages. If we are to stay competitive, concentrated efforts to increase the supply of affordable and social housing in areas of high demand must be a priority for the public and private sector.
“Staying competitive is also about retaining and attracting talent. Ireland’s tax rates on single people are way out of kilter with all our competitors. Reducing personal tax rates puts money into people’s pockets, it is good for job creation and it keeps Ireland competitive; it is a win-win situation for everyone.”