Friday Stat Attack: The Low-Paid Economy

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We need to keep wages and employers’ PRSI (the social wage) low to ensure we are competitive. That’s the line being spun everyday by employers’ organisations, Government Minister and a number of commentators.  You’d think from all this that Ireland suffers from high labour costs.  Do we?  Not a bit.

How much would average Irish labour costs have to rise just to reach the average of other EU-15 countries?  Quite a bit.


As seen, labour costs in the business economy (essentially, the private sector) would have to rise by over 16 percent to reach the average of other EU-15 countries.

However, when we compare ourselves to the average of other EU-15 countries not in bailout (that is, excluding Greece and Portugal which are trapped in massive wage deflation), the increase needed to reach average climbs even further:  over 26 percent.

And labour costs would have to rise by a massive 44 percent to reach the average of our peer group – other small open economies (Austria, Belgium, Denmark, Finland and Sweden).

Since 2011 (the latest year we have data for)  the increase in labour costs in Ireland have lagged behind almost all other EU-15 countries – marginally ahead of Spain, and ahead of poor Greece and Portugal which are experience actual cuts.

Yes, our wage levels are uncompetitive; they are uncompetitively low.   This is resulting in reduced demand in the economy, reduced tax revenue for the Exchequer and reduced living standards.

But, then, that’s what a low-pay economy is all about.

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