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Pay freezes predicted despite country’s economic growth

Labour costs in Ireland are rising at one of the slowest rates in the EU despite the country’s strong economic performance.

Ireland is currently the fastest-growing economy in western Europe, yet the latest data from Eurostat shows that wage costs in the country rose by just 1.1pc in the last three months of last year. Overall, wages across the EU grew by 1.8pc during the same period.

The data shows that wage growth in the business sector of the Irish economy is growing at a much faster rate, with pay rates up by 1.9pc in the final quarter of 2016. That compares favourably to the non-business economy, which actually contracted by 0.4pc during the same period.

That would support the view of the Irish Small and Medium Enterprises Association (Isme), which says that the number of uncertainties facing the Irish economy means many businesses are likely to freeze wage increases and hiring plans in the year ahead.

“The feedback we are getting from members is that there have actually been some wage decreases in the final quarter of last year. There is a general push to put wages up across the board,” said Isme CEO Neil McDonnell.

“However, it’s important to note that Ireland’s GDP figures are not reflective in the real economy where many of our members are operating. There is a wider perception that wages should be going up, but that doesn’t necessarily reflect the reality for individual businesses on the ground,” Mr McDonnell added.

The Eurostat figures show that wage growth in Irish industry rose by 2.5pc at the end of 2016, outstripping the overall EU rate of 1.8pc.

Wage costs in the construction industry slowed to 0.6pc in the final quarter.

That represents a levelling out of wage pressures in the sector, with labour costs having risen by 3.1pc in the second quarter of 2016.

However, the sluggishness of the Irish construction sector in the final quarter is noticeable when the figures are compared against the EU average, which stands at 3.1pc.

Wages in the services sector were ahead of the EU average in Q4, with growth of 1.9pc comparing favourably to an average wage expansion of 1.7pc in the wider EU.The statistics also show that the job vacancy rate in Ireland stands at just 1pc which is lower than the EU average of 1.7pc.

Wages in eastern Europe are rising at the fastest rate across the continent with Romania up 12.3pc, Lithuania rising 10.7pc, Latvia up by 8.1pc and Bulgarian wages improving by 8pc in the final quarter of last year.

The depression in the Greek and Italian economies is evident in figures that show wage growth to be in neutral or negative territory.

In fact, the continued effects of the recession on Greece show no signs of abating. The Greek economy saw wage contraction of 3.9pc in the industrial sector, 8.9pc in the construction sector and 2.1pc in the services sector.

Interestingly, the figures reveal a boom in UK construction in the final months of last year, with growth of 6.1pc.

However, it is apparent that wage expansion is weakening in other areas of the economy.

Industrial wages in the UK grew by just 0.5pc, which is comparable to levels seen in southern European countries, but well behind those seen in the northern part of the continent.

Wages in the UK services sector were on par with the EU average, which stood at 1.7pc.
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