Tuesday, November 25, 2014

25/11/2014: Irish Recovery: A Dreamland of Falling Wages & Rising Work Hours

More fantastic news from our 'labour cost competitiveness' fairytale economy: average weekly earnings fell 0.8% y/y to EUR671.70 in Q3 2014, just as the economy continued to recover from the blistering growth of Q2 2014.

Revised figures for the sustainably booming Q2 2014 showed earnings falling to EUR684.97 in Q2 2014 - a decrease of 1.5% y/y.

Table to summarise the latest data:

  • Average hourly earnings fell 1.4% y/y in Q3 2014. 
  • Average hours worked rose 0.6% (normally a good sign), which meant that people worked more for less. 
  • Hence average weekly earnings fell. Cheers must be heard at the IBEC and across Official Ireland as that meant the labour costs have shrunk. 
  • Except, while average hourly earnings fell 1.4% (-EUR0.29) y/y, average hourly labour costs fell only 1.1% (-EUR0.26) so workers got poorer more than economy got 'competitive'. Oh dear… beggar thy people economics at work.

CSO notes that "average weekly earnings increased in 6 of the 13 sectors in year to Q3 2014". By converse this means average weekly earnings did not increase in 7 of the 13 sectors. Kind of looks gloomy, doesn't it?

So I must get more positive on the news front. Good news is that "the largest percentage increase in the Industry sector (+3.4%) from EUR805.44 to EUR832.59. The largest percentage sectoral decrease was recorded in the Professional, scientific and technical activities sector which saw weekly earning fall from EUR792.27 to EUR750.35 (-5.3%)."

Now, wait… that last bit is somewhat puzzling if we are to assume we are operating an exports-intensive smart knowledge economy backed by 'best employment creation' by the MNCs.

Ah, never mind… here's the summary:

Over the longer range, "average hourly total labour costs decreased by 1.9% over the four years to Q3 2014 from EUR24.72 to EUR24.26 per hour. The percentage changes across the sectors ranged from -10.8% in the Education sector (from EUR40.66 to EUR36.28) to +7.6% in the Information and communication sector (from EUR31.51 to EUR33.90)."

All of which should make us only more competitive as the 'labour costs mean everything' economy, and less attractive to anyone with marketable skills. Now, lets hope companies will pick up investment on foot of all these 'savings' because it is hard for me to see how on earth these figures can be supportive of any growth in household consumption and investment.

And, of course, the above figures fly in the face of claims of robust jobs growth and rapidly declining unemployment. Just as they fly in the face of the claims that our economic growth is driven by knowledge-intensive R&D-rich innovation economy.

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