Central Bank says further pay revisions needed

The Irish Property Bubble (2006) The Republic of Property
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rte.ie/news/2012/1005/centra … iness.html

The Central Bank has said that public and private sector wages need to fall further so Ireland can regain competitiveness.

The bank has marginally cut its growth forecast and increased its estimate for unemployment for 2012.

It has also called on the Government to cut the deficit more quickly than planned.

It said this would shorten the period of uncertainty and help recovery.

In its latest quarterly bulletin, the Central Bank said GDP was expected to slow to 0.5% growth in 2012 compared to a previous estimate of 0.7%.

It predicted that GNP will contract by 0.4%.

That is expected to be followed by a pickup in growth next year to around 1.7% in GDP terms and 0.7% in GNP terms.

The bank has based its projection on some recovery in external demand next year, alongside a gradual stabilisation in the domestic economy.

Employment growth, the bank said, is not likely to emerge until next year at the earliest.

It welcomed a number of initiatives at euro area level but warned that risks remain, including a resolution to the sovereign debt and banking problems in Europe, and a marked economic slowdown at international level.

The Central Bank urges the Government to at least adhere to the deficit targets set out in the Troika programme, with a suggestion that it might go even further.

It stated: "Without increasing the overall scale of fiscal correction, there is a case for getting the adjustment over more quickly.

“This would shorten the already lengthy period of uncertainty which has been bad in itself and has doubtless slowed investment and other spending plans.”

On the issue of pay, the Central Bank said remuneration remains too high in the public and private sectors, which it warns is discouraging expansion and investment by exporters.

It said reducing pay would make a significant contribution to improving competitiveness and productivity.

In an interview with RTÉ News, Central Bank’s Chief Economist Lars Frisell said wages were 10% higher than that of Ireland’s trading partners.

Today’s quarterly bulletin also said a recovery in consumer sentiment is expected to contribute to a stabilisation in spending this year, but a modest decline is predicted for next year.

The inflation rate is expected to come in at around 2% for 2012, slightly higher than predicted in the previous bulletin.

Inflation for next year is forecast to average at 1.3%, but the Bank warned that indirect tax measures announced in the Budget could affect the outcome.

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Funny this, usually when someone posts about the need for pay cuts on the pin everyone piles in to that failing to cut pay will lead to the end of western civilisation as we know it.

However nine hours after this was posted it hasn’t attracted any interest.

Could it be because the Central Bank has called for cuts in both public and private sector pay?

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Spot on mocane. Its very easy to silence the cut everyone but me brigade with a simple cut everyone suggestion.

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cut my wages. the only reason my wages were so high was because the cost of living was ridiculous due to property prices escalating (among other things)

but before you cut me, cut the rent relief floor so that i can afford to rent somewhere

please cut me, so the cost of living can reduce and we can become competitive again

if we all earn less, everything costs less, no? but the government would get less tax, and their bill is fixed? what happens then? would the balance of more jobs paying tax make up the shortfall for the interest payments?

i’m no economist. what is the solution?

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I think we are still in shock that 5 years into the recession - they are coming out with this only now.

Irish wages (public and private) have been too high for years - even before the boom.
Much of those pay increases came about by matching inflation during the tiger years.
Inflation in the main was not caused by goods inflation but services inflation notably health and education.

The only wage increase most people have received over the past 4-5 years has not being in nominal terms
but in real terms thanks to deflation. When we have further deflation then it will be easier to accept wage reductions to maintain the wages in real terms.

As regards cutting the deficit by more, that too is obvious. But why tell us now, why not in 2009?
We have been pumping billions into the economy (expenditure pumped into economy > revenue taken out in form of taxes) for the past 5 years and it is clear that it has had very little long term effect .
Admittedly thats is because we have been channeling it into current expenditure rather than capital expenditure XX

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wont that force more people into mortgage arrears if wages are cut ?

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Expect to see new hirees hired for less, jobseekers accepting less and workers not seeking pay-rises.

Yes, increases in mortgage arrears inevitable if real wages decline. But there is still fat on the bone to be trimmed.

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Yep. Deleveraging is a fast fading pipe dream. It is a nonsense that at this point in time the cb begin to call for it. Only real solution now is the printing press. In the old days they would have well cranked up by now. Since it is gone, all that is left to them is ineffectual bleating.

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unless we left the euro

is that possible.

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Have to say I’m coming to the view that it is inevitable. May be a long way down the road. But there is only inflation left to get solvent again. Deleveraging just is not going to go all the way by a very long shot. The effort at it is actually making things worse.

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Starting salary for my job is at 2004 levels. Where is your’s at?

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How can the central bank call for PS pay cuts, what moral, academic or statutory role have they of any relevance… given their previous brainfarts the whole way through the boom. They are no more relevant and powerful now than then, arguably less so as “The protestant on a horse” IMF/ECB/EU troika really call the shots.

Enda Kenny will bleed to defend the CPA, leaving only the Private sector stooges to pick up the tab.
Gov is ineffective in engaging constructively with the Unions. Christ I think FF made more progress on reform.
There’s no need to change now surely?

Unless the troika is waterboarding Enda and the union bosses better just forget about it.

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I’m still wondering when I’ll get back to 1999 levels. Y2K… happy days :slight_smile:

Me apples and oranges are all at swings and roundabouts.

All my wages are an export…

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PS I second those that wonder what the news in this release is, except that the Central Bank has woken up to some of it’s responsibilities - it is more than an arm of the state, it is a critical arm of the state…

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Yep - maybe the reason that we have been doing so well in IT is that our wages are well below UK and European levels. This has one bad side effect though - we can’t attract IT labour into this country because the cost of living is so high. The turnover in contract staff from other countries is very high - few last more than 6 months. All the work is in the urban ring with crap public transport and no social life. These guys don’t expect to have to buy a car to get to work and they expect to be able to live in an attractive city centre. The word is getting around and its now impossible to attract qualified foreign contractors. At the beginning of the year the issue was visas and work permits for Eastern Europeans - now they’re not even appearing on the lists. Almost every job I have seen filled in the last 3 months has been an Irish graduate, usually replacing someone from Europe - they seem either to go home or to Scandinavia -seems that the pay/lifestyle balance is optimal in Scandinavia.

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Central Bank states the bleedin obvious? 400,000 people have had their wages cut to social welfare rates. How many have emigrated? What i take in is 50% down. I’m self employed. Nobody pays my pension but me.I preparing the ground for my own emigration.
Trouble is there are some people who THINK they’ve been the worst cut when in actual fact they’ve barely been touched.

How much are you down?

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Mike, my experience of wages in the IT sector is different:

*Irish software developers are on good money and many below 30 have never experienced tough times in the industry and can be unreasonable in terms of wage demands.
*There are loads of developers trying to move to Ireland, or have already moved here, from Italy, Spain, Portugal, Greece, Romania and even Brazil where wages are generally a good deal lower and the economies are in bad shape (excluding Brazil). Less so from France and Germany where salaries seem to be similar to here. Lots of Indians and even Chinese seem to get in here every year as well of course, one way or the other.
*So these IT people are coming here because the IT sector in many European countries is not as good as here (or the UK). They get higher salaries here, tax is not too bad, they get international experience and get to improve their English and most seem happy enough to stay here for several years (and they rent).
*And without these people there would be a huge shortage of development staff here
*By the way salaries are actually usually lower in the UK than here for permanent roles but higher for daily rate contract roles particularly in the London area - not sure why that difference between perm and contract is there really

Now I am talking above about software development related roles and some other specialist roles such as specialist telco or DBA roles - things are not as good for infrastructure/support roles etc. where salaries are usually not nearly as good. The IT job market should not be considered as a single market or uniformly buoyant - for instance there is probably a slight surplus of senior IT managers and PMs out there.

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Don’t doubt your experience, Caledonia, I think we all only see a small part of the bigger picture - mainly because the IT sector does have so many different parts to it.

Just to explain - my experience is at the higher end of the contract market - good people with 7 or more years coding experience in large scale systems. Most of the teams operating in this country consist of people of many nationalities - many of these are established here with families and are not likely to move - the problem seems to be with those who are not established - they came for the craic and the jobs in the good times and they find Ireland depressing now. They also find it expensive - they probably don’t see any point in setting down roots here - housing, public transport and health care are all cheaper and better in other European countries. Also the after tax salaries are higher in this country up to a certain point but after that the gap narrows. These people started leaving about three years ago, for a couple of years they were being replaced by foreign nationals but now that appears to have dried up - many Indians and Chinese used to come via the UK but the ones with the kind of experience I’m talking about are tending to stay there - its very hard to tempt them across.

As an example I was talking to someone who was trying to recruit a senior technical person (developer) for a company here - he was told the limit was 450 per day, the UK arm of his company was trying to recruit for a similar post in London (and also trying to recruit for it in Ireland by the way) but was offering £600 pd - now London may be more expensive but £600 pd translates to just over €700. On a five day week thats 1250 difference - you could fly out Monday Am back Friday PM

  • Even going London City is usually around €400 if you book a week in advance, leaving you 850 for 4 nights accommodation - Quite a few people have done the calculation and found it works for them. A lot of these UK companies are happy for people to work a day or two from home - meaning cheaper flights and lower accomodation costs. I’ve met people who have done contracts like this in London and in other UK cities.
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This is a good thing surely. Why would we want to import labour if we can provide Irish grads? We’re competitive in this industry and that’s good news. As for Scandinavia being the be all and end all - don’t make me laugh. Boring, puritan, cold, dark, feminazi shitholes IMO. How they rank so highly in the various quality of life indices is beyond me. Seriously. Living in Sweden or Norway is my definition of a nightmare - I’d take a “third world” country any day of the week local government corruption and all. The Finns are all right tho.

On topic; Irish Central Bank = full of shit

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Oops. The Troika have spotted us dragging our heels on the CPA. Now we’re in trouble.

irishtimes.com/newspaper/bre … king1.html