The IDA and the wages debate

Michael Taft: A couple of weeks ago, the Chief Executive of the IDA, Barry O’Leary, jumped into the debate about wages – suggesting they were undermining our ability to attract multi-national companies. He proposed they should be cut (though later he backtracked somewhat, suggesting that he was only referring to a few companies, a few sectors). Still, it was one more hailstone in a hailstorm that has been pummelling us – we must cut our wages to ‘restore competitiveness’.

I could suggest that Mr. O’Leary read some of the posts on this site, or UNITE’s ‘The Truth About Irish Wages’, or research by both ICTU and SIPTU. But I can appreciate he is a busy man. So I’ll just suggest that he read his own website. The IDA makes wonderful play over the fact that we are a relatively low-waged country when compared to other EU countries. From their Vital Statistics webpage they show just how low our labour costs are, using data from the European Federation of Employers. The IDA is so proud of this table that they feature it twice on their website.

They also present comparative data with the UK. On this measurement, Irish wages are higher for all the non-managerial categories. This is not so much a function of actual higher wages, as of Sterling’s depreciation. When the UK and Irish wages are compared through purchasing power parities- Irish wages trail behind as well.

None of this should be too surprising. The OECD recently published its 2007 update of its Benefit and Wages database. It showed Irish private sector wages trailing the EU-15 average by over 7 percent. And when one takes the average of our peer group – the Top-10 economies (excluding the poorer Mediterranean economies) – we trail by over 14 percent.

The question is not whether Irish wage are too high – they’re obviously not. The real question is – on what basis, on what empirical evidence, do the real devaluationists base their contention that our wages are too high?