Rising wages will drive up costs of rent and childcare

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Rising wages will drive up costs of rent and childcare


(Stock photo)
(Stock photo)

Irish labour costs have increased four times faster than other prices in the economy and threaten to drive up rents, housing and childcare costs.

Labour costs have increased by 2.9pc in the past year, the National Competitiveness Council warns today.

Without similar increases in productivity, it will “simply put pressure on Irish prices, particularly for essential consumer products such as housing and residential rent, and childcare costs”.

Economist Peter Clinch, who chairs the council, also said high taxes for those on higher incomes are creating a disincentive to work for highly skilled employees.

The National Competitiveness Council reports to the Government on key competitiveness issues facing the Irish economy and offers recommendations on policy.

In its ‘Doing Business in Ireland 2019’ report, it also noted that high commercial rents are singled out as an issue, and are seen as especially harmful for new and smaller business.

“Ireland is a high-cost economy,” according to the report.

While price inflation generally is low, it singles out rising wages, the high cost of credit and the price of business services including consultancy, legal services and computer programming, which are rising faster than anywhere in Europe with the exception of Luxembourg.

Meanwhile, separate research in Europe shows public sector wage-growth inflating the figure for average wages in Ireland. Pay in the Irish private sector is mostly equal to, or below, the eurozone average.

The cost of employing a worker here rose 3pc last year, outpacing the 2.2pc rate of growth in the euro area and at a pace that was faster than most rich member states in the eurozone.

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Data from Eurostat showed the total cost of employment in Ireland was slightly more than the eurozone average at €32.10 an hour versus €30.60 an hour – factoring in pay and Ireland’s relatively low employer taxes.

However, wages in the private sector here are not higher than the eurozone average – and in some cases lower.

The public service dominated non-business administration sector here, which includes health, social services, arts and entertainment, but not public administration, has hourly labour costs of €37.10 per hour – higher than all but Belgium, Luxembourg and the Netherlands.

Employers’ social contributions and employment taxes here represented 15.4pc of the total cost, against a eurozone average of 25.6pc.

Irish Independent

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