Dáil Éireann Debate, Thursday - 26 January 2017
51. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which pay demands in the public and private sectors are likely to impact on the growing economy to a negative or positive extent in the future; and if he will make a statement on the matter. [3706/17]
Amharc ar fhreagraProjections published by my Department in Budget 2017 anticipate growth in the overall pay bill (both private and public combined) of 4.9 per cent in 2017. This comprises growth in average pay of 2.7 per cent and employment growth of 2.1 per cent. Pay bill growth is projected to average 5.4 per cent per annum in each year thereafter, with average pay expected to grow at just over 3 per cent per annum. This outlook is consistent with the industrial relations commitments made under the Lansdowne Road Agreement.
To the extent that wage pressures exceed these projections, this could be expected to boost consumption and overall price levels in the near term. However, to the extent that such higher pay rates result in a loss of competitiveness, any positive impact will be offset by lower overall economic activity and lower numbers employed.
Work published previously by my Department titled 'Quantification of the economic impacts of selected structural reform in Ireland', (http://www.finance.gov.ie/what-we-do/economic-policy/publications/reports-research/previous-years/quantification-economic) indicates that a 1 percentage point wage shock which is not offset by a corresponding rise in productivity, could be expected to reduce the level of real output (GDP) by 1/4 percentage point (pp) within 7 years, add 1pp to the rate of unemployment, and reduce the number of people employed by some 0.4 percentage points.
Given downside risks within the international context, it is imperative that wage developments should be commensurate with trends in productivity (output per person employed) over the coming years, in order to avoid a deterioration in Ireland's competitiveness.
May I remind the Deputy that public sector pay is primarily a matter for the Minister of Public Expenditure and Reform.
