The Government does not set the general wage level for private sector workers, this is a matter for individual employers and employees.
Periods of excess inflation, such as over the last 2 years, can indeed lead to a decline in real wage levels. However, these periods of price inflation are generally followed by a pick-up in nominal wage inflation, which over time will feed through to a return to real wage growth – particularly as levels of general price inflation normalise.
The Central Bank of Ireland’s most recent Quarterly Bulletin shows that while real wages declined by 0.7% in 2023 (comparing HICP inflation of 5.2% to growth in nominal compensation per employee of 4.5%), it is forecast that average wage growth per employee will outstrip inflation over the forecast horizon. The Central Bank predict inflation of 2 per cent in 2024, compared with growth in nominal compensation per employee of 5.3 per cent. This would indicate a return to real wage growth in 2024. The forecast projects this real wage growth to continue across the forecast period out to 2026.
In contrast, the ESRI have a more constrained view on nominal wage growth for 2024, due to a slowdown in nominal wage growth at the end of 2023. In this case a return to real wage growth may not materialise until later in 2024 when inflation has eased. The two distinct forecasts highlight the difficulties in forecasting during periods of heightened inflation.
Throughout the period of inflation, the Government have provided considerable support to workers and their families in dealing with the increased cost of living. Over the two-year period prior to Budget 2024 a total of €12 billion was provided in cost of living and doing business supports. Budget 2024 contained €1.2 billion package of cost of living supports announced in Budget 2024, the Government also approved a new tranche of Electricity Credits, with over 2.2 million households benefitting from three payments of €150 (including VAT) per household between December 2023 and April 2024.
Over the last several years, this Government has also advanced a range of measures to improve working conditions in Ireland, including the transition to a Living Wage, Pension Auto-Enrolment, Parent’s Leave and Benefit, Statutory Sick Pay, an Additional Public Holiday, the Living Wage, and Remote Working. These measures bring significant economic and societal benefits, by means of increasing disposable incomes and addressing in-work poverty.
The Government remains committed to the welfare of workers throughout, and beyond, the period of increased cost of living.
