IRISH LABOUR COSTS IN EUROPEAN COMPARISON MICHAEL TAFT RESEARCH OFFICER, UNITE THE UNION
EUROPEAN LABOUR FORCE SURVEY Labour Costs in Market (Business) Economy: 2011 ( € ) Denmark 39.61 Sweden 39.28 Belgium 38.65 France 34.26 Luxembourg 33.68 Netherlands 31.29 Germany 30.10 Finland 29.86 Austria 29.06 AVERAGE 28.56 Italy 26.19 Ireland 24.57 Spain 20.80 UK 18.95 Greece 15.88 Portugal 12.25 NERI Labour Market Conference
WELL BELOW EUROPEAN AVERAGES European Labour Force Market Economy: Irish Labour Costs in Relation Survey measures hourly to other Mean European Averages 2011 (%) labour costs in all market NACE categories Other Small Open Data for enterprises with 10 or Other EU-15 Non-Med Countres Economies more employees the most complete Irish labour costs are well below European averages. Ireland ranks 11 th in the EU-15. • 14 percent below the average of other EU-15 -14.0 countries • 24 percent below the average of non-Med countries -24.3 • 30 percent below the average of other small open -30.4 economies NERI Labour Market Conference
COMPARISONS: TRADED SECTORS In the major traded sectors – Trade Sectors: Irish Labour Costs in Relation to Other Mean European Averages 2011 (%) manufacturing and information & EU-15 Non-Med SOE communication: Manufacturing Information & Communication Irish labour costs rank well below other European averages. -9.9 -15.5 -21.5 -24.5 -28.9 -29.7 NERI Labour Market Conference
COMPARISONS: NON-TRADED SECTORS In the major domestic Domestic Sectors: Irish Labour Costs in Relation sectors – wholesale & retail to other Mean European Averages: 2011 (%) and food & accommodation: EU-15 Non-Med SOE Wholesale & Retail Food & Accommodation Irish labour costs rank even further below other European averages. -20.9 -21.1 -29.7 -29.9 -37.7 -38.8 NERI Labour Market Conference
LABOUR COST INDEX 2011 - 2013 Since 2011, increases in Irish Labour Cost Index for Market Economy 2011 - 2013 labour costs have trailed 7.6% Austria most other EU-15 countries. Finland 6.3% 5.7% Luxembourg Sweden 5.6% 5.2% Germany Netherlands 4.9% Belgium 4.8% 4.1% Italy Average 3.6% 2.9% Denmark Ireland 2.8% 2.4% UK France 2.2% 1.3% Spain Portugal -6.6% NERI Labour Market Conference
NCC: LABOUR COST GROWTH CHART NERI Labour Market Conference
ACTUAL LABOUR COST GROWTH The recent National Labour Cost Growth: 2008 - 2013 (2008 = 100) Competitiveness Council’s European Union (28 countries) Euro area (17 countries) Ireland Cost of Doing Business in 113.0 Ireland presented labour cost-growth data in a way 111.0 that suggested that growth was converging with that of 109.0 EU growth – especially since 2008. 107.0 The reality is that Irish 105.0 labour cost-growth has 103.0 lagged considerably behind EU growth. 101.0 EU-28 and Eurozone labour 99.0 costs increased by 11 percent since 2008. 97.0 Ireland increased by less 95.0 than 2 percent. 2008 2009 2010 2011 2012 2013 NERI Labour Market Conference
IRISH EMPLOYEE COMPENSATION BELOW AVERAGE National Accounts data for National Accounts: Irish Employee Compensation in Relation to Other Mean European Averages: the market economy reflects 2010 (%) the European Labour force EU-15 Non-Med SOE survey. Irish employee compensation falls over 10 percent below the average of other EU-15 countries. In comparison to non-Med -10.5 countries and other small open economies, Irish employee compensation falls to21 and 25 percent below average respectively. -23.2 -25.5 NERI Labour Market Conference
EMPLOYEE COMPENSATION Employee compensation is made up of two payments: 1) Direct Wage: paid directly to the employee 2) Social Wage: paid to social insurance fund (or equivalent) The social wage takes the form of employers’ PRSI. In Ireland, the social wage is described as a tax. However, it is part of a workers’ pay package (this is given statistical form by Eurostat, the CSO and the OECD). The social wage allows workers to access particular services for free or at below-market prices (e.g. health); and to access income support in the event of certain contingencies (old age, unemployment, illness, family birth, etc.). As Ireland does not have a strong social wage, workers here don’t benefit to the same extent as workers in other EU countries do (free GP care, heavily subsidised prescription medicine, pay-related unemployment benefits / social insurance pensions / sickness benefits, etc. NERI Labour Market Conference
COMPENSATION: DIRECT WAGES When direct wages are Market Economy Direct Wages 2011 ( € per hour) compared, Ireland remains below-average, ranking 10 th . Denmark 34.42 Luxembourg 28.93 While Irish direct wages are Sweden 26.24 only 3 percent below the Belgium 26.05 average of other EU-15 Netherlands 24.06 countries, this falls to Germany 23.60 • 15 percent below the Finland 23.32 average of non-Med France 22.89 countries and Average 21.62 Austria 21.33 • 20 percent below other Ireland 20.96 SOEs. Italy 18.62 UK 16.22 Spain 15.18 Greece 12.08 Portugal 9.78 NERI Labour Market Conference
COMPENSATION: SOCIAL WAGES Social wages – expressed as Social Wage (Employers' Social Insurance) as a % employers’ social insurance of Gross Wages: 2011 as a percentage of gross Italy 29.7% wages. France 29.4% Irish social wage is the Belgium 22.9% lowest in the EU-15 bar the Spain 22.7% UK (and Denmark which doesn’t have a SI system). Finland 21.5% Average 18.5% In the EU-27, Ireland is third Greece 17.6% lowest. Austria 17.1% This low level of social wage Sweden 16.9% is a major contributor to Germany 16.1% Ireland low compensation / Portugal 13.8% low labour cost status. Netherlands 12.7% It is also a major contributor Luxembourg 11.9% to an anaemic social Ireland 8.7% protection system. UK 8.6% NERI Labour Market Conference
WAGES AND PROFITS: NON-FINANCIAL SECTOR Irish employee compensation – Non-Financial Sector - Employee Compensation as when measured as a a % of Gross Value Added: 2002 - 2012 percentage of gross value- EU-28 Ireland added – is substantially below 65 the European labour share. While Irish profits were 60 seriously reduced in the first two years of the recession, 55 they have bounced back – returning to high profit levels 50 prior to the recession. Irish profits may be inflated by 45 ‘MNC accounting practices’. However, even allowing for 40 this, Irish wages would in all likelihood remain substantially 35 below other EU countries. 30 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 NERI Labour Market Conference
PRODUCTIVITY VALUE-ADDED PER HOUR Irish productivity – Productivity in Total Economy: Value-Added per Hour Worked 2013 (PPS) measured as value-added per hour worked in PPS – is Belgium 42.80 above most other countries. France 41.30 Netherlands Total GVA may be inflated 41.07 due to the accounting Ireland 40.49 practices of MNCs. When Germany 40.21 Forfas adjusted for this they Denmark 39.60 found that Austria 37.13 Sweden 35.92 ‘These hourly adjusted Spain 35.92 national productivity Average 34.88 estimates still suggest that Italy 32.59 productivity levels in Ireland Finland 32.36 are high relative to United Kingdom 31.22 competitor countries.’ Greece 22.86 Portugal 20.47 NERI Labour Market Conference
ISSUES REGARDING WAGES: PRODUCTIVITY The argument that wage growth should be linked to productivity is economically sound However, there are considerable industrial implications. If workers’ living standards are to be based on productivity, then it is reasonable that they should have influence over the organisation of productivity inputs: process and product innovation, investment, wage differentials (e.g. between employees and management), working conditions (and their differentials) labour relations and human resources. Whether at firm, sectoral or national level – for those whom productivity will determine wages, productivity itself must become accountable. NERI Labour Market Conference
ISSUES: LABOUR COSTS We must re- think the concept of ‘labour costs’. Labour is the co-beneficiary of capital in the share-out of value-added which requires the inputs of both to be created. However, capital compensation is privileged over labour compensation – through the characterisation of the latter as a ‘cost’. While much of the debate is focused on the impact of ‘labour costs’ on the economy there is almost no discussion of the impact or efficiency of capital compensation. Nor is there discussion of the efficiency of the agents of capital compensation (e.g. employers, managers) – though Enterprise Ireland and Forfas have surveyed managerial deficits in indigenous Irish enterprise. NERI Labour Market Conference
SUMMARY Ireland is a relatively low-waged economy and, in particular, a low social-wage economy. In the low- paid sectors, Irish workers’ compensation is even lower. The gap between Irish and European compensation is widening as Irish compensation-growth is lagging. On the other hand, capital compensation is high relative to labour compensation (though MNC accounting practices skewers this). Irish productivity remains ‘high’ relative to our competitor countries. NERI Labour Market Conference
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