In the English-speaking world, few work-related issues have generated as much controversy as the stagnation of pay for low- and medium-income workers.
When adjusted for inflation, median incomes for the bottom 60 per cent of American households have not increased for more than three decades.
This extraordinary trend has led to talk of the death of the American dream and of a new gilded age in which the super-rich reap all or most of the benefits of economic growth.
Mercifully, Ireland – along with much of the rest of Europe – does not appear to have followed the lead of the United States when it comes to pay trends.
The Irish remuneration experience has been more influenced by the extraordinary rollercoaster of the boom-bubble-bust period than by slower-to-evolve structural changes taking place across the rich world.
From available figures, almost all employees in Ireland enjoyed big pay increases before the crash, while stagnation or mild declines in pretax earnings have characterised the post-crash period.
Great precision is impossible when discussing Irish pay trends, as the statistics are patchy.
First, Ireland’s number crunchers don’t collect as much data as in many other countries. Second, the Central Statistics Office (CSO) has changed the way it gathers data on pay. As a result, there is no fully consistent series of numbers dating back beyond 2008 – the year bubble turned to bust and everything changed in the labour market.
Blue-collar pay
That noted, the remainder of this article will look at the available data on earnings pre-2008 and, separately, the new data series since then (in both cases the figures refer to before-tax average weekly earnings).
One set of numbers exists for earnings from 1996 to 2006 for industry, including the manufacturing sector. In the eight years to 2006, earnings rose at almost twice the rate of inflation to give the average worker in industry, in real terms, a rise in weekly pay of a third. This is in stark contrast to the US, where blue-collar pay rates hardly changed in real terms over the same period.
The standard explanation for the stagnation of lower incomes in the US is that demand has fallen for unskilled work, as American assembly-line workers have been replaced by robots and workers in low-wage economies.
As late as the early years of the Celtic Tiger, Ireland was, relative to the US, a low-wage economy and it attracted American companies which set up or expanded manufacturing operations. Although the likes of Dell have since relocated their assembly operations to lower-wage economies farther afield, Ireland still has an unusually high proportion of its workforce in manufacturing compared with west European peer countries. As this was in marked contrast to the US it is likely to go a long way towards explaining why Ireland did not experience the same sort of structural and sustained widening of income inequality as has been happening in the US.
Earnings from 1998 to 2008
Another batch of CSO data provides figures for weekly earnings in eight broad services groupings (excluding the public sector) from 1998 to 2008. Surprisingly, these figures show that those in information technology and research had the lowest increase in average weekly earnings, at just 6 per cent in real terms over the decade to 2008. By contrast, those employed in real estate enjoyed the biggest gains, with weekly earnings rising by more than half over the same period.
According to new figures, since 2008 estate agents and financiers (now grouped in one category by statisticians) have suffered the largest falls in earnings over the slump era. Between the beginning of 2008 and the third quarter of last year (the most recent numbers available) their weekly pretax pay packets shrank by about an eighth in real terms (they remain the second best paid category of worker).
The second biggest losers have been people in the arts and entertainment, and administrators in the public sector. Both have experienced an 8 per cent reduction over this period.
By far the biggest gainers have been in the education sector, where pay rose by 6 per cent over the same period of 3¾ years.
For most of the rest lucky enough to have a job, changes in pay – either up or down – have been small since the beginning of 2008. And if it is any consolation – as the accompanying chart illustrates – median pay rates in Ireland remain second only to Denmark in Europe.