Economic war and profiteering

Michael Taft: There are some who contend that companies are taking advantage of the recession to cut wages, regardless of their need to do so. As a general rule, this could be dismissed as one more conspiracy theory, especially when looking at the headline rate of the recent Earnings and Labour Cost Survey.This shows that average hourly earnings in the industrial and financial sectors increased in the first quarter of this year, by 2.8 percent and 0.6 percent respectively (how the real devaluationists must be despairing). Yet, when one looks into the details of the tables produced by the CSO, one sees an interesting picture emerging. Maybe those conspiracy theorists might be on to something.

Let’s take the manufacturing sector – since this is a major export platform. Average hourly earnings increased by 2.7 percent in the 1st quarter of this year. However, these gross figures don’t tell the full story. The CSO helpfully breaks down hourly earnings by strata. What do we find then?

Management and professional staff, who make up less than 25 percent of all employees in the manufacturing sector, took a substantial increase – over €2 more per hour. All other employees took a hit – Clerical workers saw their hourly earnings decline by 48 cents while Production workers, who make up nearly 60 percent, fell by14 cents per hour. The average weekly earnings for the different strata are now:

Management / Professional: €1,245
Clerical / Sales / Service: €714
Production: €602

Let’s be clear about what is not going on. It’s not that firms are reducing their total hourly wage costs, which would explain why the majority of employees have seen their hourly earnings reduced. In total, hourly wage costs increased. What we are seeing is that reductions in the pay of lower paid employees are helping fund increases for those at the upper end of the enterprise structures.

And though the CSO doesn’t break down the data further within these, we shouldn’t be surprised to see those at the very top of the management structure receiving even higher pay increases than professionals and associate professionals.

Now I may be reading this wrong, but it certainly looks like many, many companies are using the recession, the general ‘share the pain’ rhetoric, to ensure that the majority of employees truly do get the pain, while a minority – those at the top – continue to amass pay increases.

One final thought. Real devaluationists claim we must cut our wage costs in order to become ‘competitive’ - a highly contestable position, rarely backed up by concrete data. Nevertheless, Jim O’Leary, articulating this view, suggested it might not be music to the ears of David Begg. Whatever about the tune, Mr. O’Leary is addressing the wrong group. Workers and trade unionists are already finding their earnings being cut. However, there is one group that seems oblivious to the concerns of the real devaluationists’. Might I suggest they contact this group directly: IBEC, Confederation House 84/86 Lower Baggot Street Dublin 2.

More data on this issue is available here.

Posted in: Economics • Labour market

Tagged with: real devaluationists • Wages

Michael Taft     @notesonthefront

Michael Taft is an economic analyst and trade unionist. He is author of the Notes of the Front blog and a member of the TASC Economists’ Network.