Two-tier workforce emerging as new employees taken on at lower pay rates

THE WAY WE WORK NOW:College-educated people open gap in increasingly unequal labour market

Today’s graduates may never have tasted yellow pack cornflakes but they know all about yellow pack jobs. Starting salaries for teachers are 25-30 per cent lower than they were three-four years ago, and trainee nurses are being offered just €85 a day under proposed new two-year contracts.

In the private sector, there’s a proliferation of unpaid internships and the scope for exploitation is great against a backdrop of few job opportunities.

“When things get bad, insiders get protected,” says Donal de Buitléir, who chairs the economic thinktank publicpolicy.ie. “You get situations like ‘last in first out’, or people doing the same job but getting paid less.”

Some economists talk of a generational wages gap emerging. Others cite a growing polarisation between a highly educated upper class and an unskilled, and less well-connected, lower class.

“This is the first generation since the second World War that will not earn more than their parents,” says Ictu economist Paul Sweeney.

“What we are seeing in Ireland is a considerable row-back on earnings and the key driver is the share of national income going to labour.”

Provisional figures, which he is collating for a forthcoming paper on the issue, show 65 per cent of national income went to employees in 1990 and “this is now down to 50 per cent” – a much lower figure than the global average of 62 per cent.

“The owners of capital – people who own shares – are getting more and more of the national income.” Within the labour market, “professional employees are doing quite well but the middle is being hollowed out and the lowest paid are being screwed.” This is mirroring trends in the US, he adds, where “college-educated people” in sectors like technology, medicine and law are pulling ahead in a two-tier workforce.

Inequality

This analysis, however, is contested by statisticians drawing on CSO and Revenue data. A new study by UCC researchers suggests that earnings inequality fell between 2006 and 2010, with the lowest-paid fifth of the workforce gaining 22 per cent and the highest-paid fifth gaining just 4 per cent.

The first study of its type, it tracked the earnings of 1.4 million people who were employed in 2006 over a five-year period, and showed earnings inequality fell in the period 2006-2008 but then rose in the period 2008 to 2010 – however without fully cancelling out the gains of the boom.

“What really struck me from this was, during the Celtic Tiger years, we had this collective guilt about being rich,” says Cormac O’Sullivan, senior research officer with publicpolicy.ie, which commissioned the report with funding from Atlantic Philanthropies. “We were being told society was crumbling all around us. Despite this perception, we were becoming less unequal. So recessions are not good for equality.”

Perceptions

Prof Philip O’Connell of the ESRI and UCD has also challenged perceptions that Ireland became more unequal in the boom. A study he co-authored in 2009 found no evidence of the labour market becoming biased in favour of skilled workers and at the expense of unskilled workers.

He says he finds the notion of a “two-tier” workforce unhelpful, noting there are several identifiable factors that influence labour market outcomes, including gender, age, ethnicity, education, experience and whether you are public or private sector.

“The new thing in the crisis is the absence for young people of the opportunity to get work experience,” he says.

More young people are staying on in education and this has led to “an over-education problem. We have more education than the job market requires. Young people are studying too long, or are unable to get jobs.”

This is compounded by undereducation in sectors like IT as part of a “skills mismatch”.

While there’s a dearth of hard data, an EU study estimates about 30 per cent of the workforce is overeducated – defined as having more education than the job requires.

The number of people in third-level education in Ireland has risen by more than 20 per cent over the past decade, with 170,000 full-time students now enrolled. The Department of Education predicts this will rise to 197,000 by 2023.