The Republic is in grave danger of pricing itself out of the market


The steady rise in price inflation over the past year to 7 per cent has led many economists to express worries about how spiralling wage inflation of 10 per cent or more could dampen the Republic's competitiveness.

It has certainly put pressure on the Programme for Prosperity and Fairness (PPF). After much argument, it was agreed this month to increase the 5.5 per cent pay rises agreed under the original negotiations by an extra 2 percentage points over the next year, plus a 1 per cent lump sum in 2002. This contrasts starkly with previous partnership agreements, which kept annual wage increases at a level of about 3 per cent or lower, on average. However, the partnership agreements have not had much impact in high-demand sectors where there have been continued labour shortages. These include IT, engineering, financial services and construction.

Many of the main recruitment agencies, including Marlborough, Grafton, and several computer and technical recruitment specialists run annual salary surveys. However, there may be some differences in the salary rates quoted across these surveys because of differing research methods and measurement criteria. Mr John Flood, managing director of Parc Technology Resources, says that the general salary inflation rate among professional technical staff has probably been about 10 per cent per annum over the past two years. There are those within the software and electronic design areas who have enjoyed increases of 15 to 20 per cent per annum. However, he adds that the distinction must be drawn between those who have moved position versus those who have remained in the same job, where increases have been more moderate.

"During the year 2000, we saw some new technical and engineering graduates achieving starting salaries of £20,000 [€25,390]. This is a new threshold and would compare with average starting salaries for new graduates two years ago of £14,000 to £16,000."

Grafton Recruitment's annual salary survey covers a wide range of industries and sectors.

In the call centre business, which has one of the highest staff turnover rates, salaries for non-managerial positions start at about £11,000 rising to a lot less than £20,000. In the construction industry, where demand is high-skilled tradesmen such as electricians, joiners, plumbers and site foremen can command up to £16 per hour. The Grafton survey notes a serious shortfall in skilled trades and warns that high wage inflation could stifle the construction industry due to excessively high overheads.

Many sectors seem willing to pay highly for good executives and managers. In the pharmaceutical and healthcare sector, a middle manager in sales and marketing could expect to earn between £33,000 and £50,000.

In Marlborough Group's most recent annual salary survey, it was found that the average wage increase was around 5 per cent in 1999, across all sectors.

Mr Adrian McGennis, managing director of the Marlborough Group, says that, while the IT, construction, multi-lingual-type jobs and engineering sectors have seen the biggest increases in salary levels, rates for administrative-type jobs are also very competitive compared with a couple of years ago.

In the public sectors, it is claimed that wage levels have fallen far behind the private sector. Under the terms of the PPF, a benchmarking body has been set up to accurately compare levels of pay between the sectors. In October, it was reported that the civil service had 1,794 vacancies in the 15 Government departments, particularly at the middle and higher levels of the service. Low entry-level wages and more lucrative pay in the private sector were blamed for difficulties in filling vacancies.

As well as considering salary levels, job candidates are also strongly advised to establish whether there are any perks and benefits included that may take the pressure off earned income, including bonuses, share options, health insurance, company car, and gym and creche facilities.

While the Republic appears to be doing reasonably well this year, in terms of salary increases, compared with many other EU countries, the rising cost of living, particularly in rental and housing, puts such increases into sharp relief. At the annual Institute of Personnel and Development conference in May this year, the organisation's chairman, Mr Peter Mulholland, warned that non-property owners were struggling to afford accommodation.