The Government’s efforts to contain the turmoil sparked by the rising cost of living have run into immediate trouble as unions press for significant pay increases in the private and public sectors.
Employers and Government are bracing themselves for a flurry of pay claims in the coming months as unions seek to boost wages in the face of rising inflation.
The Irish Congress of Trade Unions (Ictu) said on Friday that it would advise private sector members to seek pay increases of up to 5.5 per cent, and indicated it would push for similar moves in the public sector once negotiations on a new pay deal begin, likely this summer.
The congress, whose 15 affiliate private sector unions represent 400,000 workers, had previously called for a pay increase in a range up to 4.5 per cent.
“Inflation devalues the value of somebody’s wage in their pocket,” said Ictu general secretary Patricia King, adding that workers should not have to pay the price for an inflationary spiral they did not cause.
“I have no doubt that these issues on inflationary pressure will form part of the agenda to be considered by both the public unions and the Government as employer.”
But Taoiseach Micheál Martin warned: “We have to be careful that we don’t try to chase inflation and then end up causing more harm than good.”
Opposition parties immediately supported the Ictu move. Sinn Féin's finance spokesman, Pearse Doherty, said his party supported the call to seek higher wages, while Labour's finance spokesman, Ged Nash, said: "The pressure being put upon working people is immense and the reality is that Ireland needs a pay rise to cope with this cost of living crisis."
The Ictu move was not unexpected in Government, but there is a growing awareness that wage pressures are inevitable, and that this risks embedding inflation in the economy.
Coalition sources said there would be focus on actions that could reduce Government-controlled costs, promote competition and assist more people into the labour market. One senior Government figure said cutting the cost of childcare would be a focus in the coming months.
Business lobby group Ibec said many companies felt they were being hit “on the double” as costs rise with the introduction of statutory sick pay rights for all workers and other developments such as pressure to formalise remote working.
“Ictu’s numbers in the mid-range are not out of kilter with the market but it’s the principle of wages chasing inflation is where the road to ruin happens,” said Ibec chief executive Danny McCoy.
He added that “the idea that wages could compensate for cost of living is a bad precedent. Better that wages follow productivity and, where necessary, protect living standards.”
Goodbody chief economist Dermot O’Leary said a round of pay claims could lead to inflation becoming “engrained”.
“One-off, targeted reliefs are the appropriate policy response, but this will not stop employees and their unions using the high inflation rates and their current bargaining power for their benefit,” he said.
The Taoiseach, who said he would donate his €200 energy credit to charity, told reporters at a summit in France there would be no further measures to tackle the cost of living until the October budget.
On pay, he said there would be “further soundings” between the Government, unions and employers.
“The biggest pressure at the moment is talent, there are a lot of vacancies now, particularly in the hospitality sector. The sector is saying to us that it is difficult to get people. That will create its own upwards pressure on salaries and wages.”
Ms King wrote on Friday to Minister for Finance Paschal Donohoe, urging him to expand the “small benefits exemption” scheme in which employers can provide vouchers tax-free to staff.
Ictu said the tax-free limit should be doubled to €1,000 from €500 a year for workers earning weekly gross wages up to €1,462, arguing that such a move could provide an additional €100 a month between March and December.