Competitiveness is ranked globally on 111 indicators. One of those indicators is wages. The Central banks focus in yesterday’s Q4/12 report on wage restraint is completely bogus to have it focus (headline grabber from exec summary) on one item, wage cost.
Wage cost accounts for 2% of the overall measurement of competitiveness. Ireland ranks 27th in a global list of 144 countries, but this is due to the bank situation and national debt which is saddled with bank debt. Irish Banks are listed 144 or 144, worst in the world.
When Ireland was burning up the economy and inflation was on fire and wages were high, Ireland was 4th in a global index on competitiveness.
The Central Bank has said that public and private sector wages need to fall further so Ireland can regain competitiveness. [RTE News 05/10/2012]
On the issue of pay, the Central Bank said remuneration remains too high in the public and private sectors, which it warns is discouraging expansion and investment by exporters. It said reducing pay would make a significant contribution to improving competitiveness and productivity. In an interview with RTÉ News, Central Bank’s Chief Economist Lars Frisell said wages were 10% higher than that of Ireland’s trading partners.
from the report it says
More generally, pay remains high in both the public and private sectors, adding to costs and prices in the economy, and no doubt discouraging expansion and investment projects by exporting firms. While the difficulties of addressing some of these issues are acknowledged, a lowering of the cost base, both public and private, would make a significant contribution to improving competitiveness and productivity in a fundamental way. This would make clear that the economy is capable of adapting to changed circumstances and would be very beneficial to the recovery process.
but in the radio programme The Business with George Lee, broadcast 8th September 2012 Dr. Prionnsias Breathnach of NUI Maynooth and Tony Foley, senior lecturer in DCU explain how wage cuts will not alone solve the competitiveness issue that the Central Bank and right wing media is over focusing on, and wage cuts won’t allow us compete globally in the race to the bottom, can we under cut the BRIC’s? No. [Listen below to the item as broadcast on Sept. 8th].
As Seth Godin says “The problem with the race to the bottom is, you might win it”If the Central Bank really want to increase Ireland’s competitiveness they should have dealt with the bank regulation before the crisis differently. They should have dealt differently with the banks since the crisis and they should not be complicit in the fraud where bondholders get billions repaid when their bets went bad and promissory notes get paid at the expense of Ireland’s reputation, these bad banking activities overseen by the Central Bank are the real reason why Ireland’s competitiveness is where it is.