IBEC signature of benchmarking bad for members, warns economist

IRELAND’S business and employers organisation IBEC did its members a great disservice by signing up to benchmarking, a leading economist claimed at the Dublin Economic Workshop in Kenmare this weekend.

Jim Power of Friends First said IBEC should now be forced to pay a levy to finance benchmarking, which will provide pay increases of up to 16% to workers in the public sector.

Stressing that wage costs need to be in line with productivity growth, Mr Power said the private sector was proving flexible in that regard, but the public sector pay bill was an issue.

“Excessive growth in the public sector pay bill has to be paid for through higher taxes and service charges, spending cutbacks in other areas or through borrowing. The latter is not an option.

"The decision to pay the benchmarking award on the basis that it is being paid is not sensible, but the commitment has been given and Government now needs to ensure the taxpayer gets something meaningful in the form of improved public services,” he said.

Mr Power said the country could no longer compete just on the basis of a 12.5% corporation tax rate.

“Ireland will inevitably continue to shed jobs in manufacturing and lower value services over the coming years, so the authorities need to ensure that we invest heavily in infrastructure and education to ensure that the displaced workers can be deployed in higher value-added activities.

"Innovation will create new higher value-added jobs,” he said. “There are now considerable challenges facing Ireland.

"Outsourcing of manufacturing and service jobs to Asia is becoming a source of considerable angst in the US, but countries like Ireland are at least as vulnerable because those countries are very low cost and have skilled workforces.

“Competition for FDI [foreign direct investment] is set to intensify and Ireland will have to remain very competitive to maintain its market share of global FDI flows.

“The future path of the euro is another cause for concern, particularly given the growing US current account deficit.

“Ireland cannot influence the competitiveness of Asia or the level of the euro, so it needs to ensure that competitiveness issues are addressed in a meaningful way,” he said.