IBEC: Competitiveness hit by labour market regulation

IBEC, the employer lobby group, said labour market regulation “has an enormous effect on competitiveness”.

IBEC director Brendan McGinty stressed that any system of administered wages has to function in a way that “underpins employment” for the good of the economy.

“The current system is no longer fit for purpose and should be abolished,” he said. “Many of Ireland’s regulated wage rates are too high by international standards, particularly when compared with the UK, and are a major stumbling block to regaining competitiveness and creating jobs,” he said.

Certain sectors are particularly vulnerable and the “problem is most acute in the hospitality, wholesale and retail sectors,” he said.

The legal basic rate for an entry grade worker is 33% higher in the case of hotel staff and 39% higher in the contract cleaning compared to the North, he said.

“This is simply not sustainable in the current economic climate.

“The introduction of the national minimum wage, along with a substantial body of protective employment legislation, removed the rationale for mandatory minimum rates of pay in specific sectors,” he added.

In Britain the equivalent of the Irish system — the Wage Council mechanism — was abolished in 1993 and had not been replaced by an alternative mechanism in the meantime.

“Even with the decision to reduce the national minimum wage to €7.65, the national minimum wage remains about 12% above Britain.

Irish labour costs, like other costs, need to come back into line with those of our international competitors and the Government has to address those issues urgently, he said

Any credible review must look at the relevance of such mechanisms for the economy as an instrument of pay determination and examine closely “their damaging impact on competitiveness and sustainable employment”.

Other areas, including the lack of flexibility, fairness and efficiency under the current laws, must also be addressed, he said.

The cost to the exchequer of the higher costs of services contracted by the public sector from sectors with regulated wage rates must also be tackled if the Irish economy is to have a future, he said.