THE recession will last longer than a year if wages are frozen, researchers from the country’s biggest union warned yesterday.
SIPTU researchers said if people’s earnings were not improved the recession would become a depression.
The union said managers across three industries earned higher pay rises than average employees in 2007.
SIPTU said the Government will have to make difficult decisions on public expenditure and suggested deferment of recruitment and projects such as the Dublin Metro as possible options.
“It is the decline in the real value of earnings that is leading to a downturn in consumption this year,” said SIPTU head of research Manus O’Riordan.
“Unless this decline is reversed a total slump in consumption will threaten economic recovery next year.”
Publishing Don’t Turn a Recession into a Depression, Mr O’Riordan said the one-year recession predicted by the Economic and Social Research Institute (ESRI) “will last longer” if consumption fell further and if earnings did not improve.
He said that if the fall in real wages — caused by rising food and fuel prices — was not reversed the country was “moving the recession into depression”.
Mr O’Riordan said the ESRI had failed to take the loss of earnings into account and had also “seriously underestimated” the extent to which the high rate of inflation was likely to persist in 2009.
He said if Bord Gáis succeeded in getting approval for a 17%-19% price increase and the ESB secured a 30% hike, inflation will hit 5% for the whole of 2008 (compared with the ESRI forecast of 4.5%) and 3.5% for the whole of 2009 (compared with 3%).
He accused Taoiseach Brian Cowen of being “irresponsible” when, as finance minister in last year’s Budget, he used a “loose” definition of inflation, which was lower than the agreed standard, the Consumer Price Index.
Mr O’Riordan said pay rises would have to be in line with, or just above, inflation, describing this as “pay restraint”. He said a cut in pay would be “punishment”.
He pointed out that managers in the mining and quarrying industries received a 12.5% pay rise in 2007, compared with 0.4% for employees.
The respective figures in the financial sector were 8.6% for managers (6.3% for employees) and 5.1% in the manufacturing sector (4.8% for all employees).
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