Wage freeze likely for private sector

PRIVATE sector workers are to face wage freezes, according to Friends First chief economist Jim Power.

“The reality for many workers in the exposed sectors of the economy this year will be that a wage freeze is a small price to have to pay for retaining one’s job. This puts the enviable position of public sector workers in context ” he said.

“The 10.4 % decline in the income tax take in January is indicative of the deterioration in the labour market. Jobs are being lost, but more significantly overtime hours and bonuses are falling sharply, and despite the charade that is Social Partnership, many workers in the private sector will face wage freezes this year,” he warned.

At present the Irish labour market remains amazingly resilient despite unemployment hitting its highest level in three years. The unemployment rate looks set to climb from 4.5% at the moment to at least 5.25% by the end of the year, he said.

Gross National Product (GNP) figures for the third quarter of 2002 were a concern and showed that domestic activity was flat.

“Some commentators chose to interpret last week’s third quarter Irish national accounts data in a positive manner, but the reality is that the GNP decline is the more important indicator and clearly spells out even to those most unwilling to recognise the reality, that domestic activity is now pretty flat.

“This trend is likely to have intensified in subsequent months, so it appears inevitable that the coming year will see an ongoing deterioration in the Irish labour market. Redundancy data for January earlier this week showed a sharp 12.2% increase in redundancies. This trend looks set to continue,” he predicted.

While still low at 5.25% by historical standards, such a level would represent a marked deterioration in the labour market and one that could prove difficult to arrest in the economic climate that is likely to prevail over the next couple of years, Mr Power said.

“It appears that the IDA has a number of modest job announcements in the pipeline but these will hardly be sufficient to offset the ongoing job losses in the indigenous components of the economy and parts of the multinational sector,” he warned.

“The 10.4 % decline in the income tax take in January is indicative of the deterioration in the labour market,” he said. The live register data for January showed an increase of 4,559 in the number of people signing on.

When seasonal factors are taken into account the live register total increased by 2,300 during the month. In the year to January the number of people signing on the live register increased by 10,741, an increase of 6.7%.

The unemployment rate stood at 4.5% at the end of January, up from 4.4% in December and an average rate of 4.3% for the whole of 2002. The low point for the unemployment rate was 3.6% at the beginning of 2001.

The increase in the numbers signing on in January occurred in all regions of the country, with the largest increases in Dublin (4.4%) and the Mideast (4.4%). The west saw an increase of just 0.1% and the Border region (0.9%).