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IDA warns on wage increases

February 16, 2011

By Staff Reporter

By Andrew Bushe

DUBLIN — The IDA has warned that excessive wage demands could jeopardize economic growth and job-creation prospects.

Chief Executive Sean Dorgan said demands for increases based solely on the current economic boom were anti-competitive and would end up hitting job creation.

"There is nothing wrong with wage increases that are justified by higher value being produced," Dorgan said. "There are some indications of excessive wage demands beginning to appear and I think we have to be very concerned about that.

"We have succeeded for 10 years now on the basis of very reasonable wage movements. We have to ensure that we don’t lose that."

Dorgan said Ireland is getting 26 percent of all greenfield manufacturing investment by U.S. companies into Europe. In world terms, about 13 percent of manufacturing investment into Europe was ending up in Ireland.

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Job creation by the IDA is at record levels, with almost 16,000 jobs created last year.

"We are now a market leader in Europe for healthcare/pharmaceuticals, software, teleservices and shared services and holding a very strong position in electronics," Dorgan said.

Foreign industries are attracted to set up in the Celtic Tiger economy by low tax rates, proximity to mainland Europe and grants for job creation and training.

The impact of the multinational sector had resulted in sales — mostly exports – in excess of £22 billion a year.

Expenditures retained in the Irish economy was now worth £8 billion a year — double the level of four years ago.

Dorgan warned, however, that they had been receiving a feedback from investors expressing concern about skills shortages as well as the pressure developing on wage and living costs.

Infrastructure needed development both in scale, technology and management capability to keep pace with the record growth.

He said that grants featured down the list of priorities for companies investing but they are an important tool to swing investor decisions in certain directions at key points of negotiations.

Increasingly grants would be used to "push" industry into regional areas, particularly the north and west, which have not benefited to the same extent as the main cities from the jobs boom.

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