Employment 2000 - 2001

(JOHN T ELLIS)

Introduction

The twenty-first century commenced with unemployment in Ireland continuing to show a reduction as a result of the phenomenal growth in the economy.

The tight supply of skilled staff has resulted in widespread wage claim inflation. Public service workers have sought up to thirty percent wage increases. Nurses have settled their claim and Dublin Bus Drivers obtained an interim settlement by striking. Junior hospital Doctors threatened strike action. Dissatisfied teachers indicated at their conferences that they are seeking a 30% increase.

The wage price spiral is caused by several factors - oil prices, the increase in the minimum wage rate and general supply and demand factors in the housing and employee field. Interest rates are moving to unexpected heights in the European Union where expected stable rates (circa 3%) are now moving towards 7%.

Miraculously, the rise in labour cost since 1994 has had little effect on the almost stable cost of living index until this year [2000]. Unfortunately inflation has caught up in 2000 although it may escalate to no more than seven percent per annum in 2000 despite the fall in the value of the Euro resulting in imports from Britain [Ireland's main trading partner] costing more by being 25% off parity.

Inflation may have been higher were it not for savings made by absorption of increases by some industries due to competition. Economies of scale, lower interest rates to date, income tax cuts and the price war between major multiple supermarket chains vying for market share offsetting the UK currency differential, have all helped keep inflation at bay.

The Social Partners aim to maintain the Programme for Prosperity and Fairness should be achieved on the basis of workers' demands for spending power stabilisation by granting the promised Income Tax reduction.

The worst of the inflation may be over assuming the Euro does not weaken any further against Sterling and that the effects of wage increases have worked their way into the factory gate price.

Wise companies have commenced purchasing from Europe or negotiated in Euros. Tourism should benefit by being a cheaper destination for Sterling and Dollar customers but is already suffering from labour supply and minimum wage costs. Ireland is fast becoming a knowledge-based economy resulting in a two-tiered society.