Over the last couple of months some colleagues in the Trinity Business School have been working with Abrivia on their annual salary survey. See here for the 2016 survey . The survey will be formally launched in TCD on 19 January but the below is a sneak preview, based on a column for the Sunday Independent.
The Irish economy has been following a recovery trend since the middle of the Troika Bailout, even allowing for “leprechaun economics”. The success of the Irish economy post-Troika has made it the wunderkind of the European Union – from a being a horrible warning we are now back as a good example, although of what is not clear. This recovery, uneven and patchy as it might be,has also allowed certain underlying problems in the economy of Ireland to be go unnoticed. We have yet to deal with those that relate to the dysfunctional residential property market, infrastructure deficits, demographic pressures and a turbulent political economy. The Troika could not reform our deepseated governance deficits and we face into a turbulent future with perhaps an unwarranted optimism.
The economic consequences of Mr. Trump are the most important in the long termfor Ireland given the (over) reliance on US-based investment. Brexit or no the UK will remain a large and important market, and trade will continue to flow between the two islands. However, for the medium term Trump dominates. The proposal for a 15% rate of corporate tax by the incoming Commerce Secretary highlights the challenge ahead. 2017 also has the potential to bring a trade war between China and the US, the unseating of Angela Merkel as German Chancellor, a more turbulent and financially unstable Italy and a potentially explosive election in France, with Marine La Pen undoubtedly making it into the final run-off vote for the Elysee Palace. As if that was not enough we face the possibility of EU nations in the Baltics under the threat of actual physical invasion, a Phillipines rewriting the regional alliance book, a fragmented and broken ISIS metastasising and Turkey veering towards autocracy. In terms of the general macro political economy, globalisation has not been under such pressure since the early twentieth century and the “Thucydides Moment” between up-and-coming powers and those in maturity or decline is upon us. 2017 will be a powerful, painful and terrifying year to watch as the political map of world enters a period of change. In that light, the views of a large body of employers and job seekers shines a light on how Irish business sees things playing out. The ABrivia – Trinity Business School survey is just such. 500 employers and 4000 persons seeking to move employment gives a good basis for discussion
The Irish private sector economy is dominated by two factors, the presence of FDI firms and a large cohort of very small businesses. The Irish public sector, which makes up 11% of the respondents to this survey, comprise 39% of GDP and employs about 294,000 people out of a labour force of 2,170,500. It remains the largest single employer in the Republic of Ireland. The FDI sector as of the close of 2015 employed 187,056 people according to the Industrial Development Authority. Despite the outsized interest in the FDI sector for the purposes of policy formation, it does not constitute a very large proportion of the overall number of persons in employment.
Overall, the Abrivia Salary Survey highlights the views of a multinational multisectoral cohort. Interestingly, all firms expect to be giving raises of up to 5% in 2017. Generally, all firms are positive about the outlook for 2017, which in general reflects the positive mood in the Irish economy. This does not hold for those which see themselves as being impacted by Brexit. Almost all firms, bar the legal profession, see Brexit as severely impairing their ability to recruit and move employees. Some go as far as to see it directly impacting on their profitability. Ultimately, these concerns should be moderated by the fact that even the denizens of No. 10 are unsure what Brexit means, other than a red, white and blue Brexit. Or whatever.
More intriguingly the findings on the Dublin property market jump out. The numbers around rental accommodation make scary reading. The Employee Survey showed that about 44% of respondents were in rental accommodation. Of those in rental accommodation:
- 29% are paying more than they can afford – more than a third of their post-tax income.
- But, 68% of employees won’t seek a pay increase due to rent.
- 21% are looking to purchase a home in 2017 and concerned about the Central Bank rules.
While rent was not in itself sufficient to bring about salary demands, home purchases were.
- 63% will see a salary increase due to the housing market conditions.
- 65% are willing to relocate jobs to find a more affording location to purchase a house.
- 65% are willing to change jobs in order to obtain a mortgage.
So housing is, as we have suspected, a major element of the labour market wage pressure. What is interesting is that it suggests that a well functioning european style rental market might act, even with high rents, to keep a lid on these costs. On a sectoral basis 58% of the firms in the ICT sector see the current rental crisis as a challenge to recruitment. Accountancy, manufacturing, retail and the construction/real estate sectors see staff losses due to the housing situation as a significant concern.
While housing is a concern more generally for employees and employers, employers are also concerned with taxation. 51% of firms find the tax rate to be an impediment to the recruitment of international talent. This rises to 88% of firms in Accountancy. So while the personal tax system is an issue, it is not by any means the dominant and overwhelming issue. Firms are as likely as not to find that the tax rate is not an issue. Now was the national minimum wage an issue with only 4% seeing it as being in need of a decrease. Breaking down this by sector or by focus (domestic, multinational etc), or by ownership (semi-state, public sector, private) made no difference – there is no call for it to decrease, and upwards of 40% of companies see it as needing to rise.
Some other intriguing findings also emerge. When asked to think about the recent Swedish trial of the 6h working day there was significant support. 80% of employees and 50% of employers were supportive of a similar initiative here. 70% of employers saw no strain on finances from current maternity provisions and
Ultimately the Abrivia salary survey has highlighted an Irish economy that is generally looking to make modest gains over the next year in terms of income but is still under pressure due to external conditions. Some of those are local and related to Ireland’s ongoing property market dysfunction and others are global and relate to the backlash against globalisation and the turbulent political economy that has developed over the course of 2016.