All workers should get pay rises now to boost economy, says expert

IRISH workers need a pay rise to stimulate growth and avoid deflation, an international economist told a conference in Dublin yesterday.

Prof Ozlem Onaran said research had shown falling wages across Europe, including in Ireland, had led to a fall in consumption because wage-earners spend a higher proportion of their income than other groups.

Dr Onanar, who has headed research projects for the International Labour Organisation, said this meant wage-moderation policies were “counterproductive,” risking deflation, and even a destabilised economy through increased debt and over-reliance on exports.

“In all the countries we looked at – including Ireland – a fall in wages leads to lower consumption because workers spend more as a proportion of their income compared to those who earn income from profit. The data shows that a 1pc fall in the share of wages in the economy leads to a 0.3pc fall in GDP across the EU,” Ms Onaran said.

Prof Onaran was speaking at independent think-tank TASC’s sixth annual conference in the Croke Park Conference Centre. It brought together 100 policy makers and was also addressed by Tánaiste Joan Burton.

Prof Onaran said the European Commission wanted to make the EU one of the most competitive economies in the world through its Europe 2020 Strategy, based on deregulated labour markets and low wages.

“However, our research shows that these type of policies have delivered poor economic growth over the last three decades and have led to a declining share of wages in national income and rising inequality,” Dr Onaran said.

TASC policy analyst Cormac Staunton said Ireland had the third-highest prevalence of low pay in the OECD developed countries with more than 20pc of workers on “low pay.” He warned that this number was growing and not necessarily related to recession as the numbers had been increasing since 2003.