Economy can handle pay rises above inflation, unions say

The economy can bear pay increases that exceed the rate of inflation and are equal to the rate of growth, the Irish Congress of Trade Unions conference has heard.

Tom Geraghty, of the Public Service Executive Union (PSEU), told delegates in Ennis, Co Clare, that conservative estimates were forecasting average growth rates of 3 to 4 per cent over the coming years, barring unforeseen events.

In his presentation to the conference, where unions backed a strategy for wage-led growth across the economy, Mr Geraghty said the most successful economies in the world were not low tax ones but those that taxed at a reasonably high level and fund public services.

"They do not just create a socially fairer society, they create a very successful economy," he said, adding that Ireland had the opportunity to begin moving in that direction as it emerged from recession.

Mr Geragthy said the union movement should set a target to take 250,000 people who earn less than the €11.45 an hour living wage “out of the cycle of endless poverty”.

He said this should be done not by giving employers tax breaks and supplementing wages through tax cuts but by engaging in a campaign to ensure there is wage-led growth in the economy.

Mr Geraghty said given the drop in wages that had occurred since 2009, it was possible to do this without interfering with international price competitiveness.

A report drawn up by the trade union movement for the conference maintained that from the end of 2009 to the end of 2014, real average weekly earnings fell by just over 6 per cent on average.

Mr Geraghty argued that another effect of increasing wages in such a manner would be to generate more revenue to pay for public services.

"The next politician that knocks on your door promising tax cuts, send them running. Because it is far too easy to promise tax cuts as if there are no consequences," he said. "Now is the opportunity to do something completely different, to do something that is mainstream across northern Europe, to avoid temptation to view tax as simply a cost and to see it as opportunity to assist in the growth of our economy."

Meanwhile Tom Healy, director of the trade union-funded Nevin Economic Research Institute called for radical change in economic direction.

He said Ireland was emerging from a “lost decade” of falling incomes, declining public services and great uncertainty in economies across Europe.

“While some progress is being made in terms of both employment and income far too many households live in poverty and far too many children suffer for lack of proper support and investment at the beginning of their lives,” he said.

“If we are not to fall into the trap of another boom in house prices with wages and services struggling to catch up a rising population and a housing market under severe pressure then we need a radical change in the direction, purpose and implementation of public policy.”