With thousands of public and civil servants taking part in industrial action seeking higher pay to address inflation, some private sector workers could benefit if a favourable deal is reached.
The last public sector pay deal expired at the end of June, and unions say a new arrangement should address what they claim is a drop in real earnings of “at least” 5 per cent since 2020.
But what effect, if any, could a pay increase have on those working in the private sector?
Ireland’s private sector is the “leader” over the long term when it comes to setting wages. This means the public sector often adjusts to match them, according to Paul Redmond, an associate research professor with the Economic and Social Research Institute (ESRI).
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However, this does not mean “you can’t have spillovers in the other direction”, he says.
“What we think is that over the longer run, it’s the private sector really that leads the way and dictates what the wage level is generally, but in a near-term or short-term basis, if something happens to public sector wages, there can still be adjustments to the private sector.”
Redmond, who has a particular interest in labour economics, says the private sector can adjust when public sector wages increase to remain competitive. Without adjusting or matching public wages, it can be difficult to attract or retain staff in certain occupations or industries, he says.
However, the effect is not seen across the entire private sector, with Redmond saying international research shows roles more likely to be affected are those that “directly compete” with the public sector, such as health.
Adjustments in the private sector can “happen quite quickly”, he says, though the spillover effects are “quite small”.
“For example, if you have a 1 per cent increase in public sector wages, the potential spillovers to the private sector are only a fraction of that. It’s not a one-to-one, it’s much, much lower,” he says.
Similarly, Redmond says research shows increases to the minimum wage can lead to spillovers.
However, the overall effect is “quite modest” and limited to those typically earning just above the minimum wage.
“If someone is earning just above the minimum wage, you can see spillovers that kind of trickle out to low-paid workers,” he says.
Although there can be concerns that increases to the minimum wage can lead to general price inflation, a study published by the ERSI last month found no impact on prices following seven of the eight increases implemented from 2016 to 2025.
The study found the overall effect on inflation by minimum wage increases has been “pretty much negligible”, Redmond says.
“There was one minimum wage increase in 2024 that was the largest minimum wage increase to date. It was 12.4 per cent, so it was a big one,” Redmond says.
“What we found for that is that there was some effect on a small category of goods that are produced using a large number of minimum-wage employees, so things like takeaway coffee, takeaway sandwiches and meals, and meals in restaurants.”
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