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Wages and Ireland’s International Competitiveness

Author

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  • Rory O'Farrell

    (OECD, Paris, France)

Abstract

At the beginning of the crisis in 2008 it was a widely reported view that Ireland had become uncompetitive, leading to calls for wage cuts. Since then wage rates in the private sector have been largely stable. However, Ireland has shown a strong improvement in exports despite a difficult international trading situation. This presents a puzzle. If wages in Ireland were uncompetitive, how could Ireland improve its export position so rapidly, without a general fall in wages? Ireland can best be described as having moved from a position of “super-competitiveness” to “competitiveness”. During the construction boom, exports remained an important driver of growth. Since 2008, the fall in nominal unit labour costs is entirely due to a move away from the labour intensive construction sector. However, while labour costs have been stagnant in Ireland, they have increased amongst our trading partners.

Suggested Citation

  • Rory O'Farrell, 2015. "Wages and Ireland’s International Competitiveness," The Economic and Social Review, Economic and Social Studies, vol. 46(3), pages 429-458.
    • Handle: RePEc:eso:journl:v:46:y:2015:i:3:p:429-458
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    References listed on IDEAS

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    1. Philip Du Caju & Theodora Kosma & Martina Lawless & Julián Messina & Tairi Rõõm, 2015. "Why Firms Avoid Cutting Wages," ILR Review, Cornell University, ILR School, vol. 68(4), pages 862-888, August.
    2. Luc Everaert & Céline Allard, 2010. "Lifting Euro Area Growth; Priorities for Structural Reforms and Governance," IMF Staff Position Notes 10/09, International Monetary Fund.
    3. FitzGerald, John, 2013. "The Effect on Major National Accounting Aggregates of the Ending of Pharmaceutical Patents," Research Notes RN2013/2/1, Economic and Social Research Institute (ESRI).
    4. Casey, Eddie, 2012. "Unit Labour Costs in Irish Manufacturing," Research Notes RN2012/2/1, Economic and Social Research Institute (ESRI).
    5. Bergin, Adele & Kelly, Elish & McGuinness, Seamus, 2012. "Explaining Changes in Earnings and Labour Costs During the Recession," Papers EC9, Economic and Social Research Institute (ESRI).
    6. Zsolt Darvas, 2012. "Compositional effects on productivity, labour cost and export adjustments," Policy Contributions 730, Bruegel.
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    Cited by:

    1. Niamh Hardiman & Spyros Blavoukos & Sebastian Dellepiane-Avellaneda & George Pagoulatos, 2016. "Austerity in the European periphery: the Irish experience," Working Papers 201604, Geary Institute, University College Dublin.

    More about this item

    Keywords

    wages; competitiveness; Ireland;

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