Written Answers. - Labour Costs.

Thursday, 17 May 2001

Dáil Eireann Debate
Vol. 536 No. 4

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  42.  Mr. Broughan  Information on Thomas P. Broughan  Zoom on Thomas P. Broughan   asked the Minister for Finance  Information on Charlie McCreevy  Zoom on Charlie McCreevy   his views on recent Eurostat figures which show that Irish labour costs, comprising tax, pensions and social security, in industry and services, were the fourth lowest in the EU in 1999; and if he will make a statement on the matter. [10471/01]

Minister for Finance (Mr. McCreevy): Information on Charlie McCreevy  Zoom on Charlie McCreevy  Eurostat, the statistical office of the European Communities, recently published 1999 statistics which showed that average hourly labour costs in EU industry and services ranged from a low of £7 in Portugal to a high of around 27 in Germany, Denmark and Austria. The average for the 15 EU member states was 21.5 and the countries below the EU average in descending order, were the UK, Italy, Ireland, Spain, Greece and Portugal.

The term “labour cost” is defined as the expenditure borne by employers to employ workers, which include bonuses and gratuities, taxes and social security contributions, payments to saving schemes of employees and benefits in kind.

The hourly labour cost for Ireland at 16.2 euro was 75% of the EU average. However, the direct remuneration element of our labour costs were 85% of the EU average. The structure of labour costs varies significantly from one member state to another, mainly reflecting different tax, pension and social security systems. This Government, in particular, has made progress in improving the return from work through reducing the tax burden. As outlined in the Budget Book for 2001 average tax rates have been reduced at all levels of income over the last four budgets, but most notably at lower income levels.

Our lower labour costs compared to our competitors has been a significant factor in maintaining our competitiveness and delivering the very significant growth experienced in recent years.

One area of concern is the fact that our wage increases are much higher than elsewhere. Labour shortages can be expected to exert upward pressure on wage demands and there is a view that a gradual loss of competitiveness will slow the economy to a more sustainable rate of expansion. However, there is a danger that overshooting of wages could sharply erode our competitiveness which might have a lasting negative impact on output and employment.

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