Thursday, June 16, 2011

Wages remain ‘sticky’

UPDATE: The original version of this post was based on incorrect numbers that were posted to the CSO website yesterday.  This has now been corrected and so has this post.  The correct figures do not suggest that wages are as ‘sticky’ as the post title might suggest.


As well as the QNHS, the CSO have today released the Q1 2011 Earnings, Hours and Employment Costs Survey.  Here are the average weekly earnings for the overall economy with the public and private sector averages also provided.

Gross Weekly Earnings

The average weekly wage in the economy in Q1 2008 was €704.  Three years later and after the deepest, and swiftest, recession this economy has seen the average weekly wage in the economy is €675.  Average gross weekly wages have fallen by 4.2%.  Income Tax increases will have further reduced net pay.

In the public sector, the last three years has seen the average weekly wage move from €905 to €871.  The drop below the Q1 2008 level that occurred in Q1 2011 is partially the result of 5,200 temporary employees hired for Census 2011.  If these employees are ignored average weekly gross pay in the public sector was €881.  Average weekly gross pay in the public sector is down 2.6% since the start of 2008 but is unchanged since Q1 2010.

This is even after the public sector wage cuts announced in the December 2009 budget which gave rise to the largest fall seen in the graph.  It should be noted that these gross figures do not account for the public sector pension levy introduced in April 2009 which resulted in an average 7% reduction in take home pay for public sector workers that was not applicable to private sector workers.

In the private sector average weekly wages have fall from €643 to €603, a fall of 6.2%.  It can also be seen that private sector wages have continued to fall with a 1.8% fall recorded in the year since Q1 2010.

A word of caution should be noted when interpreting these averages.  These averages are simply the total pay bill divided by the number of employees.  In recent times both the numerator and denominator of this ratio have been changing.  For example, although wages are showing little change, this could because job losses are concentrated among lower paid workers (causing average wages to rise), while wages fall for everyone else (causing average wages to fall).  The aggregate effect of this could be static average wages.

To show the effect of job losses here is an index of total earnings for the public and private sector. 

Pub-Priv Index of Aggregate Earnings

Gross earnings in the public sector are down about 6% since the start of 2008 (and over 10% since the end of 2008).  In the private sector gross earnings are down 24% on the start of 2008.

In both the public and private sectors aggregate earnings were largely unchanged during 2010 and the seasonal drop usually recoded in the first quarter is also seen in 2011.  Here is a snapshot of aggregate earnings for the entire economy.

Index of Aggregate Earnings

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