Monday, December 14, 2015

Why isn’t Compensation of Employees increasing in the National Accounts?

One of the notable features of the national accounts in recent quarters has been the continued stagnation of compensation of employees.

Compensation of employees reached a peak of €21 billion per quarter at the end of 2008 but since the start of 2010 it has hovered within a few hundred million of €17.7 billion, apart from Q4 2013 when it was €18.7 billion from which it quickly fell away.  The most recent data is for Q2 2015 when it was €18.1 billion.

The pattern of compensation of employees seems to run counter to other indicators in the economy.  From the QNHS we know that employment is growing, the ELC shows that average weekly earnings are rising and the Exchequer Returns show rising receipts from Income Tax.

The following chart shows indices of total employment and compensation of employees with both set to 100 when employment bottomed out in early 2012.  To smooth out some of the volatility four-quarter moving averages are used.

The divergence during 2014 is evident.  The final chart shows the source sectors for compensation of employees which, in line with the fist chart above, shows very little happening in recent years.

Shouldn’t the navy part, at least, be showing some improvement?


  1. The sectoral accounts are a mystery to all but those who compile them.

  2. Compare this CSO series with what is happening to PRSI.

    Look at the 2014 DSP annual statistical report here: ( Go to table A7 and look at the first row employer PRSI.

    Most employment is now class A, and for the majority of employees their employer pays PRSI at a rate of 10.75%. A few are on a lower rate of 8.5%, and it is only slightly progressive. There is essentially no way to legitimately avoid PRSI on labour income the way you can with income tax (reliefs, etc). So the employers' PRSI take should move VERY CLOSELY in line with total employee labour income in the economy.

    Data for the last few years on employers' PRSI:

    2011: €5,460
    2012: €4,995
    2013: €5,331
    2014: €5,749

    So between 2012 and 2014 employers' PRSI increased by 15 per cent, but the CSO series on compensation of employees is essentially flat. Employers' PRSI is actual cash paid every week by tens of thousands of employers on the basis of what they are paying their staff. The CSO series is model-based, subject to revision and is to my knowledge ultimately based on business survey data.

    It is very difficult to reconcile the two series.