Wage increases will accelerate over this year and into 2019, outpacing rising living costs and leaving households better off, according to the latest research from the Central Bank.
By the end of next year 99,000 more people will be in work, and average pay is set to rise at a rate equal to around €50 a week.
In its latest quarterly bulletin, the Central Bank says wages will rise by 3.2pc on average this year, and by a further 3.4pc in 2019. That’s compared with a modest pick-up in the average hourly earnings during the second half of last year.
With the cost of living rising far more slowly, at less than 1pc a year, it will leave households significantly better off, Central Bank director of economics and statistics Mark Cassidy said.
“The Irish economy continues to perform well, buoyed by domestic activity and international economic growth.
“Our forecasts for further growth in earnings this year and next, combined with expectations of modest inflation, means rising wages should translate in to higher real incomes and greater purchasing power for households,” he added.
However, if current trends continue, higher skilled and specialist employees will reap the major gains, while other workers face the risk of being left behind.
The housing crisis means rising rents and housing costs will eat up much of the gains for many workers, but for others the benefits would far exceed the impact of what are likely to be marginal tax gains in the coming budget.
Earlier Central Statistics Office (CSO) data for 2017 showed average weekly earnings rose to €734.60 in the final quarter of last year – up from €716.86 at the end of 2016.
Pay increases of 3.3pc on average this year and next would take the average to €783.72 a week by the end of next year.
However, the Central Bank data shows wage growth so far has been very uneven across the economy – ranging from gains of close to 6pc last year for high-skilled workers in the sciences and professions.
Lower skilled services sector jobs and even the growing transport and construction sectors saw average wages fall.
The Central Bank’s researchers note that as unemployment overall falls, however, there is some potential scope for the pace of salary gains to increase further. However, it would heap pressure on employers.
Last month, the head of the country’s main employers’ group, Ibec, said Ireland’s competitiveness was being eroded in a more severe way than during the Celtic Tiger years, citing wage demands and in rents in particular.
The wider Central Bank quarterly bulletin forecast continued economic growth driven by domestic activity and international growth, with a positive contribution from both domestic demand and exports.
Mr Cassidy made what were described as “small upward revisions” to the projections for growth in 2018 and 2019.
The economy is now forecast to grow by 4.8pc this year and 4.2pc next year.
Unemployment is projected to fall to an average of 5.6pc this year, and to 4.8pc in 2019 – below what’s regarded as full employment.
An extra 99,000 people are predicted to be in work by the end of 2019.
However, the volatile international climate – including the effects of Brexit, currency volatility and tax reforms outside Ireland – means national and private finances must be resilient to unexpected events, the Central Bank said.
Any substantial shift in the regime governing UK-EU trade will be costly, and a further 10pc drop in sterling versus the euro would mean a small fall in jobs and wages, the report said.
Ref: Irish Independent