Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

It is not surprising that trade unions and others would call for wage increases, especially given the recent visible improvements in the economic environment, including in the labour market. Indeed this improvement in economic conditions is evident from the fact that certain firms throughout the private sector have recently agreed to pay increases to their employees. However, other firms, reflecting their own particular circumstances, are not in a position to agree to pay increases. This reflects the diversity of firms in the economy.

In my view, wage negotiations are best conducted at a local level, where individual enterprise or sector specific competitiveness and profitability issues can be taken into account. For this reason, a return to some form of centralised national wage arrangement does not appear appropriate in current circumstances. A centralised deal would inevitably result in wage increases that were either too high for some sectors or, in others, lower than would be justified by productivity and competitiveness considerations.

In principle, increases in wage rates in profitable enterprises and or sectors that reflect improvements in productivity and that are consistent with competitiveness requirements are welcome. It is crucial however, given our goal of full employment by 2020, outlined in the medium-term economic strategy, that increases in wages do not come at the cost of lower employment. While moving in the right direction, unemployment remains unacceptably high and the priority from a labour market perspective must be employment growth. All of the Government's economic policies are designed with this in mind. As a small, open economy, long-term sustainable growth in Ireland depends on the health of the internationally-traded sectors. This requires that costs in the traded and non-traded sectors evolve in a manner that, at a minimum, maintains the economy's competitiveness.

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