Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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5. To ask the Minister for Finance in the context of recent calls by trade unions and others for wage increases if he will consider a new wage policy to stimulate economic growth; and if he will make a statement on the matter. [16334/14]

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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In recent months, representatives of workers and trade unions have stated they believe it is time to change wage policy to see wage increases for workers to alleviate the deprivation many working people suffer as a result of six years of cuts, to give an urgently needed boost to demand in the economy and to stimulate growth and employment. Will the Minister consider responding positively to the calls of workers and trade unions for wage increases?

Michael Noonan (Limerick City, Fine Gael)
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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.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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A total of 27% of households in which one person is working are suffering deprivation. Moreover, 10% of those in which two people are working are suffering deprivation. Consequently, in addition to the hundreds of thousands who have no work and are suffering poverty and deprivation, there is the significant phenomenon of the working poor, that is, those who are working long and hard but still remain in poverty. On that level, there is a necessity to shift from wage cutting to wage increases to alleviate such deprivation. However, it is also extremely clear that taking money out of the pockets of working people, as has been done in the past five years, has absolutely destroyed domestic demand on the high street for small shops and businesses. Ghost towns are developing nationwide, which is hitting employment because people have no money in their pockets to spend. While the Minister might have a point about considering this issue on a sector by sector basis, does the Government intend to shift policy and begin to examine ways to push up the wages and disposable incomes of low and middle income workers?

Michael Noonan (Limerick City, Fine Gael)
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All members of society, including employees, have contributed to the adjustments it has been necessary to make in recent years. I suppose the biggest contribution has been made by those who lost their jobs. There is a trade-off between the general level of pay in an economy and the number of new jobs one can provide. The priority of the Government is focused on creating new jobs. However, that is not to state there are no profitable sectors within the economy, as, of course, there are. The Government encourages the profitable sectors to give wage increases to their employees, which also forms part of Government policy. I understand that in 2013 approximately 40% of firms in the private sector gave wage increases. While I cannot provide a statistic for the Deputy, I understand this trend is continuing and strengthening into 2014. However, the Government is not disposed to return to centralised wage bargaining. It considers the best way to do it is for those showing increases in productivity or profitability and which have the wherewithal to provide modest wage increases. However, competitiveness within the economy must be maintained. It is because Ireland has become quite competitive that the economy is now producing up to 5,000 extra jobs per month.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Ireland is a low-wage economy. Employee compensation as a percentage of total operating costs in Ireland stands at 22%, one of the lowest anywhere in Europe. It is considerably less for workers than is the case in Britain, France, Germany and most other European countries. Workers in this country, frankly, are being screwed against a backdrop in which productivity is high and profits are rising. The collapse of the joint labour committees and the lack of legislation on collective bargaining, thereby giving workers trade union rights, mean employers are not disposed to give people wage increases, even where they are making profits. What proactive measures will the Government take to ensure workers get a share of the profits they are producing to deliver them from deprivation, as well as to give a boost to the economy which could lead to the creation of jobs? There is no trade-off involved as if workers are paid a little more, they will have more to spend and it could create more jobs.

Michael Noonan (Limerick City, Fine Gael)
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Wages in Ireland, at certain levels, are lower than in the economies described by the Deputy, albeit not dramatically so. Many of the wage rates for comparative work in the United Kingdom are about the same or lower. However, if one looks towards eastern Europe, the countries of which compete with us frequently, there are much lower pay rates. I recall that in my own home town of Limerick the reason the manufacturing end of Dell was transferred to Poland was Polish wage rates were far lower than those which prevailed in Ireland at the time. Consequently, when one talks about Europe, one should recall that there are 28 member states and that it extends far to the east.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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That is the logic of the race to the bottom.

Michael Noonan (Limerick City, Fine Gael)
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It is not all confined to the Netherlands or the Italian region around Milan. However, the policy is clear. The Government is not returning to centralised bargaining, but it will continue to grow the economy. It is seeking to use many of the benefits of growth to create additional jobs because there are high unemployment levels and many students are coming out of schools and colleges.

However, at the same time we know that there are companies that have had productivity gains and gains on profitability, and we think wage increases are justified in those circumstances.