Addressing the Cost of Living in Ireland

Although recent reports have shown wages are rising in Ireland, the fact is that looking back over the last 5 years they have really been fairly static. However, because of a muted rise in the cost of living over that period (inflation in the economy was up 0.4% last month and has risen around 2% since 2011) this lack of wage growth is not seen as a big problem – YET.

The European Central Bank’s stated objective is growth in inflation by about 2% per year and they are currently pumping over €1 trillion into the financial framework to achieve that. So far this quantitative easing has not produced the desired results, however, if the ECB has its way and inflation does grow while wages remain static, we could be in for some industrial and indeed social unrest in Ireland.

It remains to be seen whether or not this is being realised, but its clear that what isn’t being fully recognised is the multi-pronged approach we can take to address the financial pressures people here feel. After years of economic strife most people rightly feel they deserve more in their pockets, (we are some of the most productive workers in the world and work some of the longest hours in Europe) however the discussion on the financial health of Irish workers has focused solely on increasing income to as opposed to cutting costs. In most cases, it doesn’t matter how much you get paid in gross terms, but how much you take home and more importantly how far your wages stretch.

If inflation rises bring higher wage demands this will lead to the costs of our goods and services rising, damaging our competitiveness and potentially our economy (If current €\£stg FX rates maintain in the medium \ long term that will only magnify the effect). Rather than wait for this to happen, we should act now to boost pay packets and cut costs in our economy so that standards of living can rise without wages having to go up dramatically.

On the income side, cuts in USC for 2016 have boosted take home pay. This path should be continued by government in future years to give back more to people who are working hard (focusing mostly on those on lower wages). In terms of cutting costs, first on the list should be the cost of having a roof over your head. A huge portion of Irish incomes goes on paying for accommodation, and in recent years these costs have only gone one way. This issue has to be tackled decisively and what’s more, it isn’t as difficult as it is being made out. Increasing the allowable height of buildings in our cities, utilising derelict spaces, including spaces over shops in the heart of the city, and taxing land owners who are intentionally holding on to sites in the hope of selling on at a higher price are simple ways that landlords and government can act to reduce these costs. Yes, we could build more houses, but that takes years to come on stream and factors in the cost of acquiring the land to do it. We have existing structures that could be refurbished and brought on stream within 6-12 months, quickly and smartly helping to alleviate the problem.

We must also look at the rising cost of healthcare and indeed childcare in the country, which sees no signs of abating. The statutory cost of doing business can also be easily reduced, the benefits of which could be passed on to consumers and used to hire more staff. These measures cost the government very little but could have a significant impact on quality of life without requiring huge rises in wages.

Our economy is growing again, and wages will rise in the coming years, but by focusing more on the cost of living, we can better address the underlying problems of our economy, keep competitive and vastly improve our people’s standard of living.