Are your wages rising or falling?

Earnings are on the rise again, at least in some sectors. That is the one of the messages from the latest data from the Central Statistics Office (CSO). Generalising is really difficult, because of the massive swings in the jobs market over the past year and the impact of factors such as Covid lay-offs and wage subsidies. For example in the accommodation and food sectors, huge numbers were on the PUP for much of 2020 and many are now coming back to work. But while the overall picture is clouded, there are clear signs of wages rising in a number of sectors, driven both by longer term trends and the exit from the pandemic.

1. The data

The CSO has a difficult job measuring earnings, given the massive swings in the market. Its headline data – drawn from data submitted by companies – show a 3.9 per cent annual rise in average weekly earnings over the past year to almost €850. The number of hours worked rose by 0.9 per cent, meaning average hourly earnings rose by 3 per cent. These figures are affected by the changing composition of the workforce over the past year – we know that a lot of lower-paid people lost their jobs during the lockdown starting last year. This boosted average earnings among those that remained, particularly in sectors such as accommodation and food.

To try to give a fuller picture, the CSO also took data from the Revenue Commissioners, looking at pay information. As well as giving a different measure, this approach allows the CSO to compare pay for people who were in the same jobs in the same company over a period of time. This isn’t a perfect measure either, but it does add to our knowledge of trends.

This data shows a quarterly fall in average weekly pay of 3.8 per cent. Some people who were out of work from last year were returning to their previous job – and this seems to have pulled down the quarterly average. Many of those returning were presumably in lower paid jobs. Looking at a comparison of people employed in the same job in quarter one and quarter two, there was a rise of 1.5 per cent in weekly earnings.

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Earnings have ebbed and flowed quarter by quarter driven by lockdowns. This Revenue data shows a 5 per cent rise in earnings over the past year and a 12.9 per cent increase from people in the same job. While there are no doubt quirks in these figures, they do suggest that, in some sectors at least, wages are on the rise. In others, however, large numbers remain supported by the Employment Wage Subsidy Scheme. We must hope that as the year goes on most of these jobs can remain in place as the emergency supports are wound down.

2. The sectors

Based on the Revenue data, the fastest rates of increase were recorded in the construction sector (16.2 per cent), the administrative & support services sector (14.9 per cent) and the information & communication sector (14.1 per cent). Administration and support is a mixed sector involving jobs such as car rental and leasing, aircraft leasing and recruitment – the latter certainly one with pay pressures as we will see below.

Education (-1.3 per cent) and the arts, entertainment, recreation & other service activities sector (-0.2 per cent) were the only sectors to show a decrease in average weekly earnings over the year.

Increases were recorded in 11 of the 13 sectors, including many sectors where there were not significant Covid lay-offs. Similar sectors led the way with increases when the CSO looked at people who were in the same job over the past year, with professional and technical activities also showing up – a sector including a number of science-based jobs.

Again we need to be careful about over-interpreting here, given the extraordinary times. But in many sectors which have continued working more or less at full throttle through the pandemic, wage increases continue – following in some cases from a trend evident before Covid-19 hit. And it seems that in some sectors, notably construction, there is evidence that a shortage of employees – probably linked in part to many foreign nationals returning home during the pandemic – is leading to upward wage pressure.

3. The evidence

There is economic evidence that, in some sectors at least, a shortage of supply of employees compared to demand is pushing up wages as pandemic restrictions lift. Pawel Ardjan, an economist for job website Indeed, and Reamonn Lydon, economist at the Central Bank have crunched the numbers. Looking at Indeed data from the UK, Ireland and France there is evidence of a big jump in job postings in reopening sectors "with many employers looking to hire large numbers of workers, all at the same time". This has been typical in sectors such as construction, food preparation, cleaning and sanitation, driving and loading and stocking. This glut in demand has put pressure on wages, notably in the UK where Brexit has also been a factor in reducing labour supply. Using clicks on the Indeed ads as a measure of demand, the economists find that companies respond to labour shortages – in other words fewer clicks – by increasing the wages on offer, exactly as economics would forecast. This is particularly evident in the UK, but also in the Republic in sectors such as construction. A key issue in terms of the inflation outlook is whether this will be sustained or is, in effect, a post-Covid transition which will wash its way through.

4. The Irish market

So what do Irish market experts say? Trayc Keevans, Global FDI director at recruiter Morgan McKinley, said the Irish jobs market is as busy now as she has ever experienced. Some of the business is due to sectors reopening or getting back to full operation, and to the disruption caused by Covid-19. A big issue in a number of sectors has been the departure of employees during Covid-19 and the difficulties of recruiting from overseas during the pandemic. Delays in getting the required documentation for non-EU employees has also been a factor in the market, she says. Many of these issues may wash out of the system in time, she believes. But for the moment, high demand is pushing up wages in many sectors and leading to employers bidding for employees in some areas and struggling to retain staff.

Perhaps not surprisingly given this backdrop, one of the key areas of shortage is recruitment professionals working for big companies, with very significant increases of 30 per cent plus in asking rates for senior jobs since before the pandemic and 15 per cent plus for more junior recruitment co-ordinator positions. Tech, where wages have increased steadily for some years, continues to have its hot points. These particularly include jobs related to data and its use by businesses, where many roles now attract salaries heading well into six figures. The funds sector, including governance jobs, is also strong and involves counter-bidding for staff in some cases. And the pressure has moved down the earnings rung to sales development representatives being hired by big multinationals to operate in markets around Europe, typically graduates with limited experience.

Keevans says she does believe the market will “stabilise”, but it is clear that for now a mixture of post-pandemic factors and the strong performance of many sectors is combining to send wages higher. The big question now is whether this spreads further through the economy as more sectors reopen more fully.