Rise in jobless forecast

The national training and employment authority Fás has forecast that there will be a noticeable increase in unemployment next year.

In its review of the labour market Fás predicts that the numbers of unemployed could rise from an average of 100,000 this year to 117,000 in 2008, assuming that migration and participation rates slow down.

It says that employment in construction could fall by 30,000 during 2007/2008, with any the jobs growth next year coming from the services sector.

The report also warns that in light of the projected slowdown in employment growth "the appropriateness of the national minimum wage will need to be regularly reassessed, taking into account the impact on competitiveness, unemployment, migration and poverty".

Fás economist Brian McCormack said that it was not suggesting that the minimum wage level would be brought down, but that the rate of increase might be looked at.

The report says that while the minimum wage in Ireland was relatively high, the percentage of people being paid this rate here was extremely low.

It says that as a result the impact of the minimum wage on overall earnings and unemployment has probably been very small.

"This has been because labour demand has been sufficiently strong to ensure that the minimum wage has remained below the market clearing rate. Yet as labour demand weakens over the short-term, then the minimum wage could exceed the market clearing rate, resulting in higher unemployment and displacement."

The report says that the relatively high level of the minimum wage in Ireland has probably been a "pull" factor for recent migration given that migrants from states that recently joined the EU are probably more likely to be in receipt of the minimum wage given that they earn less on average than their Irish counterparts.

The report also suggests that new approaches to wage bargaining need to be considered.

"These could include inflation trade-offs, two tier-approaches involving productivity and relative inflation components, as well as gainsharing", it says.