The latest earnings data from the Central Statistics Office (CSO) give some insight into why so many voters gave their support to the main parties in the outgoing government. There will be a strong rise in real earnings this year – in other words pay is rising ahead of inflation. This comes after a couple of years when earnings did not keep pace with price increases. The reversal in this trend may have come just in time for Fianna Fáil and Fine Gael.
The CSO figures show average earnings rose by 5.3 per cent over the past year. This is well ahead of inflation, last measured by the CSO as increasing at an annual rate of 0.7 per cent and – even excluding volatile energy and unprocessed food – the rise was just over 2 per cent.
Over the five years the Coalition has been in office, earnings have risen by about 24 per cent, just about outpacing inflation of close to 20 per cent. The main hit to real earnings was during the inflation surge of 2022 and 2023. The Coalition was able to protect living standards to some extent through once-off payments to households. It may also have got some credit from voters for this.
Whatever precise shape the new government takes, these trends point up some important issues. The most obvious is the potential impact of geo-political events – the Russian invasion of Ukraine was a significant factor pushing up inflation. In an uncertain world, and with Donald Trump due to take office in January, room for manoeuvre in the public finances is vital. It served Ireland well through the pandemic.
The earnings figures also show the long road to improve the position of those at work after inflation and how easily this can be upset. The other side of this story has been the big increase in the number of people at work – this means total earnings across the economy have risen strongly.
The new government must seek to protect employment, while finding ways to improve living standards, in part through better public services. It also needs to focus on permanent measures and end many of the temporary household supports which are unaffordable on an ongoing basis.