Half of firms and workers expect pay to rise this year – Bank of Ireland Pulse
Half of firms are planning to raise basic pay for employees by an average of 4% this year, according to a survey of businesses and consumers by Bank of Ireland.
A similar proportion of workers are expecting a pay rise of on average 3%, the bank’s Economic Pulse for January shows.
It comes against the backdrop of rising prices across the economy with inflation running at its highest in two decades.
The study concludes that upward pressure on wages is likely for a period as a third of firms continue to experience labour shortages and businesses look to retain and attract staff.
There are some encouraging signs on the overall inflationary environment though with hints that supply bottlenecks may be starting to ease.
“28% of firms indicated that they were struggling with material, equipment and space shortages this month, which is down from 34% in last October’s survey,” Dr Loretta O’Sullivan, Group Chief Economist with Bank of Ireland noted.
Overall confidence rose this month, the Bank of Ireland Economic Pulse showed, with sentiment well up on the same time a year ago.
The pulse score came in at 84.5 in January 2022.
The index, which combines the results of the Consumer and Business Pulses, was up 4.6 on last month and 22.9 higher than a year ago.
“The Economic Pulse was on the front foot this month as Omicron fears receded, with both the Consumer Pulse and the Business Pulse re-gaining some of the ground they lost late last year,” Dr O’Sullivan said.
“Households and firms were cautiously hopeful that the peak of the virus wave was nigh and that restrictions would be gradually eased through February.”
Although up on December’s reading and also higher than a year ago, the business index was mixed in January with labour shortages a major concern.
Firms in all sectors, apart from retail, were more downbeat about the recent trading period, the study found.
“Downing Street’s decision to temporarily postpone the introduction of customs controls on goods moving between Ireland and Great Britain also saw firms in industry upgrade their outlook for exports,” the report concluded.
The Consumer Pulse also recorded increases in the month and the year with fears receding around the Covid-19 pandemic helping to brighten the outlook.
As well as being upbeat about their own household finances, the wider economic picture provided some light with a record year for multinational employment and the state recording its highest ever tax take last year.
Despite the positive mood among consumers, the Housing Pulse actually fell in December but remained up in the year.
“The share of survey respondents expecting house prices to increase by more than 5% over the coming year ticked down this month (to 38% from 43% in December), contributing to the slippage in the index and hinting at affordability concerns,” the report noted.
“That said, seven in ten still consider it cheaper to buy than rent in their area when the typical monthly mortgage repayment and the typical monthly rent for similar properties are compared.”