Polarisation of the labour market post-crisis

A report into the impact of the recession on the Irish labour market has been published. It reveals a pattern of ‘polarisation’, with an increase in the number of jobs at the top and at the bottom of the market. There appears to be a ‘hollowing out’ of employment in the middle-paying jobs. The main reason for this, says the report, is the huge number of job losses in the construction sector during the recession, a sector where wages tend to be at this mid-range level.

Background

The results of a new study, The Irish Labour Market Since the Recession (481 KB PDF), has been published by the Nevin Economic Research Institute (NERI).

The research suggests that the structure of Ireland’s labour market has polarised with, the report says, ‘employment increases for those at the top, a hollowing out of middle paying jobs, and employment increases for those at the bottom’.

The study is one of a series of research papers produced by NERI. The organisation was established in 2012 and is supported and funded by unions affiliated to the Irish Congress of Trade Unions.

Wage levels

The report concludes that ‘managers, professionals and associated professionals’ are Ireland’s highest paid occupational group. However, there is some disparity in earnings within the group, with mangers in the ‘financial and insurance’ sector paid, on average, more than double the salary of a manager in the ‘accommodation and food’ sector.

Managers, professionals and associated professionals in the ‘accommodation and food’ sector earn an average of €18.88 per hour – some way below the overall average hourly wage of €22.11.

Overall, the accommodation and food sector was found to be the lowest paid sector of the economy, with hourly rates for clerical, sales and manual workers roughly half the national average. However, the report cautions:

…working hours tend to be measured more accurately for waged workers than salaried workers, so the reported hours worked for some high paid workers may be unreliable (and are likely underestimated).

Low pay

Eurostat defines low pay as two-thirds of the median gross hourly wage. Based on this definition, the cut-off point for low pay in Ireland is €12.20 per hour or just under €25,000 per annum, based on a 39 hour week. The study found that in 2010, by this definition, 20.7% of Ireland’s workforce were low paid.

In certain sectors, there was a relationship between low pay rates and working time. The issue of low pay ‘is compounded by the fact that low paid workers also tend to have a shorter working week, with the issue being particularly noticeable in the service sector’, says the report.

It concludes that ‘for pay rates between approximately €10 per hour and €20 per hour, there is a strong relationship between low paid workers having a shorter working week’.

Before the recession, between 2002 and 2006, workers in lower paid occupations such as cleaners, labourers, porters, other service workers and retail workers had above-average relative pay increases. The report identifies ‘institutional factors’, such as collective bargaining and minimum wage rates, that have a strong influence on wages in these sectors. In contrast, however, higher paid occupations did not see the same above-average pay increases during the same period, although this did happen in other countries.

Employment in the recession

The results of the research show that during the recession there were above-average falls in the number of employees in both skilled occupations, such as administration and secretarial work, and in elementary occupations. Employment has increased for managers, directors and senior officials, in professional occupations, and in associate professional and technical occupations. The report concludes:

Between 2008 and 2010 employment for those at the top was relatively stable, while those in the middle were hit hardest…those at the bottom [were] also losing employment, but relatively less than those in middle paying jobs.

The main source of job losses was in the construction sector where wages tend to be in the middle of the pay range. In the three occupations where wages are highest – managers, directors and senior officials; professional occupations; associate professional and technical occupations – the share of employment rose from 31.7% to 38.8% during the recession.

Overall, excluding the construction sector, the period 1995 to 2007 showed a polarisation of the labour market. The greatest job gains were in the top 20% of the wage range and the second highest gains were in the bottom 20%.

In-work training needed

The report affirms that there will be a continued expansion of employment for the higher paid, and stagnation or decline of jobs with wages in the middle of the pay range. It suggests that in-work training would help workers to improve their skills and take advantage of new job opportunities. The report concludes that institutional support will continue to be necessary ‘to protect the wages of lower paid workers.’

Reference

O’Farrell, R. (2013), The Irish labour market since the recession: Lifting the veil on long term trends, NERI Working Paper Series, NERI, Dublin.

Roisin Farrelly, IRN Publishing