CPI small yearly decline shows wages can’t be cut – Morgan
Sinn Féin Finance Spokesperson Arthur Morgan TD said today that economic indicators revealing that the Consumer Price Index excluding Mortgage Interest fell by only 1.2% between May 2008 and May 2009 shows that wages cannot be cut without risking a complete collapse in consumer spending.
Deputy Morgan said:
“Several commentators including IBEC and the IDA, as recently as yesterday, have called for wages to be cut to increase the state’s competitiveness. The government appears to have taken this line also, if the rumours surrounding the minimum wage and social welfare cuts are to be believed.
“However, these Consumer Price Index figures show that overall, the average cost of items in this state has dropped by only 1.2% in the 12 months to May 2008, if mortgage interest is excluded. The figures being reported in the media – a 5.4% drop in July, down from a 4.7% drop in May, include mortgage interest which is naturally coming down based in ECB interest rate drops.
“However there are two points to bear in mind here – firstly, people in this state have astronomical mortgages because of the property boom, so while their interest rates may have dropped, their lump sum repayments have not. Secondly, not everyone has a mortgage and even for those who have, outside this monthly repayment, the cost of goods is not falling as steeply as business bodies and the government would like us to believe.
“In some sections of the private sector, wages have been cut by 10% and more and in the public sector wages have been frozen, and through the pension levy and income levies effectively hammered. But this CPI figure highlights a real problem – if wages are cut anymore, we could be looking at a complete collapse in purchasing power which will precipitate further contraction in the economy.
“There is an agenda to drive down wages by short-sighted biased groups at the moment, but they do this at their peril. If they succeed they will only see economic conditions in this country worsen – not improve.” ENDS