Low Inflation rates conceal reality of high-cost business environment.
Any wage increases could reverse the tentative recovery.
Reacting to the release of the latest CSO Inflation figures today (13th March), ISME, the Irish Small & Medium Enterprises Association, warned Government to guard against the danger of wage-led inflation, which would stifle economic growth and reduce competitiveness. Small and medium enterprises are still struggling with a high cost base and any inflationary increase due to wage rises could halt the economic revival.
Mark Fielding, ISME CEO, commented, “The fact that inflation is remaining low means that the usual trade union reason for wage increases is not available to them. More importantly, the drive for survival and competitiveness requires that costs reduce and productivity increases”.
“The repeated calls for wage increases from trade union sources are premature in the extreme and ignore the reality of the high cost business environment in which small businesses operate. The emphasis must be on productivity and enhanced competitiveness, not on increasing the already high cost base of struggling companies. SMEs cannot afford wage increases when many are still in survival mode. The most recent ISME Quarterly Trends Survey found that 82% of SMEs do not expect to be in a position to raise wages in 2014. There can be no National Wage Agreement and no wage pressure placed on SME employers, it is simply not feasible at present.”
“Wages account for 48% of added value, on average, in the SME sector and only 8% in the multinational sector, a fact lost on some proponents of national wage agreements. Any increase in wages has a six fold comparative effect on SME costs and a devastating effect on their bottom line. While many large businesses may be in a position to increase pay, it is imperative that wage expectations are managed and the ‘one size fits all’ attitude is changed.”
“Economic revival remains tentative and costs are cripplingly high, Government, employers and employees must maintain realistic views in relation to the speed of recovery and also the productivity gains that are still needed. Government must play its role in this by reviewing state-influenced costs and benchmarking them against international standards.”
The Association called on the Government to:
Ensure that all state imposed business costs are reduced and benchmarked internationally.
Address the energy, transport and exorbitant fees of the monopolistic legal profession.
Legislate for upward only rent reviews on legacy leases.
Reduce Public Sector costs by addressing the increments, perks and inefficiencies.