Competitiveness watchdog warns state to temper response to pay demands

Chair of NCPC says Ireland should beware the risks of chasing inflation with ever-higher wages, as happened in the 1970s and 1980s

Michael McGrath: the public expenditure minister said he was conscious of not allowing wages to chase rising prices in a manner that would create an inflationary spiral. Picture:

The government should not repeat the economic mistakes of the 1970s and 1980s and be “very careful” in how it manages public sector wage demands, the head of the country’s competitiveness watchdog has warned.

Dr Frances Ruane, the chair of the National Competitiveness and Productivity Council (NCPC), said Ireland could ill-afford a repeat of the sort of wage agreements that chased inflation during those decades and made them economically “very, very difficult”.

“Those of us who were around in the 1970s are aware that what can happen with agreements is that they build in inflationary expectations. That was really the big issue that made the 70s and 80s very difficult and that’s what we want to avoid,” Ruane told the Business Post.