ESRI sees Scope for Public Sector Pay Cuts

The Economic & Social Research Institute (ESRI) in Dublin has stated that there is "scope for further pay cuts in the public sector" in Ireland.

In its latest quarterly study, the ESRI forecasts that the Irish economy will contract by 9% this year, and by a further 2.3% in 2010.

The national rate of unemployment will average 12.5% this year and is expected to soar to over 16% next year.

Unemployment among foreign-national workers has also risen sizeably, particularly compared to Irish workers, but a substantial number are nevertheless choosing to remain in Ireland.

ESRI analysts Alan Barrett, Ide Kearney and Jean Goggin expect that while the economy "may stop contracting in mid-2010", a return to growth will be "anaemic".

However, the grim report is not as bad as earlier forecasts, due to an estimated 40,000 people emigrating and others withdrawing from the labour force, possibly into education.

On pay, the ESRI says there is "scope for further public sector pay cuts", which were preferable to cutting jobs or services. It concludes that the recession will last until the end of next year.

Public sector unions have rejected the findings of the ESRI report.

Jack O'Connor (right), the General President of Ireland's largest trade union SIPTU, said "the ESRI has become a mouthpiece for the policies of the establishment".

In a statement, he argued that "pay cuts will solve nothing". "They will actually exacerbate the downward trend by further reinforcing the deflationary spiral," he added.