The Irish government, under the leadership of Minister Paschal Donohoe, has implemented a series of labor market policies that will impose significant additional costs on employers. These measures include raising the minimum wage by 12%, which will result in a 15% increase when additional PRSI costs are taken into account. As a result, Irish employers will face billions of euros in extra labor market taxes, entitlements, and regulations.
The government's decision to raise the minimum wage and introduce other measures comes at a time when the global economy is starting to slow down. Irish employers are already paying around €100bn through their private sector pay bills this year, and any further cost increases will have a significant impact on businesses. The government's spending spree on the credit card of Irish companies represents the biggest change in labor market policy in decades.
The cumulative impact of all these measures is expected to be substantial, and it is anticipated that there will be further expansions of entitlements in the coming year. Chief executives and businesses will be closely monitoring these developments as they navigate the challenges of a changing labor market landscape.
HSBC warns that Labour's proposals to introduce a 'genuine living wage' could lead to higher mortgage costs and increased unemployment. The bank's economists argue that raising the minimum wage beyond adjusting it with inflation would result in another large jump in costs for businesses next year. They also suggest that high wage growth is fuelling inflation in the UK and that services inflation is not fully under control. However, HSBC acknowledges that Labour's wage proposals could also boost employment and productivity if they motivate more people to work.
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