Have your company’s remuneration levels changed this year?

David Bloch, MD of the Brightwater Group comments:

Brightwater have recently been conducting an interim "Salary Survey". We have done this after 6 months instead of a year due to the extraordinary changes that have been occurring in our economy, affecting remuneration levels. The questions that remain are 1. How much have remuneration levels dropped? 2. Which sectors have been hit hardest? 3. Is this happening in other 1st world economies? 4. What effect will it have on Ireland from a personal and business perspective?

Our updated 2009 salary survey covers far more clearly and extensively the first two issues – where, and by how much have remuneration levels dropped? Before explaining the rest, I just want to say that in the private sector there are virtually no companies that haven’t made salary drops in Ireland. The few exceptions being those rare companies that have benefitted from the recession. They have benefitted due to providing recession-proof services like low-cost food, or because they have grown market share due to the demise of their competitors.

Salaries in other first world countries have not generally dropped, but then many have not felt the effects of the recession for as long, or as acutely as we have. Mostly though, they haven’t been driven by the fear and panic that have swept through Ireland and it is here that we need to start.

Ireland has only recently acquired great wealth, and there is nothing as scary as losing something you’ve gained. This sense of fear has been fanned by the media who have delighted in headlines about the demise of the country. Gleefully analysing every negative statistic while ignoring the big picture. There has always been the question of whether the media report the news, or make the news and it is clear to me that they do a little of both. For example in our February poll, I noted that “Fitch, one of the leading ratings agencies of sovereign debt reconfirmed Ireland as Triple A. Why wasn’t this news splashed across the front of the Irish Times, The Irish Independent, RTE news etc?” The breaking news on March 30th was that Standard and Poors ratings agency downgraded Ireland to Double A – this was front page in every newspaper and media station.

In a small country like Ireland, the media have an added social responsibility, evidenced by the fear and panic they have helped to feed, driving everyone’s salary and standard of living down. Let’s be clear on three things: Ireland is immensely wealthier than it was 15 years ago, the recession will end, and there is nothing fundamentally wrong with the Irish economy!!

In 1994, Kevin Gardiner, a London-based research analyst with Morgan Stanley penned the term Celtic Tiger, recognising the economic potential in Ireland. He realised that the Irish economy would grow because of the supply side… it was to do with the reforms of the tax system, the flexibility of the workforce and the welcoming attitude of the Government and workforce to foreign direct investment. It was a supply-driven story that was about real transformative change. Kevin recently commented that “It wasn’t just delivered by cheap credit and house prices. Those things came later and amplified the story and pushed it to an extreme. That extreme went too far and you are now left with the hangover. But when the dust has settled on this, I would say that the Irish economy is not going to go back to where it was. Those supply side changes have not been reversed and they are still out there”.

The recession in Ireland is certainly bad. Our second biggest trade partner, the US is in recession. Our biggest trading partner, the UK too – and this compounded by the pound being so cheap has meant we have had to massively reduce our margins to try and compete: All these have caused deflation, including the reduction of everyone’s salary. However, we must be clear on one thing, the Irish economy is fundamentally strong and it is a first world economy based on sectors like Banking, Pharmaceuticals and IT/Telecoms, not manufacturing and agriculture. We’ll be back!

To request a copy of our updated 2009 Salary survey released this month, please contact our marketing department on 01 6621000