Irish workers set to enjoy wages boost in coming years, Central Bank forecasts

Irish workers are in line for their biggest pay hike in a decade with real incomes when adjusted for inflation expected to rise by almost 9 per cent over the next three years, according to the latest information from the Central Bank. 

With Ireland facing record employment figures and falling inflation, workers are set to be better off than they were during the cost-of-living crisis. 

While broad measures of labour market slack and vacancy rates have eased, the labour market remains relatively tight, the Central Bank says in its quarterly bulletin.

These labour market conditions are forecast to underpin nominal wage growth of 4.7 per cent per annum on average from 2024-2026, it says. 

The good news on wages comes on the back of a rapid fall-off in headline inflation, which is expected to average just 2 per cent this year, down from more than 5 per cent last year. The ongoing tightness in the labour market is expected to underpin salary growth.

The Central Bank forecasts that “compensation per employee” would increase annually by an average of 2.9 per cent in real terms between 2024 and 2026.

However, some risks to prosperity are also noted. "With geopolitical tensions remaining elevated, energy prices could diverge from their current downward trend, putting renewed upward pressure on inflation," the quarterly report says.

A delay in addressing the housing shortage could generate higher and more persistent price and wage inflation and damage competitiveness, the quarterly report also states.