Two of every three Irish adults are working, as labour force growth bucks the global trend of ‘great retirement'

Irish Independent

5 days ago

Irish workforce participation rate of 65.8pc is above the EU average of 59pc
There has been no 'great retirement' in Ireland, with the labour force participation rate now standing at almost 66pc, way ahead of the EU average.
While the Covid pandemic led to a dramatic increase in retirements in other countries, the opposite has happened in Ireland, with more men and women joining the workforce.
'There is evidence of a clear level-shift between the period before the Covid-19 pandemic and the period since,' the ESRI's latest quarterly economic commentary says.
It points out that the Irish participation rate of 65.8pc is above both the EU average (59pc), and the average of Western European countries (62pc).
'Such a high participation rate suggests there may be limited scope in the domestic labour market for future increases to the labour force,' said the ESRI.
The 'remarkable' rise in employment means there are now almost 2.8 million people at work, a historic high. The ESRI predicts there will be another 66,000 people added to employment figures this year, and 45,000 next year.
With unemployment remaining low, at just 4pc, the tightness of the labour market is putting upward pressure on wages. Because they now outstrip price inflation, real wages are on the rise. The ESRI is forecasting real wage growth of 3.5pc this year, and 2.3pc in 2026.
'Year-on-year growth in nominal wages was 5.5pc in the first quarter. This followed similarly high growth rates in 2024,' according to the ESRI commentary, which notes that sustained growth in nominal earnings of about 5pc is high by historical standards.
Higher labour costs are having an impact on employers, with 49pc of small businesses reporting an increase in costs over the last year, according to a new survey from the Small Firms Association.
Labour-related costs remain the biggest challenge, businesses say, with 31pc saying they have increased.
The tightness of the labour market makes it harder for Government to hit house-building targets.
ADVERTISEMENT
The ESRI says that to get to the 50,000 units a year that are needed, another 40,000 construction workers would have to be employed.
To complete all the projects in the National Development Plan as well would require a total of 80,000 to be employed.
As with other institutions, including the Central Bank, the ESRI has downgraded its forecast for how many houses it expects to be completed this year.
'The number of housing completions in 2024 – at just over 30,000 – was disappointing and we remain somewhat pessimistic about the scope for substantial growth in 2025 and 2026,' the commentary says.
'We have reduced our forecast from our previous commentary for the present year, and now expect 33,000 completions in 2025 and just under 37,000 completions in 2026, but there are considerable downside risks.'
It has also reduced the forecast for modified domestic demand, regarded as the most accurate measure of Irish economic performance. The ESRI had forecast growth of 3pc last spring, but has reduced that to 2.3pc.
The word 'uncertainty' appears 19 times in the commentary, with the ESRI saying it now 'far outweighs' previous highs such as Covid and the global financial crisis.