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What's the view from Dublin?

By Brendan Keenan

Is it deja-vu all over again? Budget Day would have brought a tear of nostalgia to the driest eye. Two billion euro of spending increases, mysterious fiddling with debit card fees, and threats of strikes from none other than the train drivers and teachers. I could almost feel my hair turning black.

These dreary steeples, and the integrity of their quarrels, have survived. So has much else. The obvious, if harsh, conclusion is that no lessons have been learned. There is still time to do things differently, but perhaps no more than a couple of years before we are back on the old primrose path.

Which lessons, though, and what to learn from them? That familiar old feeling was strengthened by the fact wage pressures are already looming. The banking crash has rather erased memories of things like benchmarking, blue flu and spurious productivity deals, but it should not.

The advantage of looking back is that things can be seen more clearly. But not always that clearly, as a new paper on Ireland's competitiveness illustrates. The research, by economist Rory O'Farrell, appears in the latest edition of the Economic and Social Review.

Competitiveness is a relative measure and the wage moderation since 2008 has created cost advantages over the eurozone, while exchange rate movements have been favourable against both the UK and USA.

The trade unions responded by quoting smaller rises in unit labour costs, which measure how much output is produced by those paid the wages, and not just the wages themselves. They would also cite higher Irish prices as justification for higher Irish wages.

Ah yes, would reply the employers and even the state development agencies, but the presence of foreign firms making things like blockbuster drugs artificially boosts output, and high wages are partly the cause of high prices. O'Farrell's analysis agrees that all these things are connected, but in fiendishly complicated ways.

And one simple way. Data graphs often start in the bottom left hand corner, which is a good way of showing relative changes. But, though it may look that way, it doesn't mean everything was at the same level at the start of the period. Yet it is often interpreted as if it were.

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