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The Average Industrial Wage and the Irish Economy

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This chapter looks at the average earnings of Industrial workers in the Industry sector (defined as the average industrial wage) over the period 1938 to 2015. Average weekly earnings and average hourly earnings are presented in nominal values and in real values (i.e. adjusted for inflation to 2015 prices) along with average weekly paid hours.

Real EarningsNominal Earnings
1938163.522.94
1939153.792.85
1940138.52.95
1941126.982.98
1942118.653.09
1943117.883.44
1944119.013.65
1945123.393.77
1946135.84.1
1947151.984.85
1948162.595.36
1949169.65.61
1950171.925.76
1951177.56.42
1952173.246.81
1953173.867.2
1954178.577.41
1955183.727.83
1956184.228.18
1957180.598.35
1958183.458.86
1959189.879.17
1960202.699.83
1961213.4810.64
1962223.511.62
1963229.5612.22
1964237.9213.52
1965237.9614.2
1966251.0515.43
1967255.8716.22
1968270.0617.93
1969280.4520
1970301.6723.28
1971318.3926.77
1972334.8730.58
1973375.938.25
1974363.9143.31
1975391.3456.3
1976396.7867.35
1977409.8979.06
1978435.7890.47
1979444.33104.46
1980444.11123.43
1981429.44143.72
1982424.33166.32
1983434.05187.97
1984440.98207.36
1985450.34223.29
1986466.93240.33
1987473.85251.55
1988487.85264.53
1989486.86274.77
1990490.31285.9
1991496.37298.68
1992499.85310.16
1993520.61327.59
1994522.74336.64
1995532.38351.48
1996536.38360.11
1997545.45371.51
1998555.58387.56
1999577.25409.28
2000582.79436.21
2001600470.97
2002610.61501.51
2003630.34535.74
2004645.62560.77
2005652.9580.88
2006650.14601.21
2007640.12620.75
2008642.07647.87
2009664.05640.04
2010642.95613.84
2011616.04603.35
2012618.21615.72
2013627.69628.31
2014677.8679.8
2015685.53685.53
Table 1.1: Real and nominal average weekly earnings of industrial workers in the industry sector, 1938 - 2015

It's a Fact

  • Real earnings increased by an average of 2% per annum from 1938 to 2015.

Figure 1.1 illustrates real and nominal earnings over the period 1938 to 2015. Real average industrial weekly earnings increased by 319% from 1938 to 2015, which equates to an average annual growth rate in earnings of 2% per annum over this 77 year period. The effects of economic cycles and major economic and historic events on average weekly earnings are identifiable in Figure 1.1. For example, the impact of World War 2 from 1939 to 1945; the effect of the 1973 oil crisis; and the recessions in the early 1980s and from 2008 are all evident. 

It's a Fact

  • Excluding the 1960s and 1970s, earnings increased by an average of 1.1% per annum between 1938 and 2015.

Figure 1.2 summarises average annual real and nominal earnings growth by decade. Average weekly earnings increased most in the 1970s, both before and after adjusting for inflation. The 1980s saw nominal earnings increase by 10.3% while real earnings increased by 0.9%. The 1960s and 1970s were the only decades that had average annual real earnings growth of more than 2%. When the 1960s and 1970s are excluded, average annual earnings grew by 1.1% per annum on average.

Real Earnings GrowthNominal Earnings Growth
1940s1.27.1
1950s1.25.1
1960s48.1
1970s4.818.1
1980s0.910.3
1990s1.74.1
2000s1.44.6
2010-20150.61.2

The trends in earnings statistics illustrated in Figure 1.1 and Figure 1.2 are now discussed in relation to relevant historical events in the Irish economy over the period, including economic cycles of expansion and contraction. This provides additional information in which to frame the trends in average earnings over this 77 year period. 

Economic Background

When the Irish Free State was established in 1922, the economy in Ireland was largely agriculture-based and its main trading partner was the United Kingdom (UK). In the 1930s protectionist economic policies were pursued in Ireland to increase self-sufficiency and gain greater independence from the UK. During this period (which is known as “The Economic War”) Ireland refused to continue paying land annuities.  In response the UK put tariffs on Irish agricultural exports and Ireland then imposed tariffs on British consumer goods. This Economic War led to the loss of market share in the UK market for agricultural exporters, the decline in the food and drinks industry and some growth in the textile and clothing industry.

The Economic War came to an end in 1938, one year before the start of World War 2. Ireland remained neutral in the war, but “The Emergency” as it was known in Ireland, nevertheless brought hardship to the country. It is in this period that the earnings series begins and continues to track average earnings of workers in Ireland up to the present day.

1940s

Average weekly earnings of industrial workers in the industry sector were €2.94 in 1938 and increased to €3.44 by 1943. However, the supply shortages and resultant high inflation meant that real average weekly earnings fell by 28% between 1938 and 1943. Expressed in 2015 prices, real weekly earnings fell from €164 in 1938 to €117 in 1943. Over the full decade of the 1940s, nominal earnings grew by an average of 7.1% per annum, but real earnings grew by a more modest 1.2% per annum. This reflected a sector that was inhibited by a scarcity of production inputs from the UK and by a lack of demand from the domestic economy.

1950s

As European economies boomed post World War 2, the Irish economy in the 1950s experienced little economic growth and high emigration due to the continuation of protectionist policies. These economic policies began to change in the late 1940s and through the 1950s as Ireland joined the Organisation for European Economic Co-operation (OEEC), received Marshall Aid, joined the European Free Trade Association, established the IDA and Shannon Free Zone and removed restrictions on Foreign Direct Investment (FDI). Real earnings in the 1950s increased by an average 1.2% per annum in the decade, while nominal earnings increased by 5.1%, demonstrating lower levels of inflation than the 1940s along with low levels of wage growth. In 1958 T.K. Whitaker published the Economic Development paper which formed the basis for the First Programme for Economic Expansion and a more prosperous decade to come.

1960s

The Irish economy went through a period of expansion in the 1960s with a new focus on international trade, foreign investment in industry and Government investment in education. Industry saw productivity improvements through mechanisation and specialisation. Trade was liberalised with the 1965 Anglo-Irish Trade Agreement; free second level education was introduced in 1967; and regional policy changes were introduced in 1969. The decade was also known for industrial strife and trade union campaigns for wage increases.

Real earnings grew by 4% per annum on average in the decade, while nominal earnings increased by an average of 8.1% per annum. This earnings growth was influenced by many factors including the expansion in the Irish economy and the increased strength of trade unions.

1970s

In 1973 Ireland joined the European Economic Community (EEC) which gave Ireland access to, and competition with, the Common Market. Entry into the EEC accelerated the economic catching-up process with the rest of Europe. The Irish economy experienced growth in output throughout the decade along with increases in agricultural income led by the Common Agricultural Policy and in FDI, productivity, structural funds from the EEC and international trade. Two oil crises happened in the 1970s, these events impacted on the now open economy of Ireland by increasing the cost of energy as well as the prices of imported goods and services. Along with higher prices of goods from the EEC, the oil crises led to large increases in inflation during this decade. The rise in the cost of living caused industrial unrest with workers and trade unions demanding pay increases to match the rise in prices. This led to significant strikes in many sectors including banking, postal services, energy and transport.

The events of the 1970s are reflected in the earnings statistics for this decade as increases to nominal and real earnings are the largest of any decade in the series. The high level of inflation throughout the decade contributed to nominal average earnings growth of 18% per annum. Despite this high inflation, average earnings increased at a faster pace than the cost of goods and services, with real earnings increasing by an average of 4.8% per annum. This is the largest increase in the purchasing power of average weekly earnings over the period 1938 to 2015.

1980s

Following the second oil crisis in 1979 the 1980s started with a recession followed by years of slow growth, high emigration, high inflation and austerity. Real average earnings fell by 4.5% between 1980 and 1982 mainly due to high inflation. Real earnings grew modestly for the remainder of the decade. Over the decade, average real earnings growth was 0.9% per annum, the lowest average earnings growth of any full decade in the series. Nominal earnings increased 10.3% on average per annum, driven by the pressure on earnings from high inflation.  

1990s

Several factors influenced economic development in the 1990s. In this decade the evolution of wages was largely determined in the context of social partnership and the Maastricht convergence criteria (in advance of European Monetary Union) established a more stable economic climate. The decade saw increased competition and high inward investment. In 1995 the phrase “Celtic Tiger” was coined to describe the Irish economy which was experiencing unprecedented growth in output, numbers in employment and in the standard of living.

Average real earnings growth for the decade was 1.7% per annum while average annual nominal earnings growth was 4.1%. The relatively small gap between real and nominal earnings reflects a growing economy with a good supply of labour and competitive labour costs.

2000s

The 2000s saw the continuation of the Celtic Tiger before recession hit in 2008. The decade began with a booming export-led economy which evolved into a domestic demand-led economic bubble. The global financial crisis in 2008 had a huge impact in the Irish economy. The collapse of the financial and construction sectors caused a large increase in the numbers of unemployed and led to the Irish Government bailout of the banking system and then to the Troika bailout of the Irish state.

Average nominal weekly earnings increased each year of the decade up to 2008 and fell in 2009 with the onset of the recession. Average real earnings however, only increased each year to 2005 after which inflation outpaced earnings growth for a number of years. The average real earnings growth rate was 1.4% per annum in the decade, while average nominal earnings growth was 4.6% per annum.

2010s

The recession continued into the next decade and the Irish economy initially suffered from high unemployment, high Government debt and deficit and high borrowing costs. From 2011 onwards the economy started to slowly recover and expand. The period from 2010 to 2015 had the lowest level of inflation of any period in this series, resulting in a small difference in real and nominal average annual earnings growth. Average nominal earnings increased by 1.2% per annum while average annual real earnings increased by 0.6%. This is the lowest level of average earnings growth in the series. Real earnings fell by 7% from 2009 to 2011, the largest fall in real earnings since World War 2. Since 2011, in a low inflation environment, average real earnings have increased to above their Celtic Tiger levels.

Average Hourly Earnings

Average hourly earnings of Industrial workers in the Industry sector, illustrated in figure 1.3 below, showed similar trends to that of average weekly earnings from 1938 to 2009. Trends in average hourly earnings not only reflect changes to earnings of employees but also reflect changes to working hours over the period.

Real Hourly EarningsNominal Hourly Earnings
19383.890.07
19393.240.06
19402.810.06
19412.980.07
19422.750.07
19432.740.08
19442.740.08
19452.770.08
19463.040.09
19473.410.11
19483.640.12
19493.780.12
19503.820.13
19513.980.14
19523.860.15
19533.860.16
19543.960.16
19554.060.17
19564.10.18
19574.030.19
19584.070.2
19594.20.2
19604.460.22
19614.720.24
19625.010.26
19635.150.27
19645.390.31
19655.390.32
19665.720.35
19675.890.37
19686.240.41
19696.50.46
19707.030.54
19717.480.63
19727.860.72
19738.80.9
19748.741.04
19759.441.36
19769.461.61
19779.631.86
197810.222.12
197910.462.46
198010.72.98
198110.373.47
198210.414.08
198310.554.57
198410.635
198510.925.41
198611.265.8
198711.446.08
198811.716.35
198911.686.59
199011.826.89
199112.097.28
199212.297.63
199312.848.08
199412.768.22
199513.058.62
199613.128.81
199713.319.07
199813.679.54
199914.1710.05
200014.2410.66
200114.9811.76
200215.4412.69
200315.7313.37
200416.1414.02
200516.2114.43
200616.2315.01
200716.0415.56
200816.4716.62
200917.9117.26
Table 1.2: Real and nominal average hourly earnings of industrial workers in the industry sector, 1938 - 2009

Average Weekly Paid Hours

Average weekly paid hours of Industrial workers in the Industry sector increased from 44.1 hours per week in the 1940s to an average of 45 hours per week in the 1950s. Since the 1950s each decade has seen a fall in the average working week, dropping to 39.7 hours by the 2000s. The largest fall was seen in the 1970s when hours decreased by 4.1%, from 44.2 hours in the 1960s to 42.4 hours in the 1970s.

Hours Worked
1940s44.1
1950s45
1960s44.2
1970s42.4
1980s41.4
1990s40.9
2000s39.7
Table 1.3: Average weekly paid hours of industrial workers in the industry sector, 1938 - 2015

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