Are Irish workers overpaid? American employer thinks so


What’s going on at the Bausch & Lomb plant in Waterford is very disturbing, not least because the city in the southeast has never really recovered from the Waterford Glass closure in 2009.  There's no other industry of any scale there, so the 1,100 jobs in the Bausch & Lomb eye health/contact lens plant under threat now are vital to Waterford.  

Talks are going on this week to try to lessen the impact of what the company wants – the deadline is June 17 – and hopefully some compromise can be found.  Those talks involve senior people from the Labour Relations Commission as well as the unions.  

But there is a very serious issue at play here which has a much wider relevance than just the jobs at the Waterford plant.  That issue is the post boom pay rate competitiveness of Irish industry, including in foreign companies here like Bausch & Lomb.

You are probably familiar with the story since it made headlines here.  The company is threatening to close the plant unless they get agreement to a cost-cuttinig plan that calls for 200 redundancies and a 20 percent pay cut for the remaining staff. 

Unusually for a situation like this, the message from the company was crystal clear and no attempt was made to sugarcoat the bitter medicine.  Either accept or the entire plant shuts down and all 1,100 jobs are lost. That was it.  

But it wasn't just the stark take-it-or-leave it message that was shocking.  It was the reason tacked on to it from the company that made eye-opening news.

In their statement the company said it wanted to bring the cost base of the Waterford plant closer to the cost base in its big plant in Rochester, NY where similar work is done.  Wage rates in Rochester are "more than 30 percent lower" than the rates in Waterford, the company said.  

That was the real shocker.  We are, of course, used to losing manufacturing jobs to Eastern Europe, or India or Vietnam or other developing countries where wage rates – and standards of living – are much lower. But this is different. This time we are losing jobs because pay rates are 30 percent higher than in Rochester, NY!  

The reaction to this from the workers, trade union officials, local politicians and other leaders in Waterford was, understandably, a degree of embarrassment, followed by claims that the two situations could not be compared.  

"It's not comparing like with like,” one union official insisted on radio.

Some of the workers seemed mystified, claiming that by the time they have paid their mortgages and all their other bills and put food on the table they have nothing left.  And now there is property tax and water charges are on the way. 

To suggest they were being overpaid is nonsense, they said.  Without batting an eyelid, one union official explained that the cost of living was much higher here, so it's not surprising that pay rates are higher than in Rochester.

And that is exactly the point. For those who have managed to hold on to their jobs in Ireland, wage rates have not fallen all that much from the heady days of the boom.  

This is reinforced by what has happened to those on the state pay roll – medics, police, teachers, etc. – where pay cuts have been minimal. The same applies to lawyers and accountants and all the other professions and services.
And it's evident further down the chain.  Despite the construction collapse, hiring a plumber here is still very expensive. For example, a plumber replacing the ballcock and other bits in a toilet cistern in my house last week charged me €110 for a job that took less than an hour.

This tendency to hang on to boom time pay rates is not surprising.  It's only human nature, after all.

And as austerity has been applied here with state spending cuts, extra charges for services and tax hikes and levies, people naturally feel that they need the money.  They don't feel they are overpaid.  In fact many of them are struggling to make ends meet.

But of course the wider context is of little interest to a foreign company here.  Why should they care about the tax hikes and all the extra charges that people here have to pay as the state tries to cut the budget deficit?    

Why should Bausch & Lomb care if the cost of living here (everything from hiring a plumber to the cost of food and all the other stuff we need) means that we want high pay rates?  That's not their concern.  All they are interested in, like all companies, is their bottom line.  

So how high are the pay rates in the Bausch & Lomb plant in Waterford?  The Irish business organization body IBEC recently produced figures which show that the average basic pay rate in the Waterford plant is €29,000. That increases to average pay of €39,000 ($53,200) when shift premiums are factored in. 

That does not seem like an excessive level of pay to us here, particularly after what we saw during the boom.  But I'm not sure how it would seem to a worker at the plant in Rochester.