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Pensioners down €12 a week or €624 a year due to soaring cost of inflation

Workers also feel squeeze of over €1,000 per year

Last year’s €248.30-per-week state pension will be worth €236.50 this year in real terms. Photo: Stock image

Anne-Marie WalshIndependent.ie

The value of the State pension has fallen by €12 a week and more than €1,000 has been wiped from the average worker’s pay packet due to soaring inflation since last year.

New figures from a parliamentary advisory body reveal how the biggest spike in the cost of living in nearly 40 years has eroded pay, the State pension, welfare payments and student grants.

The Parliamentary Budget Office data reveals the average worker is effectively earning over €1,000 a year less than last year, while the value of the State pension has fallen by €12 a week or €624 a year.

Minimum-wage workers, State pensioners and social welfare recipients will suffer the sharpest percentage drop in the value of their incomes, at around 4pc.

The figures were compiled to provide guidance to politicians and are based on an inflation forecast of 7pc for this year.

The Economic and Social Research Institute (ESRI) predicted it will average 7.1pc.

The figures reveal how the average employee’s earnings of €44,370 last year have fallen in value by €1,244 a year, or €23.90 a week due to inflation, despite factoring in predicted wage growth of 4pc.

If pay only grows by 2.3pc this year, the value of wages will drop €1,949.

Gardaí, who are the highest-earning group included, will see a reduction of over €2,000 in the value of their average €72,001 earnings last year.

The average private-sector worker’s real wage will be €40,201 this year, compared with €52,469 in the public sector.

Student grant recipients’ payments have fallen by €11 in value.

The figures have emerged as the Government is being pressed to introduce new measures to help struggling households cope with rising costs ahead of the October Budget.

Rising prices will push the purchasing power of the State pension down by €12 a week this year, according to the figures.

Last year’s €248.30-per-week payment will be worth €236.50 this year in real terms, a 4.8pc decrease.

Most workers will take a 2.8pc reduction in the value of their pay as inflation is expected to erase wage growth of 4pc.

Those who received more modest increases, or none at all, will be hit further in the pocket.

Co-director of the Nevin Economic Research Institute, Tom McDonnell, said he was not surprised by the figures and warned that “things may even be worse as inflation is currently running at 7.8pc”.

“Increases have generally been well below 7pc so I knew that real incomes have been badly hit across the board,” he said.

“For example, minimum-wage workers had to settle for an increase of just 2.9pc. This is likely to equate to a hit to their real incomes of over 4pc this year.”

Mr McDonnell said inflation has been highest for the poorest 20pc of households, including single minimum-wage earners, most social welfare recipients and S tate pensioners who are living by themselves.

“This is the context for various campaign groups calling for a €15 to €20 increase in welfare rates,” he said.

“The groups experiencing the highest level of price inflation since December 2016 are renters and lone parents… Child poverty is likely to rise.”

He said inflation has been lower than average for the top 40pc of households in Ireland, who have tended to build up significant savings in recent years.

“The clear implication is that Budget 2023 should focus on targeted measures for lower income households, renters and lone parents,” he said.

“In my view, it is time to start benchmarking welfare rates, including the introduction of enhanced child income supports.”

Mr McDonnell called for State interventions to reduce the cost of childcare and public transport, stating that this would reduce the cost burden for workers while improving female labour force participation and gender equality as well as assisting with climate goals.

He said this “would therefore dampen the need for nominal wage growth”.

In education, he said a strong case can be made for enhanced State subsidies for things like schoolbooks, school meals and college fees, while an expansion of free GP care to more groups would assist hard-pressed families.

He added that tax cuts will disproportionately benefit the better off.

Ibec director of lobbying and influence, Fergal O’Brien, said it is not going to be possible for employers to fully match the rate of inflation with pay rises.

“We can’t chase down inflation,” he said. “We have to take a multi-annual perspective for the more medium term.

“Over the last 10 years, average wage growth has been twice the annual inflation growth. Clearly we are in a period of time where inflation is higher than wage growth, there’s no question about that, but it would not be the right thing for the economy for any employer to chase down inflation at the moment.”

He said employers who can afford to are giving wage increases and he believes the Government has a role to play around taxation policy in the Budget.

“In particular, we would be focused on seeing an increase in the entry point to the top rate of tax,” he said.

“The second area where the Government can help is the social wage, the cost-of-living increase that workers are facing in childcare in particular, and other services the Government can support to ease cost pressure on families.”

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