In its 2012 End of Year Statement, Enterprise Ireland reported that Irish exporting companies increased employment by 3,804 in 2012. After stabilisation in 2011, this is the first substantial net jobs gain in Enterprise Ireland client companies since the start of the crisis. This is good news. But I don’t think it will be enough to achieve the target of 100,000 additional people at work as adopted in the Government Action Plan for Jobs (2012-2016). This is an ambitious target. There is nothing wrong with that – the Government needs to be ambitious. But after one year into the plan period (2012-2016) it is important to take stock.
The IDA created 13,000 additional jobs in 2011 while only 7,000 were lost – the first net increase (6,000) since 2007. Let us assume that the IDA continues this fantastic effort of adding 6,000 net jobs a year over the next 4 years. That would mean 30,000 jobs over the program period. To underline the scale of 30,000 direct jobs, let’s relate this to the boom years of the 1990s. In this Celtic Tiger period, in the most benign international environment and supported by an expanding US economy, the IDA added 60,000 net jobs – in a decade! We are now hoping the IDA performs the same trick in the face of a severe global economic crisis. Analysts forecast a modest recovery of the world economy next year, but nothing like in the 1990s.
Enterprise Ireland in the same year supported the creation of 3,800 net jobs in export-oriented Irish companies. Assuming they continue to do this in the next four years, this would mean 19,000 net jobs over the Plan period. Added together, IDA and EI client companies would help to create about 49,000 net jobs in export oriented companies.
The rest of the jobs has to come from spin-off and multiplier effects. The IDA adopts a multiplier of 1:1, which would mean another 49,000 jobs. This multiplier is contested and some of the IDA-related multiplier jobs are already counted in the 19,000 Enterprise Ireland jobs. But, most importantly, the 49,000 (for spin-off and multiplier jobs) is a gross figure. We are losing jobs in the indigenous private and public sector as well. The non-export oriented indigenous sector is dependent on domestic demand, which remains stubbornly depressed. Employment in the combined indigenous private and public sector fell in 2011 with the number of employees in the public sector declining by another 16,200 (-4.1%) in the year to Q3 2012.
One of the issues with the Action Plan for Jobs is the sectoral composition of the jobs. The plan aims to create 20,000 jobs in manufacturing. Note again, these are net jobs. So to create 20,000 manufacturing jobs, you will have to create a far greater number of new manufacturing jobs. Now let’s consider the dynamics. We are employing about 206,000 people in manufacturing. Ireland has been losing manufacturing jobs since well before the current crisis – about 94,000 since 2000, of which about 30,000 between 2000 and 2007. Many of the low skill assembly jobs have been moving out of this country since the mid-1990s in fact. And the trend remains down, with a further loss of 4,000 in the year ending Q3 2012 (CSO, QNHS). To create 24,000 to 34,000 new manufacturing jobs (including the 4,000 lost in the first year of plan period) in the final four years of the plan would require a remarkable turn-around. The government argues that Ireland has regained its competitiveness since the start of the crisis, pointing to falling wage levels. But the low-skilled manufacturing jobs we have been losing over the last 18 years are unlikely to return. It is futile to join this race-to-the-bottom and try to be competitive for these types of jobs again. We are competing with China. You will have to reduce wages to well below social welfare level to be able to compete for these jobs.
And even in this very positive scenario we will have ‘only’ 100,000 more people in employment. That leaves a lot of unemployed people. Ignoring demographic changes and migration, taking 100,000 out of the 324,500 unemployed (Q3 2012) still leaves 224,000, in a labour force of 2.1m. – an unemployment rate of over 10 per cent. The Government can consider itself lucky with the emigration vent – a net migration of 34,400 (year ending April 2012) does more to solving our unemployment problem than the job creation efforts.
Solving the unemployment problem depends on growth in domestic demand. The big employment numbers are in retailing and personal services, hotel and tourism trade and the public sector. Retail and personal services are labour intensive sectors, accessible to the relatively low-skilled unemployed. The public sector is another big employer (Q3 2012: 378,000). Rather than trying to reduce numbers we should aim to keep public sector workers in employment. Sending, what are in many cases, relatively low-waged workers to the dole provides little savings.