Irish Economy
Knowledge workers in Ireland; Low-paid manufacturing grafters in China? - Part 2
By Michael Hennigan, Finfacts founder and editor
Jun 12, 2014 - 6:49 AM

Printer-friendly page from Finfacts Ireland Business News - Click for the News Main Page - A service of the Finfacts Ireland Business and Finance Portal

In 2004 an official group recommended that Ireland should use some of the fruits of the property boom to rapidly expand the number of knowledge workers in the economy through expanding science and engineering education, and boosting research. Economists dubbed it "moving up the value chain" and there was a notion in Ireland and elsewhere that the West could prosper as knowledge economies while low-paid manufacturing would continue to be done in China and elsewhere. Today, even the jobs of the knowledge workers are under threat.

In 2006 the Irish Government set a goal to be internationally recognised as a "world class knowledge economy" by 2013.

In 2012 services exports overtook goods exports for the first time and the growth in such exports over the previous years was seen by superficial analysts as "moving up the value chain" but it was a fairytale of fake exports arising from massive tax avoidance.

The dominant companies in Ireland's international trading economy -- such as Intel, Apple, Microsoft and Google - - do little or no research in Ireland and the staff of Apple and Google are mainly in sales and administration. Most of them are also foreign nationals because the Irish operations require a wide range of language skills.

According to the CSO, there are 87,000 people employed in the Irish ICT (Information and Communication Technologies) sector -- 4% of the workforce -- and only about half of them work in functions requiring tech knowledge.

While foreign-owned firms are responsible for almost 75% of what's called annual Irish R&D business spending  (a tax credit of 25% boosts spending but it's not all on genuine R&D), less than 30% of the firms do any meaningful research.

The current Irish government is sticking to the strategy despite evidence of failure.

Finfacts paper 2012: Ireland’s doomed goal to become a world-class knowledge economy [pdf]

PowerPoint conference presentation [pdf]

Professionals in science, technology, engineering, and mathematics (STEM) in the US account for less than 6% of the US workforce according to the AFL-CIO trade union congress.

US data show that people with university degrees consistently earn more than those with high school diploma's or less. However, the knowledge economy will remain small overall even with an increase in the education of the workforce.

China is expected to overtake the US in a decade as the world's biggest R&D spender and while it will have a bumpy ride, its companies will eventually challenge the leading firms of the OECD area.

Big US companies are no longer big employers. For example, General Motors had over 618,000 employed in the US in 1979 - - in well-paid jobs; today, General Electric employs 133,000 and Apple 47,000. The US needs to add about 70,000 to 90,000 new jobs monthly to just meet the natural growth of the workforce.

General Motors' worldwide employment in 1979 was 853,000. Today it is about 202,000 with 80,000 employed in the US.

Apple the contemporary GM, employs in the US about 12,000 professional staff; over 30,000 in retail and the rest in customer support.

The New York Times reported in 2012 that average retail staff annual pay was $25,000.

The economy "is now beginning to show incremental employment growth," said Doug Handler, chief US economist at IHS Global Insight last Friday as reported by The Wall Street Journal. But now the focus is turning to the types of jobs being created. The first new job beyond the last peak, he said, will probably be "a barista at a local coffee shop."

Generally service jobs that replace manufacturing are less-well paid and even though manufacturing has become increasingly automated in recent times, Dani Rodrik, a professor of social science at the Institute for Advanced Study, Princeton, New Jersey, who specialises on globalisation, says manufacturing remains an imperative for the developing world. He is a native of Turkey.

Prof Rodrik has written that in the United States, manufacturing employed less than 3% of the labour force in the early nineteenth century. After reaching 25-27% in the that middle third of the twentieth century, deindustrialization set in, with manufacturing absorbing less than 10% of the labour force in recent years. Only a few developing countries, typically in East Asia, have been able to emulate this pattern. Thanks to export markets, South Korea industrialized exceptionally rapidly. With manufacturing’s share of employment rising from the low single digits in the 1950’s to a high of 28% in 1989 (it has since fallen by ten percentage points), South Korea underwent in three decades a transformation that took a century or longer in the early industrializers.

But the developing world’s pattern of industrialization has been different. Prof Rodrik says: "Not only has the process been slow, but deindustrialization has begun to set in much sooner."

He says that in Brazil, manufacturing’s share of employment barely budged from 1950 to 1980, rising from 12% to 15%. Since the late 1980’s, Brazil has begun to deindustrialize, a process which recent growth has done little to stop or reverse. India presents an even more striking case: Manufacturing employment there peaked at a meagre 13% in 2002, and has since trended down.

In the current issue of Fortune magazine, Geoff Colvin, a senior editor, writes that driverless cars are safer than human-driven ones. Computers can predict Supreme Court decisions better than legal scholars and he says that it "seems common sense that the skills that computers can’t acquire - - forming emotional bonds, making human judgments - - will be valuable. Yet the lesson of history is that it’s dangerous to claim there are any skills that computers cannot eventually acquire."

Some of today's knowledge work will become redundant and Geoff Colvin writes:

The emerging picture of the future casts conventional career advice in a new light. Most notably, recommendations that students study STEM subjects - - science, technology, engineering, math - - need fine-tuning. It’s great advice at the moment; eight of the 10 highest-paying college majors are in engineering, says recent research, and those skills will remain critically important. But important isn’t the same as high value or well-paid. As infotech continues its advance into higher skills, value will continue to move elsewhere. Engineers will stay in demand, but tomorrow’s most valuable engineers will not be geniuses in cubicles; rather, they’ll be those who can build relationships, brainstorm, and lead.

It’s tempting to find comfort in the notion that right-brain skills will gain value. Calculus is hard, but we all understand emotions, right? Yet not everyone will benefit. We may all understand emotions, but we won’t all want to go there. Building the skills of human interaction, embracing our most essentially human traits, will play to some people’s strengths and make others deeply uncomfortable. Those people will be in trouble.

Finfacts: Declining regular work; Rising low-paid freelancing in Ireland & elsewhere - Part 1

Part 3: Upcoming

© Copyright 2015 by