|Snow blankets the courtyard of Government Buildings, Dublin |
Irish Jobs Plan 2012: The Government will launch
a plan today with a target of 100,000 new jobs over the coming four years. The
Action Plan for Jobs 2012, which has been produced by Minister for Employment
Richard Bruton, is reported to involve 15 Government departments and 30 State
agencies in a coordinated effort to implement a list of initiatives. However,
Irish governments have a record of big policy launches and poor subsequent
results. The prospect
of high Irish long-term unemployment will not be seriously impacted by new
incentives and schemes. A change of mindset at policy level is urgently needed
including replacing the spin that dominates enterprise policy with an
unvarnished assessment of the challenges facing Ireland in a changing global
The Government's flagship
jobs programme, the aspiration that university research will create a knowledge
economy job creation engine, is a failure despite the investment of billions of
euros. However, like its predecessor the Government has bought into a fantasy
even though few commercial jobs have been created and any spinout company with
potential is sold to a bigger US company, before the taxpayer can earn any
The potential for
significant job creation through the attraction of new overseas projects is not
high. In recent years project size has been small compared with the big
manufacturing greenfield projects of the early 1990s and last year IDA Ireland's
new net jobs achieved level was at just over 6,000. Output from the mainly
US-owned pharmaceutical and medical devices sectors increased by 40% in the
period 2004-2010 and account for about 60% of merchandise exports, but
employment remained almost static in the low 40,000s through all that period.
In respect of indigenous
exports, it would take years to develop markets in the big emerging economies
and it may well be wiser to concentrate on mainland Europe.
The challenges in
creating sustainable jobs are immense: The official unemployment total is just
over 300,000, a rate of 14.2% compared with Austria's 4.1% - the lowest in the
Eurozone. The number on live register is close to 440,000 which includes
part-timers and individuals in various public schemes.
both the foreign-owned and Irish tradeable/export goods and services firms in
2010 fell to the 1998 level when the workforce was 25% smaller and in the boom
period of 2001/2007 only 5,000 net jobs were added.
Where will the new jobs
come from now during an expected long period of slow growth in developed
In recent months the
Government has announced a number of new schemes in advance of today's plan.
Minister for Finance
Michael Noonan announced in the Budget support for exporters targeting BRIC
countries (Brazil, Russia. India and China from the original classification plus
South Africa). It will help a number of firms but exports to these five
countries only accounted for 2.3% of total exports in 2010 with China accounting
for the lion's share. Exports to India were at a decimal point. Besides most
of the existing exports are made by foreign firms. The Finance Bill 2012
includes some tax incentives for foreign enterprise managers.
Taoiseach Enda Kenny
promised the creation of 100,000 jobs by 2015 in November. He was speaking at
the announcement of plans for a temporary partial credit guarantee scheme for
business; the establishment of a micro-finance loan fund to generate up to €100m
in additional micro-enterprise lending which it is claimed will benefit over
5,000 businesses over a 10-year period and quarterly job creation targets.
Last October Minister
for Jobs, Enterprise and Innovation Richard Bruton said the Government should
aspire to create over 200,000 jobs to have 2m people at work again.
government jazzed up its jobs targets by including estimates for indirect jobs.
IDA Ireland's Horizon 2020 plan published in 2010 had a headline target of
105,000 new jobs in its assisted firms in the period 2010-2014. On closer
examination, the direct jobs target was 62,000. There was no estimate of job
losses even though IDA firms lost an average of 9,000 jobs annually in the past
decade. So the reality can be very different to the spin.
It's not only the
political leaders who are at sea on jobs targets.
Last November, two Big 4
accounting firms, PricewaterhouseCoopers (PwC) and Ernst & Young, differed by
fourteen years on how long it will take for the Irish employment situation to
return to pre-2008 recession levels.
deskbound experts in Dublin used the results of a survey of firms to forecast
that the pre-recession employment levels would return in 2016, based on the
potential of export growth by indigenous firms. However, the reality on the
ground whether in mainland Europe or Asia is that developing new markets is a
hard slog and while improved competitiveness helps, it is not crucial. There are
many competitors in most sectors of business.
The Irish economy is more
dependent on foreign firms than any other developed country and the foreign
sector is responsible for about 90% of tradeable goods and services exports.
One home truth that
should get attention is that the number of Irish firms involved in exporting is
much lower than comparable firms in other small economies.
An EU survey of more than
16,000 small and medium size companies (SMEs, < 250 employees) found that in
Estonia, 23% of companies generated turnover from exports, Slovenia: 21%,
Finland: 19%, Denmark: 17% and Ireland 11%. The proportion of SME revenue
generated from exports in 2005 was Belgium: 15%, Estonia: 12%, Slovenia: 11%,
Iceland: 10% and Ireland: 4.2%.
Almost half the exports
from indigenous firms go to the UK and more than 60% to English speaking
countries. Britain is the destination of a massive 75%% of all consumer foods
exports and in recent years the traditional surplus in the food and drinks trade
has been eroded through imports made by groups such as Tesco.
Enterprise Ireland said
two years ago that the markets, Germany, France, Benelux, Italy and Spain,
collectively represent a gross domestic product (GDP) 3.9 times the size of the
UK, yet the non-food exports by clients companies of the agency for these
countries, is 40% of that of the UK.
competence remains poor and is an impediment to developing markets in Europe.
According to Eurostat, the EU's statistics agency, nearly 80% of children in the
EU were studying a foreign language at primary school in 2008; in Ireland the
level was 3%!
It would be facile to
blame this situation on the requirement to teach the Irish language.
So while the single
market and common currency area benefits are not being exploited, it would be
foolish to see salvation further afield.
Apart from niche areas,
developing export business in for example China is a huge challenge and trying
to keep control of intellectual capital in a joint venture situation, is not for
the faint hearted.
developed country is banking on innovation but a small country like Ireland
cannot afford to put significant resources into general research.
"This is our generation's
Sputnik moment," President Obama said earlier this year in reference to the
success of the Soviet Union in launching a satellite into space in 1957. As a
result, America needs to fund "a level of research and development we haven't
seen since the height of the space race."
Green energy is getting a
lot of attention from the big economies but the collapse of the solar energy
market last year highlights the risks. The biotech industry, a
fusion of biology and technology, dates from the 1940s but only a small number
of firms have ever made a profit.
science related public spending across 39 government departments and agencies
rose from €1.2bn in 1999 to €2.5bn in 2009.
so-called smart economy has got the lion's share of Irish enterprise public
funding in recent years with research and development spending in higher
education almost trebling from €322m in 2002.
While research can have
several benefits, direct commercialisation is not a significant one. For
example, in the US the income from intellectual property is 4% of university
research spending and in England in 2009, only £73m was earned.
The Organisation for
Economic Cooperation and Development (OECD) says there is "little evidence of
success" in the commercialisation of university research and according to
Enterprise Ireland, it has assisted 100 spinout companies from universities and
public research institutes over a decade and about 1,000 jobs were created.
In 2010, there were an
estimated 35 spinout companies at Irish third level institutions, which would
have had a few employees each and Science Foundation Ireland, the State grants
agency, supported 4 new spinout firms.
brutal reality is that the default route for the odd spinout with international
potential is to be acquired by a US firm, long before it reaches a significant
size - good news for founders but not the taxpayer.
High tech employment is
never significant in an economy but the creation of startups across all sectors
is crucial for job creation.
The issue for Irish
policy-makers is not whether the State should fund research but the dependence
on a sector that will never create a significant of jobs.
dilemma for the young high tech firm is that the local market may be very small
or non-existent while export success generally requires home experience.
For policy-makers, the
crucial issue is the risk of crowding out support for sectors that have
potential to create sustainable jobs.
A UCD study shows that in
2009, firms supported by venture capital companies, employed 9,700 people.
The Government must do a
reality check on the high-tech sector that is not led by the many vested
interests. It must also reject arguments that Ireland should aim to spend 3% or
more of GDP on research and development (R&D) like for example Sweden and
Finland as the Irish enterprise sector is dominated by foreign firms who
generally do not do original research in Ireland.
Even the Swedes complain about the low output compared with what it spends.
For startups across all
sectors, the Government must provide transparency in the annual €15 billion
public procurement market. The current system of Victorian secrecy, shielding
bidders from the public glare, protects insiders and big firms.
The food sector has great
potential as global population grows and emerging economies become richer.
It should be a priority
of science policy and Nestlé, the world's biggest food company, says the future
of foods will increasingly be driven by science. The Swiss company has over
5,000 people working in 29 research, development and technology facilities
Tourism which employs
about 6% of the workforce is important for individual communities and is
Training is important but whether the planned successor to FÁS can adequately
meet the challenge is doubtful. Proven personnel from overseas should be hired
for this important task, including ensuring that the long-term unemployed have
an incentive to remain available for work.
However beyond all that,
the return to sustainable economic growth and a stable construction sector is
the most important issue for job creation.
In the developed world,
there is no longer certainty that each generation can do better than the one
that preceded it.
cannot shield itself from the competitive forces in a globalised world. The once
expected globalisation model of knowledge workers in advanced countries and
low-paid manufacturing in the rest of the world is already dead.
In the US in 2009 the
median full-time male worker aged 25-64 brought home $48,000 - - roughly the
same as in 1969 after adjusting for inflation. For Ireland, the standard of
living of the boom years is not going to return soon, if at all.
Ireland depends on about
20 American firms in the drugs sector - - an industry in transition, for the
majority of its goods exports.
The Government must move
beyond spin and vacuous superlatives in its enterprise policy, be open to change
existing policies and level with the people.
must meet a reality check with no place for fairytales such as the 2010
aspiration in the Innovation Taskforce report of creating up to 235,000 Irish
high tech jobs in a decade, equivalent to 40% of high tech employment in
California's Silicon Valley.
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