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News : Irish Economy Last Updated: Jun 10, 2014 - 2:14 PM

Kenny should learn some lessons on Irish tax and jobs from California trip
By Michael Hennigan, Finfacts founder and editor
Jun 9, 2014 - 7:16 AM

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Enda Kenny, taoiseach (2nd from left), maybe giving live responses or possibly not, at a Facebook Q&A at Facebook's headquarters in Silicon Valley, California, June 05, 2014. Barry O'Leary, IDA Ireland chief, is on the right of image. What is surprising is that so few images of meetings with leaders of the tech giants he met on the 3-day trip, were released. They may have been avoiding giving attention to their Irish tax arrangements but Governor Jerry Brown filled that void.

In the week when the Irish ambassador to the United States contacted the office of Chuck Schumer, US senator for New York, over a tussle about jobs at the Bausch+Lomb plant in Waterford, and Governor Jerry Brown of California at an event in San Francisco attended by Enda Kenny, taoiseach, made a  barbed comment about Apple's 'creative accounting' and Ireland, there should be some lessons learned from the trip to California.

Even a Facebook Q&A was a dud as the taoiseach managed to only answer six questions on the theme of 'trade, investment and job creation.'

"I don't know how you got to have Apple to have so much of their business in Ireland, we thought they were a Californian company, when you look at their tax returns they're really an Irish company... it's called creative accounting," Governor Brown said to laughter at the Enterprise Ireland organised event on Friday.

Jerry Brown is an experienced politician who was the once the youngest and now is the oldest governor of the nation's biggest state, having succeeded Ronald Reagan in 1975, who had defeated his father Governor Edmund G. Brown Snr in 1966.

Governors and US senators are closer to the real world of a challenging jobs market than the president and earlier on Friday in Washington DC, the Bureau of Labor Statistics reported ostensible good news that employers added a net 217,000 workers in May, more than enough to overtake the 138.4m jobs that existed when the US recession began in December 2007.

However, just 58.9% of working-age Americans have jobs, down from 62.7% at the start of the recession and the Economic Policy Institute, a think-tank, says that 7m more jobs would have been needed to keep up with population growth.

For the bottom 30% of earners, inflation-adjusted wages have fallen over the past 14 years. For the next 40% of earners, pay effectively flatlined.

The Wall Street Journal said that despite signs of sustained strength, the job market is a far cry from what it was before the financial crisis slammed the economy in 2008. The number of jobs in manufacturing, construction and government—typically well-paying fields—has shrunk, while lower-wage work grew. The US has 1.6m fewer manufacturing jobs than when the recession began, but 941,000 more jobs in the accommodation and food-service sector. More than 40% of the jobs added in just the past year have come in generally lower-paying fields such as food service, retail and temporary help.

The economy "is now beginning to show incremental employment growth," said Doug Handler, chief US economist at IHS Global Insight. 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."

We recently reported that Bausch + Lomb, the eye contact lens manufacturer that was founded in Rochester, New York in 1853 and is now owned by Valeant, a Canadian firm, is seeking job and pay cuts at its Waterford plant.  

Valeant has threatened to shut the Irish facility.

In light of the news Senator Schumer urged the CEO of Valeant Pharmaceuticals, to strongly consider moving the work and jobs to Rochester from Ireland. Schumer said that, after his phone call with CEO J. Michael Pearson, he is confident that Rochester will have "a great shot at adding work and jobs from the potential closure of the Ireland plant."

The senator claimed to have successfully pushed Valeant to locate the manufacturing of the next-generation contact lens line called “Ultra” in Rochester instead of Ireland, and is following up that effort by urging Valeant to make a similar move with the jobs in Ireland. Schumer explained that Rochester has a number of competitive advantages over other locations, including a dedicated and well-educated workforce, and a wealth of experience in optics manufacturing.

Last week, the Irish ambassador to the US confirmed in a letter to Fine Gael TD John Deasy that following his request, the Embassy in Washington got in contact with the New York office of Senator Schumer.

The week should be a reality check for Enda Kenny that it's easy to promise tech chiefs in Silicon Valley that he will fight to maintain their low tax breaks in the upcoming reform of international tax rules when he will have little if any influence on the outcomes.

Magicing up ready-made American jobs is also easier than developing a credible jobs strategy for the Irish economy, but that is also running out of road despite the official jobs propaganda machine.

The number of jobs in the foreign-owned exporting sector are below the level in 2000 and the competition for American jobs is intense.

A blizzard of announcements on job and activation schemes is no substitute for a strategy and claims about the Irish tax system that are risible to people in California and Ireland, show a continuing failure of leadership.

Finfacts: OECD BEPS Project: Ireland should embrace corporate tax reform

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