IBEC: focus must be on top jobs

GREATER focus must be placed on creating jobs in areas with high productivity and high-value-added sectors, employers’ body IBEC has warned in its first quarterly economic bulletin for 2005.

The economy is doing well it said, but an imbalance exists between jobs created in the high-value added sectors and less productive areas.

In the year to March 31, 2005, the economy generated 72,400 jobs, the highest since the second quarter of 2000, and bringing the total number in employment to 1,908 million.

Of that figure of 72,400, over 30,000 were in construction, boosted by the housing boom, and another 18,000 were in mortgages and legal services - activities linked directly to the property boom.

Thousands of those jobs are vulnerable once the boom in property ends, warned David Croughan, chief economist, IBEC.

So far this year however, most indicators covering employment, Exchequer revenue and retail sales point to another year of solid GNP growth of close to 5%. That follows an increase in 2004 of 5.5%, which followed a period of relatively slow growth of 2.7% per annum in the 2001-2003 period.

The first quarter employment figures were impressive, showing an annual growth of 72,400 or 3.9%, which was the strongest employment growth since the second quarter of 2000. That left unemployment at 4.1%.

Thousands of those jobs are associated with the housebuilding boom and will be gone after the boom is over, Mr Croughan warned.

Another serious worry is that 90% of the 72,000-plus jobs were generated in three sectors that have experienced either no growth in productivity or declining productivity. These were in the public sector, construction and financial and business services, he said.

“Our concerns surround the medium-term viability of jobs in sectors of declining productivity and the implications surrounding value for money, given the massive infrastructure programme that still needed to be undertaken.”

In the relatively higher productivity sectors of distribution, hotels, transport and communications there were just 5,600 jobs created. In the industrial sector with the highest productivity growth rates, there was an actual marginal decline, he said.

An imbalance exists between the significant proportion of new jobs associated with the housing boom and the virtual standstill in new jobs in the higher productivity sectors, he said.

The average productivity growth in the economy in the period 1995-2003 was 3.5% per annum, well ahead of the EU-15 member states at 1.1% and the US at 2%.

“If the modern sector of the economy is excluded, average productivity growth falls from 3.5% per annum to 1.1% and that is a real issue for Ireland,” he said.