High price to pay to attract foreign investment?
This new drive follows on from a Government initiative called Winning Abroad, with a specific objective to ‘enable’ the delivery of 10,000 jobs over the scheme’s three years. It is a worthy objective, and much needed, but is it do-able?
Ireland’s track record of attracting foreign direct investment is extremely impressive, particularly as we are a little island on the periphery of Europe. IDA Ireland has a portfolio of over 1,050 companies which employ 166,000 people, spending €21bn in this economy and exporting €121bn in goods and service annually.
However, our record to date is not a guarantee of future success. There are dark clouds approaching and more still on the horizon. Some of these clouds are beyond our control but others are, at least partially, in our control.
Last Sunday, one of the national newspapers looked at a hypothetical situation based on the possible election of Democrat Hillary Clinton as US president in 2016. Over the last several years, there was much consternation on the minimal amount of tax major multinational companies have been paying.
The US has been affected more than most by the exodus of companies to low-tax economies, which has resulted in both the loss of taxation and jobs.
The fear is that Clinton will try to address this immediately on election using a carrot-and-stick approach of lowering taxes, making companies effectively compensate treasury, and increasing penalties on firms caught using aggressive taxation planning methods. Not a lot we can do at this time but keep our eye on the ball and make sure our bibs are clean.
There is, however, a far more immediate concern and that is our high cost base. In the last week, Waterford-based contact lenses manufacturer Bausch + Lomb announced that it is seeking 200 voluntary redundancies out of its workforce of 1,100-plus. It is also looking for a 20% wage cut from the workforce that remains.
Already, US Democrat senator Charles Schumer has urged Bausch + Lomb to repatriate the work to the US.
Any loss of employment is serious but one emanating from the largest private-sector employer in the south-east is a major body blow, not only to the region but nationally.
It’s hard to believe given the austerity measures of the last six years that Irish payroll costs are a major constraint on the economy. It’s even harder to believe that payroll costs in the Bausch + Lomb base in Rochester, New York, are 30% lower than in its Irish plant.
The unions are quite rightly trying to find a compromise and are hoping to reduce the numbers to be made redundant and to the salary reduction required. As union organiser Alan O’Leary said, “a 20% pay cut is unsustainable for workers”.
Why is it unsustainable? Costs on families are being driven through the roof predominately by the Government as it seeks to balance the books by unfairly and continuously targeting those already struggling.
A cut of 20% under the circumstances is an impossible ask. We can only hope that a win-win compromise can be reached.
These are but some of the issues faced by IDA Ireland as it sets forth to attract even more foreign direct investment.
As the Government moves forward in preparing the budget it needs to seriously consider the implications on jobs resulting from increasing payroll cost, whether it be through direct, indirect, or stealth taxation, or through extortionate costs for vital services, or permitting state-owned utilities to raise prices willy nilly.
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