CAREERS 2019: Buoyant jobs market, but big challenges ahead

Ireland’s jobs market is in a sweet place right now.

In the third quarter of 2018, the total number of people in paid work amounted to 2.265 million, including just under 1.8 million people in full-time employment.

Beneath the surface, however, cost pressures are developing and the focus is on emerging threats to the country’s competitiveness at a time when the wider environment is particularly uncertain.

The prospect of a ‘no deal’ British EU exit has not disappeared and at the very best, Irish exporters must face into a period of turbulence in currency markets.

The global economic outlook has become much more uncertain as trade wars break out and the unwinding of quantitative easing measures by the US Federal Reserve impacts heavily indebted companies and corporations.

A series of environmental catastrophes have also highlighted the need for measures to tackle climate change raising the prospect of higher carbon taxes and insurance costs along with the need to divert more resources into physical protection.

Ireland at least, finds itself well embarked on recovery from a downturn that stretched our societal resources to the limit.

We are still in catch up mode after several years of underinvestment and the sheer pace of our recovery has exposed many gaps in our infrastructure, physical and social.

Impact of jobs recovery

The total number at work now in the Republic exceeds the figure reached at the height of the boom, in 2008, when the construction sector accounted for a disproportionate share of economic activity in the State and a financial bubble was about to burst.

The jobless rate — at 5.4% — has fallen to its lowest level since February 2008.

Seasonally adjusted Live Register total decreases by 3,100 in Novemberhttps://t.co/EVQXSanNNA#CSOIreland #Ireland #LiveRegister #LabourMarket #Unemployment #Jobs pic.twitter.com/WOjQfgPaMN

— Central Statistics Office Ireland (@CSOIreland) December 6, 2018

The total population has risen considerably over the past decade and the employment rate — the proportion of people of working age in employment — is still somewhat lower than it was before the downturn, a decade ago.

In the third quarter of this year, employment stood at a healthy 69%.

This compares with a rate of 72.5% in 2007.However, the average rate over the past 20 years is just over 66%.

The big difference is that youth unemployment has remained stubbornly high at almost 13% compared to just over 6% back in 2007 when the house building boom was peaking.

Efforts at labour market activation, including the expansion in apprenticeships, will hopefully bear fruit, reducing the number of people remaining outside or on the periphery of the labour market.

Economists accept Ireland is now close to full employment and in many key areas, the labour market has tightened considerably.

In the latest quarter, annual jobs growth has actually slowed slightly from a rate of 3.4% to 3%.

Labour supply constraints may be playing a part in this slowdown.

There are indications that wage inflation is on the up.

At a conference organised recently by the IR consultancy, Resolve Ireland, (as reported in Industrial Relations News), a senior SIPTU official, Gerry McCormack, set a target for a 3.4% increase in basic pay in the next round.

Since 2009, private sector pay has been set locally rather than centrally — as was the case previously under social partnership.

According to Mr McCormack, “local bargaining has been good for trade unions.”

He pointed to agreements on bonus payments, pensions, the provision of tax-free vouchers and a ‘variety of legacy issues’ as examples of additional boosts to worker well being.

All of which must be paid for.

Brendan McGinty, director of ‘Resolve’ countered that the wage targets set by SIPTU ‘ignored the virtual absence of inflation and the threat posed by Brexit.

He estimated that in 2018 deals typically ranges between 2% and 2.75% and he expects this pattern to be repeated, next year.

Economist, Dan O’Brien — to the surprise of some — said that talk of an overheating economy has been ‘exaggerated’.

He is not concerned about the level of pay rises currently being handed out.

The Central Statistics Office has indicated that average weekly earnings (including one-off payments such as bonuses and overtime) rose 3.2% in the period to the third quarter of this year, with an average weekly wage at €745 (the mean, or midpoint wage is somewhat lower).

Average weekly earnings up 3.2% in year to Q3 2018https://t.co/USGbDI2YQ4#CSOIreland #Ireland #Earnings #LabourCosts #LabourMarket pic.twitter.com/b9BqabB63f

— Central Statistics Office Ireland (@CSOIreland) November 26, 2018

Irish competitiveness

A country’s competitiveness is determined by a far greater number of factors than comparative wage and salary rates.

Ireland has been successful in attracting large quantities of foreign direct investment as a result of which we have a significant proportion of highly productive entities in high growth sectors.

But our indigenous companies as a whole have struggled to match these new entrants when it comes to R&D and levels of output per worker.

According to the recent WEF competitiveness ranking, Ireland held on the 23rd place overall out of 140 countries surveyed.

How competitive is your county? Read our new Global Competitiveness Report: https://t.co/aYBUQ4sKi4 #gcr18 pic.twitter.com/DwP1YRgnrr

— World Economic Forum (@wef) October 16, 2018

We are the eighth most competitive in the Euro area and in 11th place among the EU-28 (soon to become the EU-27 — barring a major event).

We perform highly in certain areas such as labour market (7th); business dynamism (10th), skills (15th) and the quality of our institutions (17th).

We’re also strong, surprisingly so, in female participation (14th) and in costs of starting a business (4th).

So where do we fall down?

Three areas stand out — our physical infrastructure, or the lack of it; levels of internet adoption; and the financial system (in particular, the availability and cost of credit).

However, the high level of housing costs combined with the early stage at which the higher rate of income tax becomes payable are both acting as deterrents when it comes to the attraction of skilled labour.

In an effort to counteract these drawbacks and to spread investment and development more widely across the country, the Government has focused on a regional jobs strategy.

Foreign direct investment has played a big role in the country’s recovery since 2012.

However, there are some concerns that we may have reached an inflection point due to the Trump tax reforms and the prospect of corporate tax reform at EU level.

The long drawn out Brexit process has increased uncertainty and may well be acting to restrain investment and job creation across parts of the domestic economy, but the prospect of a British EU exit has also fostered inward investment particularly on the part of tech companies.

Irish FDI and the regional development strategy

There are positive developments regarding job creation outside Dublin.

While the capital has captured the bulk of the investments being made by the major technology companies, a number of jobs announcements elsewhere have caught the eye.

Almost 60% of employees of multinationals are based outside Dublin and through the year, some areas on the periphery have benefited.

The Chinese based biologics company, WuXi, announced a €325m investment for Dundalk involving plans to increase more than 400 jobs at a new global centre of excellence (with a further 700 during construction of the plant ).

Ann-Marie Tierney-Le Roux is Head of Regional Development at IDA Ireland.

She points out that the WuXi investment will be ‘the largest to date by a Chinese manufacturer in Europe'.

She points to ‘knock-on effects’ from the announcement, including a new genomics joint venture.

Elsewhere, she singles out the creation of 170 jobs in Carlow by pharmaceuticals giant, MSD (Merck) and an investment in an R&D facility, in Shannon, by Jaguar Land Rover.

She points out that sometimes, it is not the size of an investment, but its nature which is what counts.

Ever since the 1960s, pharma chemical firms have helped to anchor the economy in Cork and more recently, the sector has brought high valued added jobs to places like Mayo.

Its contribution to local prosperity has, in turn, helped to jump charge tourism.

The larger cities outside Dublin, led by Cork, are increasingly pitching for high-end services jobs.

A major expansion in office capacity is planned, or underway in Cork, Limerick and Galway.

“We welcome these developments” says Ann Marie.