I recently asked the Minister for Jobs, Enterprise and Innovation a number of questions regarding unemployment and Ireland’s low waged economy.
To ask the Minister for Jobs, Enterprise and Innovation his views on whether it is appropriate for the chief executive of the Industrial Development Agency to laud Ireland’s low pay as a selling point for multinationals.
R E P L Y
Minister for Jobs, Enterprise and Innovation (Mr Bruton)
I have not seen any of the comments to which the Deputy could be referring to.
IDA Ireland competes globally for high quality mobile foreign direct investment (FDI). There are now a growing number of global locations that are competing for mobile investments including Asia Pacific and Eastern Europe on the basis of low costs but also future market potential. The effect on Ireland now is that we are competing for a bigger pool of investment but against an increased number of potential locations with attractive product offerings.
Cost competitiveness is a key factor particularly related to property and construction costs, energy costs, wages and salaries, local authority charges and services where competition may be limited. Continued flexibility in responding to changes in both local and international economic conditions is essential.
The report of the National Competitiveness Council “Costs of Doing Business in Ireland 2014 Report”, which was launched just two weeks ago shows that Ireland’s cost base has improved across a range of metrics over the last number of years making Irish firms more competitive internationally and thereby making Ireland a more attractive location for firms to base their operations. However, the Report also finds that, despite these improvements, Ireland is still a high cost location for a number of key business inputs.
Taking labour costs as an example, labour costs are rising again following a number of years decline. Although growth in labour costs is now below the Euro area average, gross earnings are the 8th highest in the Euro area while net wages are the 6th highest.
The importance of wage competitiveness in future economic development is illustrated by the status of the Manufacturing Sector in Ireland. In light of the serious decline in employment in that sector over recent years, with 50,000 jobs having been lost in the decade to 2010, I arranged for Forfás to undertake an in-depth study of Manufacturing in Ireland and I launched that Strategy early last year. A very wide range of issues and solutions were identified and analysed, including an assessment of various cost competitiveness factors for the sector. The study found that average pay levels in Ireland were higher than those in Germany and the UK and that hourly labour costs for Manufacturing were almost 50% more expensive here than in the UK. Further recent research shows that there has been a decline in labour costs in the years since 2009 but this trend is now being reversed with recent growth over the last year or so. Our Manufacturing Strategy has set an ambitious target of creating an additional 20,000 jobs in this sector by 2016 but we need to be mindful of the significant impact that our labour cost competitiveness will have in achieving this target.
While Ireland’s competitiveness has improved in recent years, we must continue to do more, to ensure that these competitiveness gains are not eroded as the economy begins to recover and that we continue to address the structural imbalances which had built up over the lifetime of the previous Government. Ireland’s continued success in attracting foreign direct investment requires a clear focus on improving and enhancing the national competitive environment, easing the impediments to business investment and encouraging job creation.
To ask the Minister for Jobs, Enterprise and Innovation his views on whether the moneys spent by Enterprise Ireland and other such agencies justify the level of jobs created.
R E P L Y
Minister for Jobs, Enterprise and Innovation (Mr Bruton)
I believe the Agencies under the aegis of my Department, Enterprise Ireland (EI), IDA Ireland and the CEB network, are performing very well in a challenging environment. They are driving a vital transition from an economy founded on property to one built on enterprise, exports and innovation. Their impact is measured by the gross job creation in enterprises supported by them, the net job movements across their portfolio as well as numerous agency specific key performance indicators which are regularly published. I am encouraged by the progress across almost all of these indicators at a time of declining staff in these Agencies.
As part of our overall strategy to have 100,000 people at work by 2016, under the 2014 Action Plan for Jobs IDA Ireland, Enterprise Ireland and the new Local Enterprise Offices, which from today will replace the CEB network, have been tasked with supporting a total of 30,500 direct new jobs during 2014. Enterprise Ireland will target the creation of 13,000 new fulltime permanent jobs in 2014. IDA Ireland will also target 13,000 new gross jobs in 2014 and work to win another 155 new FDI investment projects, with 20% of those from growth markets. In addition, a further 10,000 jobs (6,000 direct and 4,000 indirect) will be created over a five-year period through the recruitment of extra staff for IDA overseas.
In the past year, overall employment increased by 3.3% in year to Q4 2013. 2013 was the first year where every region demonstrated employment growth and there has been an increase of more than 1,200 jobs per week in the private sector compared to more than 1,600 per week being lost between 2008 and 2010.
The Forfás Annual Employment Survey 2013 shows employment in Enterprise Development agency-assisted companies at 303,155, an increase of 8,579 jobs in total permanent full-time employment. There was also an increase in part-time employment of 3,827 jobs to 46,167 in the same year. This continues the trend in positive employment growth since 2011.
Enterprise Ireland client companies are key contributors to the Irish economy and in 2012, spent €18.9bn on wages, services and materials sourced in Ireland. The Agency’s clients are vital components of the supply chains of many sectors and provide sub-supply opportunities for local businesses. For example, client companies in the Agri-Food sector process the produce of approximately 140,000 family farms annually. This impacts positively on local business by creating new opportunities for sub-supply, distribution, professional services, local domestic services etc. as part of the multiplier factor.
In 2012, IDA Ireland client companies also had a significant impact on the Irish economy, accounting for: €120.8bn of exports; €2.8bn of corporation tax; €1.3bn expenditure on R&D, and €20.8bn spend in the Irish economy comprising €8bn on payroll, €2.4bn on Irish materials, and €10.4bn on Irish services.
The total value of grants paid by Agencies of my Department in the years 2011-2013 amounted to €641m. This comprises €268m by IDA, €313m by Enterprise Ireland, €42m by the CEBs and €18m by Intertrade Ireland.
The Forfás Annual Business Survey of Economic Impact (ABSEI), which covers the period 2003–2012, shows that client companies of the Enterprise Development agencies reported a rise in sales and exports in 2012. Direct expenditure in the Irish economy in terms of payroll and purchases of Irish materials and services produced in Ireland increased by 3.8% to approximately €40.8bn in 2012. The results of this most recent survey show that the enterprise agency client companies continue to make a significant contribution to the Irish economy. Data for the most recent full year available, 2012, show that it was a successful year overall for enterprise agency client companies with increases in all the main economic indicators. Sales increased by 4.4%, exports by 5.1%, value added by 3.6% and direct expenditure to the economy increased by 3.8%.
These figures demonstrate the significant and positive contribution that both indigenous exporting companies and foreign-owned companies are making to the growth of the Irish economy. Considering that they have been achieved in the teeth of a serious recession, this news is particularly encouraging.