I call the IBEC representative, Mr. Geoghegan.
Presentation by IBEC.
Mr. Geoghegan
I thank the Chairman for the opportunity to speak to the committee on this important issue. IBEC not surprisingly agrees with almost everything that has been said by the representative of our sister employer and business organisation. We represent about 7,000 companies that employ between 500 and 600 employees. The experiences members have heard this morning have been the experiences of companies we represent.
With regard to the technical issue the Chairman addressed in relation to the measurement of unemployment, we would unequivocally support the view that the ILO is a valid and the best internationally acceptable measure but more attention needs to be given to those broader measures that are available in the public statistic on labour supply. The points members have heard underline the importance of that not only for the private sector but also for the public sector. We need to examine labour supply in a strategic sense more actively than we have in the past. The statistics have the capacity to do that now and prominence needs to be given to that.
The other issue is the live register and examining the appropriateness of the number or indeed whether the payments are being made and accounted for properly. We would suggest that the employment action plan and developments from that provide at least some of the basis for examining that thoroughly and successively, in particular through increased co-ordination between the Department of Social, Community and Family Affairs, FÁS and other agencies. I can declare an interest here. I am an employer and a board member of FÁS. I readily acknowledge that the performance of that organisation, in particular the co-ordination with the Department of Social, Community and Family Affairs, has improved immensely. There is still a lot of work to be done, particularly in dealing with the problems of what are termed statistically discouraged workers or those whom Mike Allen would describe as people in varying degrees of despair about getting into work. There are issues which need to be dealt with there and that can be done through the type of approaches which have been adopted, namely, upskilling the people in FÁS, linking with the LES more proactively and engaging with people in a co-ordinated way.
It is obvious that there has been an extraordinary change in the labour market and in the economy over recent years. Between 95,000 and 97,000 additional jobs are created each year. If projections, even those on the lower side, are correct, it looks like we will have continuing expansion over the coming years unless we fail to address the problems not just of labour supply but also the ones mentioned in relation to infrastructure and so forth.
I will not lecture you, Chairman, or attempt to deal with all the issues which come together in this. Not one of the issues stands alone; all of them are relevant. The point about the regional balance of development is related directly to infrastructure, which is related to the possibility of flexibility of employment opportunity for people across the country. Vacancies exist in all sectors - multinationals, smaller and medium indigenous industries, in the service sector and manufacturing - at a much higher level than in the past. We will not deal with these problems overnight. We need to look at new sources of labour supply, develop immigration policy and encourage women and older people into jobs in ways we have not thought about before. Employers are addressing these issues in ways they have not had to think about previously.
The Programme for Prosperity and Fairness is currently before people for approval. It has within it a number of chapters, frameworks or draft agreements relating, for example, to family friendly policies which are new and give a new emphasis to these issues and which ultimately will begin to address some of the problems this committee has dealt with in, perhaps, a technical way but in a way which has relevance for broader policy matters. It is interesting and important that these matters are now the subject of agreement between people who, five or six years ago, might have found it difficult even to talk to each other. That marks some of the progress made.
There are problems which we should not sweep under the carpet, such as problems about the continuing size of some of the labour market programmes. Community employment, for example, is being reduced and there is scope to reduce it further. We believe that is the correct policy approach. In a tight labour market and given the current problems we should continue to exert downward pressure on these massive programmes which were appropriate to a different type of economy. This committee's report should help with that process and should give broader political support to the type of hard political decisions which must be made on that front. Other things can be done in relation to the social economy but CE is one which we would see as a problem in relation to the supply of labour.
The Programme for Prosperity and Fairness includes a draft commitment to a review of all active labour market policies. It would be useful, in that context, to take on board some of the considerations of this committee to see if the social partners can add value to the work of the committee in this area. There are problems in relation to employment and literacy and problems which will not be dealt with overnight. We need to raise the quality and quantity of labour supply, the quality through literacy programmes, early school leaver programmes, some of the programmes being administered by FÁS and by more market relevant training in general.
We have included with our report a labour market paper which we prepared some time ago. It is interesting to look at it in the context of what is a quickly changing situation but one where we will, on every reasonable basis of forecasting, have to deal with problems of labour supply, infrastructure and other constraints in the economy in a way which we have not had to face in the past. The public service is an example. Problems exist there and likewise there are problems for all our member companies.
That was a comprehensive analysis. I will sum up before we put questions. There is an air of desperation among many of the employer organisations about getting labour. There is talk about phasing down community employment schemes and the need for a new approach to the literacy problem. However, there are still 176,000 people drawing unemployment payments, of whom 121,000 are getting full unemployment payments. Need I say more? Having heard all today's submissions, I cannot be satisfied that the people who are accountable to this committee are doing all that can be done to address a problem which has not only economic consequences but also adverse social consequences.
I could not agree more with the Chairman's sentiments. I have a few questions for Mr. Boyle and I can give an example of the difficulties that exist. A member of my family came back to Ireland, went back to college and got a degree. A week after she finished she applied to join the public service. In the meantime, she rang a substantial employer in the north County Dublin area on the Friday of that weekend. The employer asked her to come in for an interview on the following morning, a Saturday. She drove to the airport, met the employer and was in a job on Monday. Four months later she had not heard from the Civil Service Commission.
Can you expect that girl, having spent all that time furthering her education, to wait that length of time to do an interview, not knowing if she would have to do a second interview or whether she would get a job? I respectfully suggest, with regard to the public service, that the time from the application to the time of interview should be substantially reduced. Young people cannot afford to wait several weeks or months to get an interview at the Civil Service Commission. That is not only inefficiency but a gross waste of public money.
Mr. Gallagher, I made my earlier comment in a slightly different context from the way you picked it up. I was saying there has been a great increase in sub-contracting in industry. I dealt with it myself during my trade union days. Congress has acknowledged it. However, there is a substantial lack of apprentices and qualified craftsmen because, traditionally, subcontractors, with the occasional exception, will not employ apprentices. I sure Mr. Gallagher will accept that. This is creating a problem for the State because it then must fill the gaps. It must provide the necessary training if the Construction Industry Federation will not do it. It cannot do it on its own. It can do it in partnership with the State, but there must be a substantial change in the approach to the provision of training of apprentices.
Mr. Gallagher wants to know why people are not entering the industry or, if they do, are not staying in it. The development of agencies is rampant in the construction industry, as he is aware. I spoke to a number of people on major Dublin sites with my colleagues in the trade union movement and with members of my family. My son is a shop steward in one of the major unions involved in the construction industry. These agencies are being paid £15 an hour by the contractor, but they are paying the employees approximately £10 an hour. As Mr. Gallagher should know as the chief in this area, the agencies are not giving the men any public or annual holiday pay. This is well known to the CIF and it is not the way to attract skilled workers from the UK or elsewhere to work in the industry here. When a job shuts down for three weeks, they have no holiday pay. In terms of the hourly rates of pay, the agents are ripping off the industry. They take the cream off it but the boys have to do the work on the site. This should be redressed because it is one of the major reasons for the current situation. A number of members of my family were very much involved in brick laying and carpentry, but they left the industry and went into alternative employment because of that problem.
I agree with Mr. Crowley's suggestion that if the unemployment rate was reduced to 4% rate it would effectively mean that the balance would not be employable. There are many people in that category who should be on invalidity or disability benefit but who struggle on as unemployed people although medically they are unfit for work. If they say they are sick, the Department of Social, Community and Family Affairs, in accordance with the rules, must take them off benefit because they are not available for work. There is a conflict. There are many thousands of workers in that category who, regardless of the incentives or training on offer, will never be available for work even though they are signing on and stating that they are unemployed. They should be on long-term sickness benefit because many of them are alcoholics and drug addicts.
I agree with the Chairman that there is a certain amount of despair. It is for the employers to find ways and means of encouraging people into the industry. For example, there is no incentive to take a clerical job in the public service because people can get better rates of pay elsewhere. This is the reason clerical staff are leaving the public service. All the responsibility should not be placed on the State and the Dáil. There is also a responsibility on the employer organisations to introduce programmes in partnership with the industry. Many of the points made in this debate are useful and should be put to the Government.
Mr. Geoghegan was most strident in his criticism of the community employment schemes. I understand his point, but from a political perspective these schemes are hugely beneficial, particularly for young single mothers and people who have family responsibilities. They work 19 hours a week and they can work from 9.30 a.m. or 10 a.m. until 2 p.m. I have no problem with reducing the numbers on community employment schemes if industry is prepared to be flexible enough to provide jobs that will give those people the type of working conditions they need so they can also look after their family responsibilities. This would allow each area to have equal priority and the family would not lose priority in the shake up. I do not think unilaterally cutting the numbers on community employment schemes will find favour, irrespective of the problem with employment, unless the employers do their part.
Mr. Geoghegan
I accept that one cannot unilaterally reduce the numbers significantly overnight. However, my point was that the community employment scheme was introduced and developed to deal with a different situation. There are now opportunities for people in employment, including unmarried mothers, many of whom are on community employment schemes. The tax changes in the budget and the subsequent changes, some of which were negotiated as part of the Partnership for Prosperity and Fairness, should help with that. One of the problems is the loss of secondary benefits, for example with regard to tax liability and PRSI, which people face and also child care costs.
As the Deputy knows, child care is a matter of hot debate at present, not only in Government but between the social partners. Many employers, particularly in services, are looking at more flexible ways of employing people. Supermarkets and service companies in all kinds of sectors are engaging people in shifts which are suitable to them and their needs in relation, for example, to child care, education and so on. Things are changing but there are other issues around CE. Some schemes and local economic activities are being supported and one might question whether it is appropriate that a labour market programme should be used to continue these kind of activities. That is one of the issues which could be addressed.
I acknowledge that it is not easy politically sometimes to deal with that because it is often reduced to local politics. However, we should look at the costs. The Chairman mentioned 170,000 people. If one adds the CE number, one gets a very large number of people and we need to be aware of the relevance of these programmes in a different situation.
The employers say things have changed in this country and this committee has just completed an inquiry into the financial institutions. Everybody says that was then, but this is now and all is changed. However, a number of the points made today raise questions about the employers' role, especially in employing people and paying cash directly either in whole or in part and conspiring with people to break the law by allowing them to draw social welfare benefits illegally. What steps are the employers' organisations taking to root out this where it occurs? In comparison to the past, by how much, if any, has it been reduced? What further steps are being taken to eliminate it as far as possible?
Mr. Geoghegan
We unequivocally do not support, condone or encourage any of our members or any employer to engage in tax evasion or in conspiracies, small or large, to defraud the Department of Social, Community and Family Affairs. We participate actively in the black economy working group. We frequently discuss these issues with our members and have had frequent meetings with the Revenue Commissioners and other State institutions on behalf of members who feel they are being undercut by employers or businesses engaging in such activities.
It is a fact, as was suggested by Kieran Crowley, that employers are regularly approached by potential employees who want to be paid under the counter. We actively discourage that. We have a very hands-on relationship with our members. Each member is on the case list of one our executives who advise them on all these matters. We regularly bring these issues to their attention. As was suggested, there is a high regard for the thoroughness of a Revenue audit these days, which is welcomed by our organisation.
I suppose this does not happen in Galway, Mr. Feeney.
Mr. Feeney
I have never heard of it, but thank you for bringing it to my attention. As Mr. Geoghegan said, the problem is that employers are approached by prospective employees. There are many reports of this. The Revenue audit has, by and large, sorted out the huge majority of what might have been happening in the past. I do not think anyone would like to face a Revenue audit on the basis of having made cash payments. We are the same as IBEC in this regard - we would not condone, promote or in any way endorse tax avoidance. That is our response. However, to be realistic, it is a factor, in that there are people who want to have cash earnings——
Is Galway Chamber of Commerce proactively trying to root it out or encouraging its members to be vigilant in this regard?
Mr. Feeney
Other than directly advising our members to be vigilant, we do not have a programme telling them to rectify their situation. However, we advise people that to be a legitimate employer is to abide by the tax laws and we also warn them of the consequences of any avoidance measures they may be involved in.
I call Mr. Kelleher of the Construction Industry Federation.
I will ask Mr. George Hennessy to take that.
Mr. Hennessy
The federation participates in the black economy monitoring committee with the Revenue and the Department of Social, Community and Family Affairs, so we are actively involved. In addition to regular Revenue audits, the construction industry has the separate regime of the subcontractors tax system. In addition to that, in 1998 Revenue inspectors did a complete audit of the industry. They visited 7,000 firms, covered 100,000 PAYE workers and checked through almost 62,000 subcontractor arrangements in the industry. When everything was boiled down and having dealt with the various issues that arose, they advised us that they had 88% overall compliance at the end of the audit and between 2,000 and 3,000 cases where contractors were disputing their findings.
We believe Revenue have quite a strict regime in place in regard to the construction sector, which tends to get a lot of criticism in relation to this area, through the operation of the subcontractors tax system. When the audit was concluded it gave us the view that there were quite high levels of compliance in the industry currently.
I know that, but a figure of 88% compliance means there is 12% non-compliance. How many are employed in that sector?
The number employed is 150,000. The 12% figure related to the number of companies. That is a much smaller percentage of the workers in the industry because there tends to be more compliance the larger the company is and the more structured and regulated its affairs are.
I thought that about the banks as well.
I am talking about the construction industry. It is a reality that the construction industry comprises a very large number of companies, ranging from very large employers to one-man companies. Some 7,000 firms were visited, which is a very substantial number. We believe we cover the vast majority of the major firms and we have 2,700 members.
I call Mr. Crowley.
Mr. Crowley
The SFA's position on the black economy has always been very clear. We have opposed it and have been resolute and consistent in our criticism of it. We have never used weasel words of any type to excuse the black economy. We participate in the black economy working group, with the Revenue and the Department of Social, Community and Family Affairs.
I have touched on the absolutely terrifying prospect of a Revenue audit for a small business, the thoroughness with which they are conducted and the absolutely penal nature of their assessments where they find untaxed payments to workers. The committee has recently encountered secrecy of a very high order in its investigations of the banking world. However, the possibility of secrecy in these arrangements for small business employers is non-existent.
Typically, an employee will disclose at interview where he has been receiving under the counter untaxed payments from previous employers. It is routine to encounter such declarations in the course of an interview. Some of it is probably a negotiating tactic to increase their opening position but some of it must be real. Anyone with any sense will not participate in an arrangement of this type, where the current employee is going to disclose the existence of the arrangement when it suits him at a later point. That just does not make business sense.
The black economy poses a competition challenge, particularly to those members in the service sector because there are no goods involved. It is very easy to provide labour based services that are not taxed. Our legitimate members are very vulnerable to competition in those areas. The worker, in such an untaxed situation, does not really benefit because it is almost axiomatic that such an arrangement will go hand in hand with the employer having a casual concern for health and safety and other employee conditions.
I think our first concern has to be to avoid giving the impression that the black economy option may be more irresistible than before. We expect employers to be ever more vigilant and resistant to temptations to break the law.
I want to ask the Civil Service Commission the weekly entry level pay for clerical officers in the Civil Service.
Mr. Boyle
The clerical officer starts at around £195 a week.
Is there any scope to vary that, depending on age and so on?
Mr. Boyle
There is some scope. I do not have the actual figures. There is a number of age related points on the scale. The maximum of the scale is around £360 a week.
A 31 year old who recently joined the Civil Service and who has two children is earning £194.19 and has take home pay of £162.79. The same person would be better off on social welfare because of the children factor and the secondary benefits. I know that is probably not a matter for the commission, but is there some discretion in the pay rates?
Mr. Boyle
It is certainly a concern that arises in our dealings with candidates and our research. We do not have any input into the setting of pay scales.
You have no scope?
Mr. Boyle
No.
I see the Department of Finance officials behind Mr. Boyle are looking sympathetic. I am not going to let this rest because I believe it is a serious problem. I am not satisfied that, even after a year's pursuit by this committee, sufficient attention is being given to this. I want to reflect on what further steps we can take. We have 176,000 people on the live register, 121,000 of whom are in receipt of full unemployment benefit. That does not include the over-55s who are receiving pre-retirement allowances or credits, nor does it include people on CE schemes or those in training. The global picture is that over 250,000 are not engaged in normal economic activity despite all we have heard about labour shortages, so something is wrong. I am not saying that all of it is fraud, or that fraud is the only thing that is wrong, but we must do more to address this issue. Fraud is a principal concern of this committee but there may be other areas that are contributing to the problem and these need to be addressed.
The question of creating a bridge to enable people to take up employment is vital. I know that much has been done in recent years in relation to secondary benefits in order to remove the poverty trap element, but has enough been done? What are the other factors contributing to these numbers? We have to address those issues.
I want to take up a suggestion that was being made by Mr. Feeney He said there are 2,000 people on long-term unemployment benefit in Galway. The Department of Social, Community and Family Affairs might wish to consider the suggestion he made to take that as a project and look in more detail at those 2,000 people to see what the picture is. Since there are significant labour shortages in Galway, why are 2,000 people still on long-term unemployment benefit there? What is the profile of those people and what are the problems preventing them from taking up job vacancies? If we had a similar survey for some other part of the country, we would then have two surveys with which to compare the picture. Would the Department of Social, Community and Family Affairs be open to undertaking such surveys, Mr. Sullivan?
Mr. Sullivan
Certainly, Chairman. In that context, as part of its normal dealings, the Department would have many contacts with the various organisations you spoke about. In particular, we did have some contacts with the Galway Chamber of Commerce, so it is not as if nothing is happening locally in that respect. I would certainly have no objection to sitting down with the Galway Chamber of Commerce and trying to do something like that on a pilot basis. We would be delighted to try to do something like that. We have always been open to any suggestions by any group about doing something for people on the live register.
What we are trying to do here is obtain a picture of reality. Clearly there is some abuse; we will never get rid of all abuse anyway but what are the other problems? A survey of the type now being suggested, if teased out and set up properly, might give us a better picture of the reality of the situation. It might help the appropriate people to decide what other measures need to be taken to improve matters. Something has to be done about it, not only from the point of view that the law as it stands is being applied, but also because we need to know if the economy is being hampered either by bad law or legislation not being properly applied.
Votes 34, 5 and 40 noted and progress reported.
On this issue, I would like the Secretary General to come back to us within a month and, having considered the suggestion, report on what it is proposed to do about it. I would like to have some details on what issues you intend to address and how you intend to address them. The Galway case concerns a manageable 2,000 people who could be surveyed. If a survey of similar proportions could be undertaken elsewhere we would be able to make comparisons.
Mr. Sullivan
Certainly, Chairman.
I thank everyone for their time and co-operation, which I appreciate. I am sorry for having kept people so late.
The next meeting of the committee is scheduled for next Thursday, 24 February, when we will consider Vote 30 - Department of the Marine and Natural Resources, Appropriations Account 1998, and the Central Fisheries Board, Annual Financial Statements 1995-1998.
I will be away for the next two weeks so I have asked Deputy McCormack to take my place.
The committee adjourned at 1.55 p.m.