Seymour Crawford
Question:20 Mr. Crawford asked the Minister for Enterprise and Employment the reason Ireland has proved to have the worst record in Europe at turning economic growth into growth in jobs.
Ceisteanna — Questions. Oral Answers. - Employment Intensity of Output Growth.
Ireland does not have the worst record in Europe at turning economic growth into growth in jobs.
The relevant NESC study, Report No. 94 P1 94, "The Association between Economic Growth and Employment Growth in Ireland" certainly indicated that, over the period 1960-90, the employment intensity of our output growth was well below the average for OECD countries as a whole and some way below the average for "European Union" countries. However, at least three other member states of the present European Union, Italy, Spain and Greece, were further below the OECD average than Ireland over that period. Data were not available for all members states. In the more recent period, 1987-90, Ireland, while still below both the OECD and European Union averages, was ranked ahead of France, Italy and Denmark.
A major factor in our performance relative to that of other countries generally, over the 30 year period, was the massive decline in agricultural employment here. The impact of this decline in slowing the rate of growth of total employment was much more pronounced in Ireland because of the relatively large share of the workforce employed in agriculture at the start of that period.
In the more recent past, 1987-90, the NESC study identifies three factors in particular which has set Ireland apart from most other countries in terms of the structure and composition of its recent output growth. These are (i) the exceptionally high, and growing, share of output growth accounted for by manufacturing industry in Ireland; (ii) the very rapid rate of productivity growth in Irish manufacturing industry; and (iii) the unusually severe contraction in the non-market services sector in Ireland during the second half of the 1980s.
The NESC study presents the first stage of a two-stage investigation of links between economic growth and employment growth. In the next stage, the focus will be on interpreting and explaining the different development patterns described, and drawing implications for policy formulation.
Some important policy implications of the trends described in the NESC study have already been drawn by Government. If we are to achieve significant net employment growth, we will need sustained high rates of output growth. In addition, we need significant growth in indigenous enterprises where employment intensity tends to be greater. We also need to pay more attention to the services sector and we are re-focusing industrial policy to take account of that. Overall, we need a balanced approach in which all sectors capable of contributing both to economic and employment growth are encouraged and assisted to the maximum extent possible. That is the objective at which current policies and programmes for the promotion of enterprise and the creation of employment are aiming.
The Minister's complacency about our performance in this area is disturbing. I refer the Minister to a recent study by the European Union entitled Employment in Europe in which employment versus growth performance of all Community countries in the period 1983-91 is outlined. Ireland's dismal failure, at the bottom of the league, was remarkable in that during that period we enjoyed the highest rate of growth in Europe yet we were the only country that experienced a decline in employment. Would the Minister agree that we have to take this issue very seriously? If other European countries had enjoyed our rate of growth, 24,000 jobs per year would have been created, which, coincidentally, corresponds to the growth in our labour force. Would the Minister agree also that during recent years we have had massive contributions from the European Union — 11 per cent of GNP in the past five years — and that we cannot afford to allow policy to drift? We must take another look at the manufacturing sector and be much more radical in the area of services than the Government has indicated to date. Does the Minister recognise that employment targets have not been met in recent years?
I agree with the Deputy to the extent that none of us can afford to be complacent and I certainly am not. If I have given that impression. I want to correct it immediately. The Deputy's question asks the reason Ireland has proved to have the worst record in Europe at turning economic growth into growth in jobs. My reply is based on the reports of the NESC and OECD which do not agree with the assertion in the Deputy's question. We recognise that indigenous industry needs to be given greater assistance and for that reason we have implemented within the space of one year the recommendations of Culliton and Moriarty with regard to focusing the domestic side of the IDA, now known as Forbairt, to do precisely that.
The Minister of State in my Department, Deputy Brennan, has identified the particular role that small businesses can play in relation to employment. There are 100,000 small businesses and if even one third of them could create a sustainable job and employ a person, we would have a net addition of 30,000 jobs. In reply to three earlier questions the Minister detailed seven explicit and detailed measures that the business sector requested be implemented and which the Government has implemented. In addition, the Taoiseach's office set up the task force on services; we have published its report and, in reply to a previous question from Deputy Bruton, I indicated that we will be responding within a matter of weeks on the role envisaged for services. To suggest that either we are not aware of the problem or we are complacent in responding to it is not in accord with the facts given this afternoon.
Some of the reasons the Minister gave for our problems are interesting. He highlighted the fact that the decrease in the numbers employed in agriculture has contributed to the problem. However, as a result of the GATT and CAP reforms there is no doubt that there will be a further decline in the numbers engaged in agriculture in the not too distant future.
A question please, Deputy.
The Minister outlined changes in taxation and, in particular, VAT which will help small businesses but obviously we will have to wait for some time to see if that will be the case. The Minister needs to be more enthusiastic about creating opportunities for employment because in my book it is not sufficient to fiddle about with the system. Recently I visited a factory where the workers have been replaced by machines.
The only way we can proceed is by way of question.
Can the Minister give us hope because that is what the 300,000 unemployed people are looking for?
This Government is barely one year in office and in that time it has done a number of things that people had been seeking for many years. In the area to which the Deputy referred we have made available a fund of £100 million to small businesses for working capital and expansion at 6.75 per cent fixed for ten years — something that is not available anywhere else in the European Union. We responded to the repeated cries that the local community had within itself the seeds for employment creation and established county enterprise boards throughout the country with clear democratic representation, a local community focus and a fund of at least £500,000.
The Deputy is shaking his head but I would have thought that in the Cavan-Monaghan constituency, of all constituencies, the ability of entrepreneurs to create business and jobs from the agricultural sector is a lesson for everyone to follow. Across the spectrum, in taxation, compliance and the refocusing of the IDA, the Government has been implementing a co-ordinated and planned strategy that is addressing the needs of those who say that given a little help they can do the job. We have put in place a well thought out co-ordinated programme and it is up to the communities who have been looking for such initiatives to run with the ball.
Will the Minister acknowledge that part of the difficulty in translating the very impressive growth rates into jobs stems from the fact that excellent recommendations made by experts or committees of experts in relation to budgetary adjustments are not acted upon at budget time?
The Government is implementing the recommendations of an array of experts and is doing so in a co-ordinated manner. If the Deputy wants to hear chapter and verse I am ready to quote them. The fact is that many of the things people were looking for in the area of employment creation are being done. However, the fact remains — all Members know this — that our collective performance relative to other economies in turning economic growth into jobs is extremely disappointing. There are numerous reasons as to why that is the case. Deputy Rabbitte, Deputy Cox from the Deputy's own party, my colleague, Deputy O'Rourke and I debated this at length at a seminar in Donegal two summers ago.
The Minister made an interesting speech; it could be quoted back to him.
Indeed it was, I am glad the Deputy read it.
The Deputy should keep reading.
In Government I stand over everything I said when in Opposition. I am delighted the Deputy had the opportunity to read such erudite observations.
It is different now.
Does the Minister agree that if he threw away those written replies we would make a great deal more progress at Question Time? Further, does he agree that he seriously misrepresents the NESC Report No. 94 when he goes rambling on about the performance of Portugal and Greece when in fact the NESC report went further than one normally expects in polite language and said we have a major problem in this economy in terms of translating relatively healthy growth rates into employment? Specifically, will the Minister comment on its conclusion that transfer pricing is probably a significant contributory factor in explaining that phenomenon?
I would be happy to answer questions of that kind posed by Deputy Rabbitte instead of adversarial questions——
The Minister did not say that in Donegal.
——to which one could respond with factual data, which is supplied to me and any office holder when such a question is tabled. The question the Deputy posed has been and will continue to be the source of concern for all of us for a long time to come. Experts have proposed a number of answers and we hope they will work. We think some will but in all probability some will not. We will have to implement it to see how it works. However, I agree with the Deputy.