Written Answers. - Labour-Intensive Industries Study.
Seamus Kirk
Question:
20
Mr. Kirk
asked the
Minister for Enterprise and Employment,
in view of the difficult experiences of labour-intensive industries in Ireland in recent years, if he will initiate a special study of the sector to establish its comparative cost competitiveness with the purpose of establishing its present needs and medium and long term prospects; and if he will make a statement on the matter.
[1695/95]
As the Deputy rightly implies in his question, cost competitiveness is a vital component in the long term survival and prosperity of labour-intensive industries, and industry generally, in Ireland. However, the labour-intensive sector is not a homogenous sector, and practical difficulties would arise in trying to encapsulate the various elements of labour-intensive industries into a special study. Labour-intensive industries vary widely by sector, market-orientation, skill requirement, geography, ownership profile and current trading circumstances, to mention some of the major distinguishing features. The problems particular sectors or individual firms face to secure their long term future could be related to any one or a combination of the above.
A recent report, "Taxes on Labour in Ireland and in the United Kingdom," by McCarthy & Tansey, notes that job growth in Ireland has been lower than in countries perceived to have done poorly, including the United Kingdom. The report goes on to state that the reasons for this low jobs growth are many and complex and have been analysed in numerous official reports. Pre-eminent amongst those official reports has been the report of the Industrial Policy Review Group — the Cullition report.
The issue of competitiveness was identified in the Culliton report as a central requirement if indigenous firms are to maintain their existing markets and expand into new ones. In this connection, the recently published Operational Programme for Industrial Development brings to attention the fact that many Irish companies have a considerable gap to bridge before they can compete successfully on a long term basis with international firms both on the domestic and export markets. Many indigenous firms tend to have particular deficiencies in areas of marketing, technology, business skills and finance for expansion/marketing which represents a significant obstacle to their development and to the expansion of trade. For this reason, the primary focus of strategy in the operational programme will be on improving the competitiveness of indigenous industry by improving performance in all these key operational areas.
Improving competitiveness also involves important aspects of national policy which do not come within the scope of the industry programme. These relate to the broader issues identified in the Cullition report as affecting the competitiveness and productivity of the economy as a whole. These broader issues include tax reform, improvements to physical infrastructure, access transport, improvements in the education system and having competitive public utility costs. These issues are being addressed by the Government in the context of the implementation of the Moriarty report. In relation to tax reform, measures outlined in the budget by the Minister for Finance are clear evidence of the Government's commitment to helping potentially vulnerable indigenous sectors to lower their cost base and improve their competitive position.
Yesterday, I announced the establishment of a new task force for industry adjustment to identify areas of business at risk from competitive forces.
In keeping with the Government's commitment to a participative approach to economic development as set out in its policy agreement of December 1994,A Government of Renewal and in the Programme for Competitiveness andWork, this task force has been established to enable the social partners — ICTU and IBEC — to contribute, along with State agencies and Departments, to addressing the problems of job maintenance/losses and to the promotion of models for early, preventative change and adjustment strategies in industry.
The task force will also oversee a new initiative to assist areas of business under particular pressure, such as traditional sectors and segments of industry like clothing, timber and furniture and some engineering areas, to identify early and preventative actions that should be taken to gear up to the pressures from international trade and the increasing immediacy of the global marketplace.
This new task force within whose remit the social partners and State bodies will identify the early preventative actions that need to be taken, will provide a further and necessary impetus for employers and workers to implement an agenda for change so as to survive and prosper in competitive markets.
The decision to increase the income threshold below which the lower rate employers' PRSI of 9 per cent applies from £9,000 to £12,000 and to reduce corporation tax to a standard rate of 38 per cent, with further reductions planned as resources allow, are a clear demonstration of that commitment. In addition, the position of low paid employees will be improved by the introduction of a £50 per week allowance for full rate PRSI contributors. Furthermore, the increases in personal allowances and the significant widening of the standard rate income tax band will increase the reward for people in work and reduce the number of people paying tax at the higher 48 per cent rate.
Therefore, the Government is addressing the cost of labour in a coherent and comprehensive way by reforming the three key elements of the tax wedge; income tax, employee PRSI and employer PRSI. This will enhance the relative competitiveness of Irish labour and help labour-intensive firms, in particular. By doing this we should increase the employment intensity of current and future economic growth.
While the employment creation task facing us is daunting, it is reassuring to note that recent employment growth, as compiled in the OECD's Employment Outlook 1994, shows Ireland outperforming both the EU and the total OECD positions in 1994 and they expect this performance to continue into 1995. This reassuring position is echoed in the European Commission's publicationEmployment in Europe 1994, which states:
Indeed, only in Denmark, Ireland, Luxembourg and the United Kingdom is employment expected to increase in 1994, and only in Ireland, is the rise likely to be more than 1 per cent.
