The figures from the latest quarterly national household survey are marked proof of the effectiveness of Government policies in the areas of employment and the labour market. Our recent economic success has been remarkable. The so-called "jobless growth" of the early 1990s has long since been replaced by consistent employment creation. Employment increased by 93,000 in the 12 months to August 2005, bringing the total at work to 1,929,000. This is the highest annual growth rate in five years and is an increase of 31% or 461,000 since 1997. Women have particularly benefited from the massive growth in employment during this period. The number of women in the workforce has increased by 39% since 1997 as against the 26% increase in male workers. More needs to be done if we are to continue to attract women into the workforce. In addition the figures show a strong regional performance, with employment in the Border, midlands and west region increasing by almost 6%, giving employment to an additional 26,000 people. Moreover, we have seen employment increase in most sectors of the economy, with financial and business services showing strong growth.
This strong employment growth has been based on a strong and vibrant economy. With favourable economic growth forecast to continue, the indications are that employment growth will be maintained in 2005 and into 2006. Employment is forecast to grow by around 2.9% in 2005 and by 2% in 2006. Unemployment continues to be maintained at a low level at 4.2% and is forecast to remain at around this level into next year. Our unemployment rate is currently less than half the EU average of 8.6%. Our current rate compares to an unemployment rate of 10.4% in 1997. The numbers unemployed have decreased by 50% in this period, from 171,200 to 85,600. Long-term unemployment has dropped from 90,000 to 27,000, a decrease of almost 70%. It now stands at 1.4%, which is about one third of the EU average.
The consensus approach under social partnership, involving employers, employees and Government, has been a major contributor to Ireland's economic success. This has been backed by a well-balanced suite of employment rights legislation, which, together with measures designed to stimulate employment, provide an appropriate framework for the purpose of achieving an efficient and competitive business environment. In addition to employment growth, the partnership agreements have been effective in securing improved economic performance and, above all, raising living standards. In the ten years to 1987 inflation was running at an average of 12% whereas the current rate is just 3%. Moreover, the pay terms of the two most recent national agreements have given workers pay increases of almost 30%.
Ireland will continue to implement policies that lead to higher levels of employment. We will strive to reach and if possible exceed the EU employment rate targets for 2010 of 70% for overall employment, 60% for female employment and 50% for employment of older workers. As pointed out by the enterprise strategy group, the policies adopted to date have proved very successful. However, if we are to move forward in the context of a knowledge based, innovation driven economy, a new set of challenges awaits us which require a different approach. In the labour market context this means we need to maintain a strong focus on education and training, including lifelong learning, to ensure the development of a high skilled, adaptable workforce. We need to ensure an adequate supply of labour to meet the needs of the economy and to sustain economic growth. Labour will be supplied through a number of sources: the underlying population increase; increased participation by the unemployed and those outside the labour force; and economic migration.
Education and training have been central to our economic success. Similarly, our future prosperity will depend on workers acquiring the knowledge, skills and competencies required to compete in an increasingly global economy. The enterprise strategy group's recommendations made it clear that lifelong learning will be key, as the nature of the workplace requires that workers be ever more flexible and adaptable. More than in the past, people will need to upskill and reskill throughout their working lives. This can only be achieved by introducing new approaches and putting in place the necessary delivery structures. The One Step Up initiative, which I announced recently and have substantially resourced, is an important element in this process. This initiative will promote life-long learning and upskilling of our workforce by providing easy access to a range of training and learning initiatives, including both tutor-led training and e-learning. It will also assist employees to obtain a recognised qualifications within the national framework of qualifications.
In ensuring an adequate supply of labour to increase the numbers at work in the context of the decreasing numbers of young people coming into the labour market, there will always be a need to mobilise labour supply from other sources. This will mean encouraging increased participation in the domestic labour market. It will also mean adjusting economic migration policy in Ireland to address identified labour shortages and skills needs.
Migration, combined with the natural increase in the population, has resulted in an increase in the population by 87,000 to more than 4 million in April 2005, the highest it has been in nearly 150 years. This is truly a historic milestone. This is a very positive trend for Ireland in view of our labour and skills shortages. The high level of immigration in the past year, with over a third coming from the ten new member states, is a result of our non-restrictive policy to those from these countries who wish to work in Ireland. There is no doubt that for most of our skills shortages, appropriate EEA workers are available.
The total population today is the highest since the census of 1861. The historic nature of this population increase should not be lost sight of. Demographers agree that if there had been no emigration since 1841, the population of the Republic would be in the region of 20 million instead of 4.13 million today. It is interesting to note that Pádraig Pearse believed the country could support a population of 30 million. These figures may be fanciful to us today and we would have an entirely different economy but, nonetheless, we have turned a corner in terms of the history of population growth in this country.
The Employment Permits Bill 2005, which I introduced in the Dáil last week, includes provision for a more managed economic migration policy, including a continual assessment of skill and labour needs in future. Research carried out by the expert group on future skills needs will continue to inform Government policy in this field. The focus of this policy will be to facilitate efficiently and effectively the entry into Ireland of people with skills we need but which we cannot source from within Ireland or the European Economic Area. The high growth in employment indicates how well the economy is doing and how important it is that we can absorb increases in the labour force both on the domestic front and from overseas.
In the space of fewer than 15 years, we have built a very different economy that has the inherent capacity to sustain growth rates that are the envy of some and a sought after example for others. At the root of this exceptional employment performance is a deeply embedded commitment to pursue policies across Government that boost our competitiveness. This is underpinned by recognising that we must constantly change, adapt and reform if we are to stay ahead.
I am realistic enough to know that keeping, let alone expanding, our share of world trade and investment will not be easy. Our competitors are no more than a mouse click away. Competitiveness is as easily lost as it has been hard won. While we are no longer a low cost economy, the recent annual report from the National Competitiveness Council recognises that we retain some fairly impressive and significant national strengths.
For example, we have achieved remarkable rates of economic growth over the past decade and we have recorded one of the best economic performances in the world. From 1997 to 2004, Irish gross domestic product grew by an average of more than 7.5% compared with an average of just over 2% in the European Union 15. Under the sustainable growth heading, Ireland's living standards, as measured by GDP per capita, the National Competitiveness Council calculates we come first out of 15 countries, and for gross national product per capita, we are sixth out of 16 economies at which it looked. GNP per capita has almost doubled since 1997.
However, it is not all about arcane economic numbers. Real progress has been achieved in improving living standards and this is reflected in Ireland's strong performance in the United Nations human development index that is a good indicator of general quality of life. Here we came fifth out of 15 comparable countries. In addition to the decline in unemployment and long-term unemployment in particular, the ESRI has shown that over the period 1994 to 2001, life chances improved significantly. This trend is directly related to declining unemployment and reduced levels of dependence on social welfare in a period of economic boom.
Maintaining our competitiveness is of huge importance for Ireland because we are one of the most open economies in the world. In terms of trade performance, we came second out of 16 nations in the National Competitiveness Council's league table, with much of this driven by our strengths in the foreign investment sector. We have one of the most favourable taxation regimes in Europe and have put in place enterprise policies that support all investors. This makes Ireland a secure and profitable location from which to do business globally. The combined effect of these policy strands has ensured that Ireland has consistently been an attractive location for foreign direct investment for a considerable period and we have successfully won more global and EU foreign direct investment than our size would naturally suggest.
Our commitment to developing a modern high technology and competitive economy is winning where it counts, that is, in the marketplace. The export performance of the high technology sector is powered by the skill and ingenuity of a productive and competitive workforce. Chemical, pharmaceutical, medical devices, electronic and electronic commerce sectors would not consistently choose Ireland as an investment location if we did not provide solid competitive advantages. We all know that global competition for prestige and high value mobile investment is intense, yet global businesses continually choose to invest here because we are competitive for these high end industries. Hard nosed investment decisions are not made in favour of uncompetitive and lowly rated economies.
Not only is foreign direct investment critical to maintaining economic vitality, how we manage the transition to a different portfolio of foreign investors is a key challenge that we meet. Manufacturing is still the engine driving our economy and represents by far the greater part of the exports of €68 billion and local economy expenditure of €15 billion by overseas companies in Ireland each year. However, the type of manufacturing investment being secured for Ireland has changed. Many western-type economies are seeing a gradual loss of low level, labour intensive operations to lower cost countries, but innovative economies like Ireland continue to attract advanced manufacturing operations that are at the cutting edge of technology, where high productivity output is heavily reliant on the skills and capability of a highly educated and agile workforce. These investments may not have the headline grabbing head count of previous years but their massive capital investment per employee shows that we are serious contenders when it comes to winning sophisticated, technology driven, mobile investment. We will continue to encourage manufacturing. It provides the test bed for innovation and ingenuity. Developing new products, creating new processes and achieving greater productivity is an integral part of manufacturing today.
Helping us further along the road of transformation, the enterprise strategy group's analysis of our enterprise performance made a very strong case. It showed us how and where we need to be creative in policy thought and deed. I spoke about the One Step Up initiative and the upskilling of the workforce and population. This is one part of our response to the enterprise strategy group.
A second key plank in our response to the O'Driscoll report has been the new Enterprise Ireland strategy to help transform indigenous enterprise. The vision set out in the strategy is the support and creation of a dynamic indigenous firms sector engaged in high value added activities. Enterprise Ireland's clients will become more intensely market focused and innovative, providing new and proprietary products at premium prices. The strategy has a heavy emphasis on research and innovation, exports, competitiveness and entrepreneurship to deliver greater numbers of new high growth companies with strong potential to win increasingly profitable contracts in global markets. It aims to help Irish companies grow into self-sustaining enterprises of sufficient scale to compete internationally.
Driving the competitiveness agenda and keeping us ahead of the curve was very much at the heart of the enterprise strategy group's recommendations. We have a broad and diversified enterprise base that has expanded with the help of constructive economic and business policies and we have one of the best possible international locations from which to do business. I want to keep it this way and I am determined we maintain this competitive advantage.
Sustaining the momentum for change and reform demands a close dialogue with business. I recently announced the business members of the enterprise advisory group who will advise Government on the implementation of the enterprise strategy group recommendations and on enterprise policy generally.
Globalisation provides huge opportunities for companies with international ambitions but it is also presenting unprecedented competitive pressures. I fully agree with the enterprise strategy group's report when it describes the new emphasis we should place on building strong indigenous small and medium-sized enterprises. Through Enterprise Ireland we are designing a new approach to helping SMEs but I do not believe changing our support schemes is sufficient. Ten years ago, the growth issues for small companies were very different and a small firms task force presented radical and important reforms that helped small companies mature and capitalise on economic expansion. Today SMEs face very different but no less difficult problems about growth and expansion in a world transformed by freer trade and massive competition.
We have made a very clear commitment to the need for a substantial step change in research and development, building on the outstanding success we have had since 1998 in that area. We need to change step again to bring Ireland into the next decade. In recent weeks, there has been much comment about the establishment of a variety of groups. It is effective that Ireland Inc. has looked strategically in consulting with people and has developed strategic frameworks for policy formulation. People criticise, in a shallow way, the establishment of strategic groups to look ten years ahead. It is a dangerous debate that is without substance. If we adopt that approach, we will do so at our peril.