Priority Questions

IDA Data

Dara Calleary

Question:

1. Deputy Dara Calleary asked the Minister for Jobs, Enterprise and Innovation the number of new overseas offices established by IDA Ireland since 2011; the number of staff in each new office; the number of offices closed during the period; the plans by IDA Ireland to exploit opportunities in the Middle East and BRIC countries; the number of IDA Ireland staff based in Middle East and BRIC countries; and if he will make a statement on the matter. [48392/14]

My first question relates to IDA Ireland's presence in BRIC and Middle East countries. It is a replica of a question that I tabled in January. I would like to know what progress has been made in the intervening period.

Since 2011 IDA Ireland has opened three additional offices in overseas locations. During 2013 two additional overseas offices were opened, one in Korea and one in Beijing, with one member of staff in each office. In 2014 an additional office was opened in Texas in the United States. It has two staff members. In 2011 IDA Ireland ceased to have a presence in Taiwan, with activity now being managed from China.

The BRIC countries - Brazil, Russia, India and China - form the core countries of IDA Ireland’s growth markets strategy, together with the ASEAN region, comprising South Africa, Japan, Korea, Australia and New Zealand. Since 2007 IDA Ireland has opened offices in all of the BRIC countries. The agency now has three offices in China and two in India, as well as having a presence in Moscow in Russia and Sao Paulo in Brazil. These offices are staffed by a combination of permanent staff, contract employees and part-time consultants, numbering 11 in all. In the past three years IDA Ireland has secured an emerging base of investments from India - HCL, Wipro, TCS and Genpact - and China - Huawei, ICBC, CDB and Satir - and was integral in facilitating the acquisition of Air Atlanta’s aero-engineering facility at Shannon by the Russian airline Transaero.

Although IDA Ireland does not have an office in the Middle East, I am informed by the agency that its growth markets team in Dublin, in conjunction with its international financial services division, works with the embassy network in the region to identify and target prospective client companies, particularly in the growth area of Islamic finance.

One of the disruptive reforms set out in An Action Plan for Jobs 2014 is the Winning Abroad initiative which targets the creation of an additional 10,000 jobs - 6,000 direct and 4,000 indirect - over and above the annual jobs target of 13,000. Additional resources have been provided for IDA Ireland to enable the agency to recruit an additional 35 staff on a contract basis for a period of three years to cover the lifetime of the initiative. The additional staff will be based at various locations, including Boston, New York, Chicago, Atlanta, Austin, Mountain View, Irvine, London, Frankfurt, Paris, Tokyo, Shanghai, Sydney and Dublin. To date, 21 staff have been recruited and interviews are ongoing to fill the remaining positions.

One of the high level goals set out IDA Ireland’s strategy document, Horizon 2020, for the period 2010 to 2014, is that of achieving 20% of greenfield investment from high growth markets, including the BRIC countries, by the end of 2014. The agency informs me that it is confident that this target will be achieved.

I ask the Minister to provide more detail on the question of meeting the 20% target. He has said IDA Ireland is "confident" that it will be achieved, but it only has two weeks in which to do so. Is there any monitoring by the Department of IDA Ireland in reaching the target?

On the 35 new staff recruited, I notice that the BRIC markets are well down the priority list. While I welcome the investment in North America, we already have a very strong and successful presence there. Is there merit in placing the greater proportion of the additional staff in the growing markets, that is, the BRIC countries, rather than in ones in which we are very well covered? The President has just concluded a very successful visit to China, to where I know that there have been a lot of trade missions. However, the key to success, particularly in China but also in the other BRIC markets, is having a presence and active and ongoing engagement. While high profile visits are very beneficial and often very successful, we need boots on the ground constantly. In the context of the aforementioned 35 new staff, should the emphasis be on the BRIC countries?

I can report good progress in meeting the 20% target. In 2011, 8% of greenfield investment came from high growth markets, while the figures for 2012 and 2013 were 14% and 16%, respectively. IDA Ireland is confident that it will hit the 20% target this year. There are still a number of investments yet to be considered by the board of IDA Ireland; therefore, the definitive figure for 2014 will not be known until after the board's last meeting of the year which will be held next week.

I take the Deputy's point about focusing on emerging markets. There is always a balance to be struck between new areas that will be high-growth in the future and existing areas that are yielding a very high investment. That is one of the areas IDA Ireland is examining very closely in its current strategy. Clearly, there is merit in opening up these new markets, given that 90% of future growth is projected to take place outside the European Union, particularly from the ASEAN region. It is, however, a question of striking a balance. It is important to note that 70% of the flow of investment is still coming from the USA; therefore, we cannot neglect growth areas within that country. Clearly, growth has shifted from the traditional east coast locations to other parts of the United States such as Texas which we are targeting, as well as areas in the south east such as Raleigh. There is a response in areas of opportunity.

I wish to ask about the relationship between the Department of Jobs, Enterprise and Innovation and the Department of Foreign Affairs and Trade. In the context of trade being the responsibility of the Department of Foreign Affairs and Trade for the past three years or so, what monitoring takes place of the economic wing of that Department? What is the level of monitoring of economic promotion and investment work undertaken by embassies, particularly in the BRIC countries? Is the Minister confident and happy with the relationship between his Department and the Department of Foreign Affairs and Trade?

As the Deputy knows, when his party was in government, the Export Trade Council was established. One of the initiatives in our programme for Government was to include private sector members in the council. The council meets quarterly and closely reviews progress made across all of the agencies, not just those under the aegis of my Department, including, for example, Bord Bia, Fáilte Ireland and so on. It is working well and all of the agencies are reporting that they are exceeding their targets, with the exception of those involved in the tourism sector which was hit very hard in one year but which is doing really well in recovering markets. Increasingly, an Ireland House-Team Ireland approach is being adopted. There is, however, further work to be done in looking at individual countries and delivery of plans within these countries. That is one of the ambitions of the Export Trade Council, namely, to look in a more granular way at individual markets and build on the success of this approach.

Commercial Property

Peadar Tóibín

Question:

2. Deputy Peadar Tóibín asked the Minister for Jobs, Enterprise and Innovation in view of the growing difficulties within the commercial property sector, the steps he is taking to ease cost competitive disadvantages and create jobs in construction industry. [48458/14]

A crisis is developing in the property sector. House prices are rising in the Dublin area at a faster rate than during the craziest days of the Celtic tiger. This has the effect of denying many people homes, increasing pressure on wages and making the city of Dublin and surrounding areas very uncompetitive.

Since the crash, access to commercial property is drying up within the State for some of the same reasons as residential property. There are difficulties with regard to the cost of development and access to finance for organisations. That is creating strain within the FDI sector and within the indigenous enterprise sector, as they search for space.

The house price issue will have to be directed to another Minister, but I can deal with the issue the Deputy inquired about on the commercial property sector. The Central Bank noted that 2013 saw the largest investment in commercial property since 2007, at €1.8 billion, with 60% in the office market, and that investment activity has remained strong into 2014. The growth in demand for office accommodation in particular is due in part to our continued success in attracting new foreign direct investment and the recovery in the economy more generally.

The availability of cost-effective and flexible property solutions continues to play a key role in supporting the delivery of FDI into Ireland. Many recent investments won, including West Pharma in Waterford, LinkedIn and Novartis in Dublin, Apple in Cork, Regeneron in Limerick, Jazz and Alexion Pharmaceuticals in Athlone and eBay and Paypal in Dundalk, among others, had significant property and infrastructural requirements that were a key component of their business case and rationale for investing in Ireland.

In the larger urban centres, the availability and supply of grade A office accommodation is a challenge in an environment of ongoing demand, particularly from FDI, diminishing availability and a lack of substantial speculative development. These issues have led to rental inflation in Dublin, Galway and Limerick during 2014, with prime rents relatively stable in the Cork market.

The autumn review of the Irish office market by DTZ Sherry Fitzgerald estimates that the current office vacancy rates range from 11.8% in Galway, 14% in Dublin and 18% in Cork to 20.5% in Limerick. In terms of new construction of office accommodation, DTZ estimates that 8,500 sq. m of office space is under construction in Galway and 16,000 sq. m in Cork, while in Limerick, 13,300 sq. m is under construction, and in Dublin an estimated 22,500 sq. m is under construction. The agencies of my Department, particularly IDA Ireland, are in continuous dialogue with key stakeholders in the property market to ensure the required competitive property solutions are available in the short and medium term.

While the office market nationally is leading the way in terms of recovery, with overseas investors such as Kennedy Wilson and Blackstone and the likes of NAMA investing in substantial commercial developments across the country - for example, the Dublin strategic development zone, Bolands Mills, and Albert Quay in Cork - there are also significant opportunities to refurbish older buildings nationally, which could increase the supply of commercial stock suitable for FDI and allow us to maintain competitiveness over time.

Additional information not given on the floor of the House

In May 2014, the Government published Construction 2020 – a Strategy for a Renewed Construction Sector, which contained a detailed programme of work, including 75 time-bound actions across a range of issues including housing, the planning process, availability of financing, monitoring and regulating the sector, and ensuring that we have a highly skilled workforce and opportunities for construction jobseekers. The latest data from the CSO shows a significant recovery in construction employment as the sector responds to an upturn in demand.

The housing market is a dysfunctional market currently. While it is not directly the responsibility of the Minister, thousands of jobs could potentially be created within the housing market if this dysfunction was resolved. I ask the Minister to focus on the area in the Action Plan for Jobs, which is meant to be a cross-departmental plan. Vacancy rates for commercial property are falling. We will have a problem if this country cannot continue to supply commercial property to indigenous and FDI companies. They will not necessarily relocate to another part of the State; they will relocate to another country. The IDA has sought to develop new advance factories in a number of different locations. However, 23 counties will not have such factories, which will be a challenge for them. In Meath, for example, we are told regularly that there is not enough space for large firms to move there. I am sure Louth has similar troubles.

I thank the Deputy.

I wish to refer to four issues briefly. Improved access to finance for developers locally is important to ensure they can build facilities to take the pressure off the Government. NAMA is not resolving its processes properly at the moment. The planning regime in the State is not suitable for current needs, nor is the supply chain within the construction industry suited to addressing the demand for commercial property.

I agree with the Deputy. That is the reason the Government published Construction 2020, which is the strategy for renewing the construction sector. It contains a detailed programme of work, including 75 time-bound actions across the issues the Deputy raised. They cover housing, the planning process, the availability of financing, monitoring and regulating the sector, and ensuring that we have a high skilled workforce and opportunities for jobseekers. This area is benefitting from a concerted approach. We are taking the same approach that we adopted in the Action Plan for Jobs, with time-bound actions that are regularly monitored. In terms of the impact, it is encouraging to see that the latest data from the CSO show a significant increase in the number of people at work in construction - well over 6,000 in the past 12 months. It is a sign that the construction sector is recovering. However, I recognise that there have been difficulties in the recovery, and the Government has sought to intervene to deal with some of the issues the Deputy has raised.

I am talking about workers in the construction industry. That side of the whole process is in chaos at the moment. As the Minister is aware, the instability arose from the Supreme Court decision in 2013 on registered employment agreements, REAs. Currently, there are widespread abuses within the construction industry in terms of the National Minimum Wage Act, relevant contracts tax, RCT, and pay and conditions, among other areas. That is creating enormous tensions for employers who are doing the right thing and therefore operating on an uneven playing field and workers who are trying to do the right thing. On the other side, one has unscrupulous employers and problems with RCT. The Government is failing to ensure compliance.

Contracts for public works contain measures relating to rates of pay and conditions of employment certificates. If compliance was sought and the certificates were properly regulated it would significantly resolve some of the disasters that are currently taking place. Men and women within the construction industry currently earn far less than the minimum wage. Those individuals are being supplanted every week in this country. One example I have brought to the attention of the Minister is that of the Kishoge community college site. If J.J. Rhatigan is involved in that type of practice at the Kishoge site, there is no doubt it must be happening in the large number of other sites on which he currently has building contracts from the Department of Education and Skills.

If, as the Deputy says, there are cases in which the national minimum wage is not being paid, NERA will investigate. There are other cases that the Deputy has brought to my attention, which relate to the terms of employment. I understand the scope section of the Department of Social Protection is investigating them. The law in that regard is well established.

With regard to registered employment agreements, we are drafting legislation that will withstand constitutional challenge. The Minister of State, Deputy Nash, is working on that. We believe we are at a very advanced point in the development of the legislation, which we are treating as a high priority. Clearly, there are issues in this sector as it emerges from the crash that it has experienced, but the Government is taking concerted action as part of a solid programme to address all of the issues raised by Deputy Tóibín - the REAs, the planning system and access to finance.

Trade Agreements

Paul Murphy

Question:

3. Deputy Paul Murphy asked the Minister for Jobs, Enterprise and Innovation if he has received a response to the letter that he co-signed, dated 21 October 2014, to the Commissioner-designate for Trade, Cecilia Malmström, regarding the Transatlantic Trade and Investment Partnership; and if he will make a statement on the matter. [48248/14]

I wish to ask the Minister about the letter of 21 October 2014 to the trade Commissioner, which he co-signed with a number of other trade Ministers across Europe. The essence of the letter was to argue for the maintenance of the investor-state dispute settlement, ISDS, mechanism, which gives privileged access to corporations to justice against states that attempt to regulate in the EU-US free trade agreement, the so-called TTIP. Did the Government give the Minister a mandate to sign the letter? Is it the official Government position to argue for the inclusion of ISDS, and has there been a response yet from the trade Commissioner?

The purpose of the negotiations on the Transatlantic Trade and Investment Partnership, TTIP, is to reduce barriers to trade and investment in order to generate jobs and growth. According to assessments made by the European Commission and other European bodies, a comprehensive TTIP could over time boost the EU's GDP by 0.5% per annum, resulting in 400,000 additional jobs across the EU. The gains for Ireland could be double that in proportionate terms because of the significant flows of trade between Ireland and the US.

Ireland was one of 14 EU member states that wrote to the new Commissioner for Trade, Cecilia Malmström, expressing the view that the public consultation on investor protection in TTIP held earlier this year was an important step in seeking to strike the right balance and that stakeholders’ contributions should be carefully considered before a firm decision is reached on the way forward. While no reply has issued to the letter, I am aware that the results of the consultation will be made available soon.

The aim of the investment protection chapter of the EU's free trade agreements is to provide EU investors abroad with a level of protection similar to that which would obtain within the EU.

In respect of inward investment, Ireland guarantees investors in Ireland that they will not be treated in a discriminatory manner. The protection is provided by virtue of our Constitution. However, all other EU member states have bilateral investment treaties with third countries that include investor-state dispute settlement, ISDS, arrangements. Nine member states have such treaties with the US. TTIP would replace these with a single arrangement. Ultimately, an EU mechanism would provide a uniform system of guaranteed fair and equitable treatment for investors across all EU member states.

International experience with ISDS points to a wide disparity of bilateral investment agreement provisions, and some cases taken by investors under some of these have brought criticism on the mechanism. TTIP and other agreements provide an opportunity for the EU to make improvements that address the weaknesses identified in those other cases.

The mandate for negotiation has made it clear that the objectives of any investment protection provisions would be without prejudice to the right of the EU and the member states to adopt and enforce measures necessary to pursue legitimate policy objectives, such as social, environmental or security objectives, stability of the financial system, or public health and safety, in a non-discriminatory manner.

Additional information not given on the floor of the House

In the case of the recently concluded negotiations between the EU and Canada, for example, a breach of the fair and equitable treatment obligation could only arise when there is denial of justice in criminal, civil or administrative proceedings; a fundamental breach of due process, including a fundamental breach of transparency, in judicial and administrative proceedings; manifest arbitrariness; targeted discrimination on manifestly wrongful grounds, such as gender, race or religious belief; or abusive treatment of investors, such as coercion, duress and harassment.

In addition, in the Canada agreement, there is provision for a list of arbitrators pre-agreed by the EU and Canada. In case of disagreement between the disputing parties, the arbitrator will be selected from this list. This ensures that the EU or Canada has always agreed to at least two of the three arbitrators that will act under agreement and will have vetted them to ensure that they live up to the highest standards.

Ultimately, and only after prior consultation with member states and in accordance with the EU treaties, the inclusion of investment protection and ISDS in TTIP will depend on an outcome satisfactory to the EU in meeting its interests both in relation to investment protection and in view of the final balance of the agreement as a whole.

I recently met the US Trade Representative, Mike Froman, who told me that the US also sees the need for major improvement in the terms of ISDS. He reminded me that the US also has a strong interest in ensuring that the right of the US Government to regulate in the public interest is fully respected.

I would be highly sceptical of the promised growth figures form the Commission. Similar figures promised for the North American Free Trade Agreement, NAFTA, never materialised - in fact, a million jobs disappeared. Professor Clive George, who has previously done impact assessments for the European Commission, has noted that its model is highly speculative and said that the actual likely increase in growth rate is 0.01% per year over a ten-year period. Why do we need these for certainty of investment? Does the Minister think there is a fundamental flaw in the US justice system? Does he think there is a fundamental flaw in the European justice system? Why is the regular access to justice that any ordinary person can get not good enough for the corporations? Why do the corporations want to have the right, and why does the Minister want them to have the right, to sue in private tribunals where they get to choose the arbitrator? They pay them an average of $3,000 per day and get to invoke causes such as indirect expropriation, in the case of a challenge to fracking in Canada, where a corporation, Lone Pine, is suing for almost €200 million because of a moratorium on fracking. There are also challenges against a moratorium on nuclear power in Germany and challenges by the cigarette industry.

First, the EU has made provision that such hearings will not be in private and the individuals involved will not choose the arbitrators. The choice of arbitrator will be by the two sides - the European Union and the US, if the US is involved. On the question of why such protections are necessary, the EU is seeking to set up investment agreements with many countries, including China, Korea and Singapore, and in many of these countries the body of law that one would need has not yet been developed, so there is clearly a case for investor protection. In the case of the US, they obviously want us to have uniformity across the EU, but the EU in its negotiating mandate has sought to ensure that European interests are protected by insisting that freedom of public policy will be guaranteed so that one can introduce regulation in those areas. The Canada agreement is a good model. A challenge can be brought under these systems - these are listed - where there has been a denial of justice in criminal, civil or administrative proceedings, a fundamental breach of due process, manifest arbitrariness, targeted discrimination on manifestly wrongful grounds or abusive treatment of investors. Clearly, those are protections that could reasonably be put into an agreement. It is important to bear in mind that we are negotiating with a sovereign government in the US and it, equally, is determined to ensure its freedom to regulate. This is an area where there is a mutual interest in having fair protection in such trade agreements.

When I worked in the European Parliament, I heard this argument again and again for ISDS in the case of trade agreements with countries with undeveloped legal systems. That was the argument put forward, but the US, which has the most developed legal system in the world, and, similarly, the EU are still arguing that corporations have special rights, rights that are not afforded to ordinary people in either bloc. This is a right of corporations to sue states that interfere with their right to make a profit. Does the Minister agree with the right of corporations to sue for what is known as indirect expropriation? Does he consider that our attempt to legislate for plain packaging for cigarettes could be challenged, as is currently happening under such agreements, with Philip Morris suing Uruguay and Australia? What is happening here is that the right to profit is being put above the right of states to regulate in the interests of public health, the environment and workers' rights, and it also represents a fundamental attack on our right to democratically discuss and decide on these policies, as opposed to allowing corporations to set the rules in private tribunals.

The Deputy may have listened to debates in the European Parliament, but it does not sound like he learned anything from them, because the mandate specifically excludes all those social protection areas. Countries will have the right to pursue public policy objectives in all these areas under a model such as that set out with Canada. The Canada agreement has an investor protection mechanism, and environmental protection is perfectly within the rights of governments. Clearly, investor protection is an important part of any trade agreement. If one is investing, ones want to ensure - I listed the items - that one is not arbitrarily discriminated against. It is quite reasonable to put such protections into EU agreements. They are in the Canada agreement and they will be in all future agreements. Under the Lisbon treaty, we have given the European Union the ability to negotiate such protections. They give our investors certainty in the countries in which we invest, and the same is true of the parties with whom we are negotiating. Investors, including Chinese or Indian investors who do not have familiarity with our legal system, will want to see that the basic ingredients are protected, and that is the purpose of these mechanisms.

Thank you, Minister. We must move on.

Enterprise Support Services Provision

Dara Calleary

Question:

4. Deputy Dara Calleary asked the Minister for Jobs, Enterprise and Innovation how his Department will seek to support Irish-owned manufacturing firms to achieve growth in the domestic and export markets; and if he will make a statement on the matter. [48393/14]

Our manufacturing sector is under huge pressure at present while gaining from the so-called recovery. What actions is the Department taking in regard to costs and ensuring that we have a proper skills base for any growth that takes place? What supports is the Minister willing to put in place for start-up manufacturing industries around the country?

As Deputy Calleary knows, the Minister, Deputy Bruton, commissioned a major report on the strategy for the manufacturing sector, which was published in April 2013. The strategy identifies an additional 20,000 jobs that can be created in manufacturing by 2016 and proposes key actions across a range of areas, including access to new funding, management training and support, cost reduction, the adoption of technology, and the implementation of a national step change initiative. The key issues arising from this strategy are being pursued through the Action Plan for Jobs process. In addition to developing the manufacturing strategy, the Government has also initiated research on the specific skills needs of the manufacturing sector up to 2020, and this work was completed in 2013 by the Expert Group on Future Skills Needs. That report identifies what needs to be done regarding training and skills development for the sector. A wide range of recommendations are made and work is already under way to address some of the recommendations in that report.

Under action 49 of the Action Plan for Jobs 2014, Enterprise Ireland is tasked with specifically identifying and working with a group of mid-sized manufacturing firms - initially 12 - to secure their commitment to achieve significant growth over the next five years. Management development, benchmarking and strategic reviews and lean business programmes will form the basis of this suite of supports. This action has already been delivered. Furthermore, a targeted call for innovation vouchers for the manufacturing sector also took place.

Further commitments specifically relating to the manufacturing sector and focusing on competitiveness, access to finance and supply chain opportunities will be continued in the Action Plan for Jobs 2015, which will be launched early in the new year.

As the Deputy knows, the manufacturing base is very diverse and includes companies in the food, construction materials, medical devices and engineering sectors. Many of the supports required or sought by Irish-owned manufacturing companies are relevant for companies across the indigenous enterprise base. To assist both manufacturing and internationally traded service companies in achieving growth, Enterprise Ireland provides the supports for internationalisation, access to finance, capability and management development, competitiveness, innovation and so on.

How many of the 20,000 jobs that were due to be created by 2016, which is only a year from now, have been created? On skills needs, feedback is beginning to come through from employers in manufacturing, but also across all areas, is that it is getting more difficult and costly to find the skills they need as the economy grows.

Third, we had a discussion with the Minister, Deputy Richard Bruton, about costs, in particular State-controlled costs, about which the Government has done nothing. It has been highlighted by the National Competitiveness Council, for example, that nothing has been done about energy or legal costs.

On access to finance, I again welcome the improvements in the terms of Microfinance Ireland, but we are now at the end of a parliamentary session in which we were promised reform of the credit guarantee scheme, which is particularly relevant to manufacturing. Where is that legislation? It was due to be passed before the end of the session. It is a particular support that manufacturing needs.

Manufacturing has been an important sector in Ireland since the 1960s when it was ramped up. However, there has been a noticeable decline in employment in the sector in recent years and, in fact, dating back to the 1980s. There has been a similar trend across the developed world; other industrialised countries such as Germany, the USA, the Netherlands and Korea have experienced similar rates of decline. Employment in the sector in Ireland suffered a major shock between 2008 and 2010 when approximately 50,000 people lost their jobs. However, in 2011 and 2012 there was a net increase of 3,700 jobs in the sector and that trend is continuing. Enterprise Ireland and IDA Ireland figures show that 211,100 people are directly employed in the sector. Nonetheless, there is undoubtedly a challenge around skills availability, something the Minister of State, Deputy Damien English, is addressing. In terms of-----

I will come back to the Minister of State.

I want to reiterate my original questions. Where are we in reaching the 20,000 target to be achieved by 2016 and with regard to the credit guarantee scheme? What are the Minister of State's views on the cost base which is directly within the control of the State and State agencies, given that it will impinge on the Government's efforts in reaching any employment target if it is allowed to continue as it is?

There have been increases in manufacturing, particularly in the agri-business and food sectors. There would have been a concern about the patent cliff, but pharma is performing extremely well, too, as we can see in the job announcements made recently. Early in the new year Enterprise Ireland will launch its results for this year and I expect them to be very positive. I do not have available the precise figures the Deputy is seeking, but I will forward them to him.

To return to the skills piece, an apprenticeship call will be made very shortly because there is a gap. This will be important across the country in providing opportunities for young people to have a career in manufacturing and try to address the skills needs the industry has identified to me, the Minister, Deputy Richard Bruton, and others. Of particular importance is the need to address the pinch-points in apprenticeships, for example, in the case of polymers and tool-making, to set out and promote career paths in manufacturing. We will be working very closely with industry, SOLAS and the education and training boards to address the manufacturing skills supports the industry needs.

Wage-setting Mechanisms

Paul Murphy

Question:

5. Deputy Paul Murphy asked the Minister for Jobs, Enterprise and Innovation in view of the OECD Employment Outlook 2014 which found that Ireland had the second highest percentage of low-paid jobs in these countries; his views in favour of raising the minimum wage; and if he will make a statement on the matter. [48249/14]

I want to ask the Minister of State about the recent OECD Employment Outlook 2014 which found, among other things, that Ireland had the second highest percentage of low-paid jobs among the countries of the OECD, second only to the United States. Is that the model of recovery of which the Government is in favour, namely, low-wage, precarious, short-term contracts, or, in other words, recovery for the rich and corporations at the expense of working people? Is the Minister of State in favour of wage rises generally across the economy, in particular a rise in the minimum wage?

The OECD Employment Outlook 2014 contains data on the incidence of low and high pay in OECD countries. In this context, the report defines the incidence of low pay as referring to the share of workers earning less than two thirds of median earnings. It ranks Ireland in fourth position, not second, with a figure of 21.8%, behind the United States, Korea and Israel, with figures of 25.3%, 25.1% and 22.1%, respectively, followed closely by Canada, at 21.7%, and Poland, at 21.6%. Significantly, it also shows that Irish average earnings in 2013 were the sixth highest among the 34 countries compared in terms of purchasing power parity.

The national minimum wage in Ireland is relatively high by international standards. The most recent figures published by EUROSTAT show that Ireland’s rate is the fourth highest among the 21 EU member states that have a national minimum wage. When the cost of living is taken into account, Ireland’s rate is the fifth highest. The most recent figures from the Central Statistics Office’s quarterly earnings hours and employment costs survey show that 4.7% of all employees, or just over 73,000 workers, were being paid the adult experienced national minimum wage of €8.65 per hour, or less, in the second quarter of 2014.

In the first instance, the decision to restore the national minimum wage to €8.65 per hour with effect from 1 July 2011, together with the decision to put the joint labour committee system on a more secure legal and constitutional footing and reinstate a robust system of protection for workers, represented a significant commitment by the Government to protect the lowest paid and most vulnerable workers. Second, as the Deputy will be aware, there is a commitment in the statement of Government priorities to establish the Low Pay Commission on a statutory basis as an independent body to make annual recommendations to the Government about the appropriate level of the minimum wage and related matters. With a view to ensuring it is in a position to carry out its functions as soon as possible, I am in the process of establishing the commission on an administrative basis. Legislation to provide for its establishment will be brought forward early next year to place it on a statutory footing.

It is difficult to dispute the fact that the problem of low pay is rife in Ireland. It can be compared in many ways, but let us compare it across the European Union, in which, compared to EU15 countries, the level of Irish wage compensation in the private sector is 14% below average; compared to other EU countries not in a bailout programme, the level in Ireland is 21% below average, and compared to economies which are small and open such as some of the Nordic countries, in particular, the level in Ireland is 30% below average. Ireland, therefore, has a problem with low pay. One result is that one in four families with at least one person in work suffers from multiple deprivation experiences, while 16% of employees live below the poverty line. We have the creation of a sector of the workforce that is incredibly low paid, work that is subsidised by the State, given that low-pay employers are being subsidised by the State through the likes of family income supplement. Surely the Government has to do something about this. I argue that wage rises are a much more effective way of targeting the issue than tax cuts.

I certainly support wage rises in profitable companies and where circumstances allow. To answer the Deputy's question concisely about where I stand on the national minimum wage, clearly, we are in the process of setting up the Low Pay Commission. I am in favour of ensuring changes to the national minimum wage on a progressive basis where circumstances allow. While clearly we are creating jobs across the economy, recovery should not be allowed to be characterised by any class of a race to the bottom. It is very important that people's pay and terms and conditions are protected and secured and we are taking measures to ensure this is the case. That is why we have re-established the joint labour committee system, why we are working to reinstate registered employment agreements and why we are making significant progress in dealing with Ireland's collective bargaining laws. We need to do this. We need to make sure the jobs we are creating are decent and sustainable and that people are well paid.

The problem is that the Government is not a neutral bystander. It has and implements policies that encourage the creation of a very low wage sector in the economy, many of which represent subsidies to employers. One example I have raised repeatedly is JobBridge, which directly costs the State approximately €60 million a year in payments to those participating in the scheme but which costs the State multiples of that amount in lost employers' PRSI payments and employee income taxes by allowing companies to benefit from free labour. What has happened in this country, under the guise of the crisis and the need to improve competitiveness, is that the share of wages relative to profit has continued to plummet. The IMF found that Ireland had witnessed the largest decline in the share of labour among the industrialised countries between 1970 and 2012. That process has continued and it can only be reversed by a strong trade union movement but also by legislation introduced by the Government on the minimum wage.

The last thing I can be accused of is shying away from my responsibilities to protect the interests of low paid workers by ensuring the jobs we create pay well. We are revising and reframing the legislative framework to ensure we can do this. Since Deputy Paul Murphy arrived in the House a few weeks ago, I have not found him engaging on these issues to ensure we can develop the framework that those on the left and everybody else in society want to see in protecting people's incomes, promoting employment growth and ensuring the jobs we create are decent and sustainable. I encourage Deputy Paul Murphy and others who profess to be of the left in this House to engage with the Government. They should not be immune from actually supporting a Government initiative to deal with matters such as the national minimum wage, joint labour committees, registered employment agreements and collective bargaining. I look forward to the Deputy's positive engagement on that front.