That Seanad Éireann, in light of the fact that the bulk of new jobs in the future will be created in the services sector, recognises the need for a determined national effort to develop the services sector to its fullest potential.
The aim of this motion is not to score points off anyone on either side of the House. Its aim is to build consensus around a fundamental step, a fundamental shift in attitudes that this country urgently needs to take. It is the hope of the Independent Senators, Senator Henry and myself, in putting forward this motion to kick start a national debate that has barely begun but is long overdue. In that consensual mood I wish to acknowledge contributions to this issue that have already been made by both the Government and Opposition. I wish to praise the swift response of the Taoiseach in April when he established a committee to examine the potential for jobs in services following the landmark speech by the chairman of the Irish Management Institute in Killarney. I look forward to the findings of that committee. Perhaps we will hear more from the Minister on the progress of the committee in the course of the debate.
On the other side of the House I wish to commend the initiative of the Fine Gael Party in publishing their recent white paper on jobs through services prepared under the direction of Deputy Richard Bruton. I understand that Senator Doyle will be speaking on this paper. It is an excellent study which sets out clearly the strategic issues and the relevant facts and also goes on to make a series of concrete proposals which merit close consideration by this House.
I hope that the Government will take an open and generous approach to both these proposals and will not be tempted into the sterility of a "not invented here" policy. This issue is far too critical for the future of our country to be allowed to become a matter of political point scoring. As I mentioned at the outset, the aim should be to create consensus.
What is the issue that this motion seeks to highlight and why is it important? The issue is that we are witnessing the dramatic shift in where jobs are. Just as a century ago a great shift began when jobs in agriculture shrank and jobs in manufacturing took their place, we are now seeing an equally historic shift. This time it is away from manufacturing and towards services. In the future, which is quickly becoming the present, the overwhelming majority of jobs in every developed economy will be in services. According to the most recent forecast, made last week by two British economists, we are heading towards a future where fewer than one job in ten will be in manufacturing. This is in line with many other forecasts from a variety of sources and, more to the point, it is fully in line with what has already started to happen across the world and here in Ireland.
Since 1982, the number of jobs in manufacturing in this country has decreased by 21,000, while the number of jobs in services has increased by 78,000. During the same period manufacturing employment in the USA, the UK and in most European countries showed a sharp drop and is continuing to fall. Despite this historic shift, a shift that we can do nothing about, we still have a mind set in this country that leads us to believe that what we should be doing is stimulating growth in manufacture and growth in manufacturing jobs alone.
When the broad lines of our development strategy was first laid down 35 years ago under Seán Lemass and Kenneth Whitaker it was correct to focus on manufacturing as the main pillar of our growth. It is not correct to do so now in a world that has totally changed. It made sense 35 years ago to create a tax regime that was skewed quite deliberately in favour of manufacturing companies and to reserve to them and to them alone the expensive battery of State incentives that were being put together to stimulate growth. It is not correct to do so now in a world that has totally changed. It made sense 35 years ago to create a stable of State development agencies, such as the IDA, An Bord Trachtála, Eolas and so on that, in contrast to what other countries did, concentrated entirely on nurturing manufacturing companies. It is not correct to do so now in a world that has totally changed. That is the situation.
Even though some of the State agencies have now broadened their scope to include a narrow range of internationally traded service, these agencies, and the State as a whole, regard services as nothing more than a poor relation, a minor side-show that they do not know very much about and, worse still, whose importance they clearly do not understand. It is vital that we understand what is going on here. We are quite literally living in the past. We are providing a very expensive response to a world that no longer exists. That is why we must change. We must make a leap in our attitudes so that our response is to the world of today and the world of tomorrow and not to the world of yesterday.
We can make that change if we put our minds to it. I am optimistic because of the national consensus that now exists about the seriousness of our jobs problem and the national determination to tackle that problem effectively. If we are serious about jobs it cannot be long before we realise that we must concentrate our efforts on where those jobs are going to materialise. If we do not do that it only takes a further moments thought to realise that the jobs growth we want is going to come from services.
At present we are putting 80 per cent of our effort and resources into 20 per cent of the job opportunities. What we should be doing is putting 80 per cent of our resources into the sectors where there are 80 per cent of the job opportunities. I do not exaggerate, rather I believe that I understate how upside down we have managed to become in our priorities. We spend £600 million a year seeking to stimulate manufacturing growth where there is no prospect of significant job growth. In contrast we spend less than £50 million a year, that is one twelfth as much, on stimulating growth in services, the sector where virtually all of the new jobs are going to derive. In fact most of that £50 million goes on tourism which I have no problem with, but it means that State encouragement for all the rest of the services sector is much less than those other figures would suggest.
What we are doing is rather like as if we stood at the beginning of the twentieth century when agriculture was on the decline and industry was at the beginning of its massive growth and we decided to forget about industry and put all our resources into creating jobs in agriculture. If we had done that at the beginning of the century it would have been madness. From an historical perspective that is exactly how stupid our present situation looks. Unless we change our attitudes now, future generations will condemn our monumental short-sightedness. They will condemn our inability to adapt to a world that was changing in front of our eyes while we refused to acknowledge or to face up to that change.
This shift towards services is a challenge all countries are now facing. However it is a greater challenge for Ireland than for other countries. We alone of all the EC partners have chosen to skew our approach towards manufacturing, singling it out and giving it exclusive privileges. We alone have massively discriminated against our services sector, creating a battery of disincentives and barriers for those operating in the services.
Therefore we have more chickens coming home to roost. At a time when we need a healthy, vibrant services sector to take the brunt of our job creation, that sector is stunted by comparison with other countries. It is smaller and growing more slowly than in other countries, and that is not happening by chance. It is happening because of policy decisions in the past which we continue to follow.
Two negative points are often made to downgrade the contribution of the services sector. First is the notion that services do not bring extra wealth into the economy, while manufacturing does. The truth is the scope for service exports from Ireland is at least as great as that for manufacturing products. We have not fully caught up with the great trend of services becoming more international and more freely traded across borders. It is remarkable that we have not seized that opportunity.
The portable nature of services compared to products means we are not as disadvantaged by our geographical position. Putting more emphasis on services is the best strategy for coping with our much discussed peripheral position. Many services are now entirely driven by telecommunications and geographical location is almost irrelevant.
It is also remarkable that we have not put more emphasis on exporting services. We run a deficit to the rest of the world on services of the order of £800 million per year, if tourism is left out of the equation. I think it should be because it is a special case. Given that we import that many services, other countries obviously have no difficulty exporting them. If we apply the principle of import substitution to the services sector and look for opportunities there, we would create the potential for several thousand extra jobs.
The second negative comment often made is that an economy can only support a limited amount of services and that amount is directly related to how much manufacturing industry is in the economy. I am not opposed to manufacturing in any sense and it is clearly needed. We need to attract more foreign manufacturing firms to stimulate Irish firms. However the notion that we cannot have more services without more manufacturing is quite wrong.
There is slack in our economy which could be taken up by the service industry. One can prove this by looking at the level of services in other countries in comparison with ours, making the necessary adjustments for population, earning capacity, etc. One homely example is that people often complain they cannot find anyone to clean their windows. That market is not being fully exploited. It is limited because not enough people are offering that service, not because people do not want to buy it.
In the past decade in Ireland we have seen service businesses come into existence which were never dreamed of previously. Ten years ago few Irish people had eaten pizza. It is now a big business. We even export pizzas. One offshoot has been a new service of home delivery of pizzas. Similarly there has been a tremendous growth in fast food restaurants because of a lifestyle change which has seen people eat out more than ever before. The economy seems able to support this development, which creates massive numbers of jobs.
Just as new service businesses are springing up all the time, the potential future growth from existing concerns can be as great. Bray, County Wicklow, has one home pizza delivery service. Some may think that about right for a town with a population of 25,000. However a similar sized town in the USA would typically support no less than 19 pizza delivery companies. That gives an idea of the dynamics buried in services and the potential they offer for extra jobs. I am not suggesting anyone goes into the pizza delivery business in Bray because I know the person running the existing operation and she hopes no one enters that market. The point is our mind set does not encourage it.
I harp on about jobs because that is the core issue. Some 300,000 people are unemployed, yet we put almost all of our job creation effort into manufacturing industry. That sector contains only 200,000 jobs now and will be put to the pin of its collar to hold on to those. At the same time the service sector is ignored, although it already employs twice as many people and has the sole potential to make a real dent in our unemployment problem. We need a change of attitude and that is what this debate is about.
I am most concerned about the risk of paying only lip service to this challenge. People say this is being taken on board and services are now part of our strategy. Yet the underlying mind set remains the same. Services are thought of as one more sector instead of being seen as the critical area from where most of our extra jobs will come. Service companies are not thought as valuable as manufacturing companies, although the impact on the Irish economy of service companies is pound for pound much higher. That is because they spend more of their revenue on wages and salaries and source more of their inputs in Ireland.
Most dangerously, services are still thought to be parasitical on manufacturing growth. The idea is that growth in services can only come after growth in manufacturing and the downstream effect will flow automatically even if it is not stimulated or in fact actively discouraged. These attitudes may have been well founded at one time but they are now misconceptions.
These misconceptions seem to inform most of our recent job creation initiatives. How much mention is made of services in the Culliton or Moriarty reports? How much mention of them is there in the Government documentEmployment and Enterprise or in the National Plan debated here some weeks ago? In all cases the answer is virtually no mention. As long as that is the approach the need for a radical change in our attitudes will remain.
Services are where the jobs and job opportunities now exist and it is where we must concentrate. We must put the main thrust of our efforts and resources there. That is why Senator Henry and I have put down this motion. It is essential it be debated and attention be drawn to it. This House must be used to change the attitudes of the nation.