Vol. 420 No. 4
6 Mr. Noonan (Limerick East) asked the Taoiseach if the Government have discussed with the social partners the mismatch between growth rates and job creation; whether they have identified any strategies which would turn positive growth rates into extra jobs; and if he will make a statement on the matter.
The mismatch between growth rates and job creation was discussed at the meeting which I and other Ministers had with the Central Review Committee on 28 February 1992. I informed the committee of the consideration the Government were giving to a new appropriate structure with political input to develop new ideas and proposals to deal with unemployment. Such a structure was welcomed by the committee and it has since been set up as the Oireachtas Joint Committee on Employment.
I also informed the committee that the National Economic and Social Council are undertaking an EC-supported study on the connection between growth and employment which will analyse Ireland's performance compared to other EC-OECD economies. Phase I, which is underway, will examine Ireland's recent performance with regard to growth, employment and unemployment in comparison with the other EC member states and selected other OECD countries. This descriptive account will be linked to an examination of theoretical approaches to the growth-employment-unemployment relationship.
Phase II will draw on the overview of performance to analyse (i) the factors influencing the employment intensity of Irish growth, and (ii) the policy and practice of those countries where comparative analysis indicates better employment performance.
The Government have already numerous strategies in place to generate more employment, for example, tax reform, the employment and training subsidy schemes, the 12 area-based partnerships, the Culliton-based development of indigenous industry, the task force on employment and the task force on tourism. The conclusions of the NESC study will be taken into account fully by the Government as will the recommendations of the Oireachtas Joint Committee on Employment.
I attach special importance to the work being done by the State companies linkage group established by the task force on employment to use the resources of the major State commercial companies to promote linkages between those companies, the multinational businesses operating in Ireland, and specialist indigenous Irish sub-supply companies. The approach has recently been extended by developing an integrated approach to linkiages through a deepening of the national linkage programme in which the lead role is taken by the IDA. The first industrial sector in which this new integrated approach to linkages is being developed is the Irish building products industry. The second industrial sector for which an integrated linkages approach is being developed by the State companies linkage group is the software and related services industry. The group are also examining in detail a report entitled "Forging Links With Foreign Industry" which was recently submitted to me by the Small Firms Association. Another aspect of the development of linkages was the launch by Deputy O'Rourke, Minister of State for Trade and Marketing, on Wednesday, 22 April 1992, of a new campaign involving Bord Tráchtála and the Industrial Development Board of Northern Ireland which is aimed at increasing the level of supply to industry by small companies in Ireland, north and south.
(Limerick East): I thank the Taoiseach for his very full reply and in particular for his announcement that the National Economic and Social Council, in co-operation with the EC, are undertaking a specific study into this crucial area.
Would the Taoiseach agree that this is the critical problem in the Irish economy and that it is very disappointing that continuing reasonable growth rates are not being translated into jobs? Would he further agree that the experience of the past decade is that approximately the first 2 per cent growth in GNP is absorbed by better productivity in the existing work-force and has absolutely no effect on creating extra jobs and is effect anything less than 2 per cent growth will show a decline in the number of jobs in our economy?
Will the Taoiseach ask the National Economic and Social Council to look specifically at the situation in the United States where very moderate growth rates result immediately in extra jobs? Will the Taoiseach establish the differences in the US economy which lead to such a quick response to growth in the job market?
In response to the various questions raised by the Deputy, let me say that we are of course disappointed, and everybody should be disappointed that the level of growth which has run on average at approximately 5 per cent — and, in fact, in 1990 the growth rate in our economy was one of the highest in the world, if not the highest and was 2 per cent higher than the Japanese rate in that year — has not paid off in terms of jobs. While this resulted in thousands of jobs we did not create the number of jobs that one would expect from a growth rate of that magnitude. That problem is being examined by this study in order to find out why there is such a mismatch between growth rates and job creation.
For many years we were led to believe that if we achieved a certain level of growth in that area it would make big inroads into the creation of employment. This has not happened for many reasons, some of which are evident. One reason is the leakage out of the Irish economy in the first instance through the poor supply of goods and services to large investors in the country and many of the semi-State and commercial organisations. We are not producing anything like the level we should be producing to supply those investment needs. We are only producing something like 27 per cent of the requirements of large multinational investment here; the remaining requirements are imported. Clearly we are not getting the value-added within our economy by virtue of the sub-sector supply being sourced elsewhere. We are sustaining jobs abroad through the purchase of exports of approximately £800 million to £1,000 million every year. These requirements could be met in Ireland. That is the reason for the focus to which I referred in my reply.
The quick response in the American market would clearly come from the self sustaining aspects of that economy. Their level of imports is very low in relation to their requirements. They are self-sustaining in many aspects of their economy and clearly any upturn in the economy there will immediately generate jobs; the demand is within the economy and does not mean there has to be a demand for imports. I accept that approximately 2 per cent of the growth rate is taken up with increased productivity within the system and that this would not generate many extra jobs.
(Limerick East): Would the Taoiseach agree that some of the growth rates claimed are artificial and can be explained by the transfer pricing policies of foreign companies who transfer their profits into Ireland on the basis that we have a benign tax regime and that growth in the international industrial sector is not real growth but is simply paper transactions?
There was always an element of transfer pricing in the Irish economy. I believe the level of transfer pricing has been less since the termination of the exports sales relief. There may be some attraction in this respect but not anything like the level it was in the past. I repeat that even though our exports are booming, because we are not supplying the demands in materials, services and goods naturally we do not get the same pay off in jobs as we would expect. This is why the focus has to be placed very strongly on linkage.
Question No. 6 relates to job creation and the discussions which have taken place with the social partners. Does the information the Taoiseach possesses include the number of jobs which have been created in the area-based initiatives to-date? How many jobs have the Government and the social partners created specifically in the area-based initiatives which were launched with such a fanfare?
The Deputy is asking for some detail which may require a second question.
I do not have that detailed information but I will get it for the Deputy. I should say that I doubt whether the information is available at this stage.
Deputy Noonan raised an important point in relation to transfer pricing policy. Can the Taoiseach indicate how the growth to which he referred has been measured and whether any attempt has been made to analyse the components of that growth? To what extent have the transfer pricing arrangements which the multi-nationals in the Irish economy clearly engage in affected our growth figures?
The Deputy is referring to an economic study. The growth rate is made up of the normal components of production within the economy. I do not have information on the different components with me but they are well known and are available. Any economic study will set out clearly what the components are. With regard to the effect the transfer pricing arrangements have on our growth rate, I would not be able to answer this question off the top of my head.
The Taoiseach referred to the closed or self-sustaining nature of the US economy. Would he agree that Europe is equally as closed, relatively speaking, as the United States in so far as this issue is concerned? Would he further agree that there is a poorer performance in Europe as a whole in converting growth into jobs than there is in the United States and that, therefore, there may be other factors at work apart from the closed nature of the economy? Will he look at whether centralised wage bargaining may contribute in some cases to converting extra growth into higher incomes for those at work in Europe whereas decentralised wage bargaining, or plant level bargaining which is the norm in the United States, may contribute to the United States converting extra growth into extra employment?
It is well recognised that the flexibility and mobility of the workforce in the United States economy contribute to growth in jobs. Many of the same problems exist in Europe which the Single Market will eliminate. For example, the control of public purchasing represents approximately 15 per cent of growth in the European economy. The removal of the bureaucratic and national restrictions built into the system will inject the necessary impetus and dynamic into the European economies. With regard to the arguments for and against centralised bargaining, we have seen over the past four or five years the benefit in our economy of our consensus with the Social Partners. Having spoken to our European Partners, I know they are surprised at the way in which we have managed to turn around our economy while at the same time restricting the increase in borrowing and expenditure. They believe that the consensus of the Social Partners has been a major contributor in this regard.
That is all very interesting but it does not answer my question.
Deputy Noonan and the Taoiseach seem to be surprised that jobs have been lost while growth has been rising. I have been saying this for years but no one listened to me. Would the Taoiseach not agree that one of the main reasons for the lack of job creation is that much modern technology has destroyed jobs at the same time as it has created growth?
Undoubtedly modern technology and the rapid changes in technology have replaced manpower in many labour-intensive industries. We also have to take into account the increase in population and the fact that approximately 25,000 people join the labour force every year. Those are two of the factors operating against growth in employment. In addition, we must remember that there is a depression in economies throughout the world which take our exports. We export two-thirds of what we produce and when international markets are in a recession inevitably we catch the backwash. All those factors contribute to an increase in our unemployment level.
(Limerick East): I put it to the Taoiseach that it was unfortunate the Culliton committee failed to address this issue in what was otherwise an excellent study and report. Will the Taoiseach ensure that the task force he has put in place to implement the recommendations made in the Culliton report will have available to them the results from the NESC study to which he referred in his reply?
I will make the results of the NESC study available to everybody who has a contribution to make in tackling the unemployment problem. I am on public record as saying that I will make the study available to the Oireachtas Joint Committee on Employment. The study will be available to everyone, but I should point out that I picked up anything the Culliton report might have missed.
We now come to deal with questions nominated for priority to the Minister for Finance. The questions before us are governed by a rigid time limit, let us try to ensure that they are dealt with in a fair and equitable manner.
