Dáil Éireann díospóireacht -
Thursday, 23 May 1996

Vol. 465 No. 8

Written Answers. - Production Costs.

Peter Barry

Ceist:

95 Mr. Barry asked the Minister for Enterprise and Employment if his attention has been drawn to statements made by multi-national companies who have made workers redundant in Ireland in 1996, that the reason for the redundancies was the high cost of production in Ireland in comparison to countries in the Far East; the studies, if any, that have been conducted by his Department to verify these statements; if so, the validity of these claims; whether the excess costs in Ireland are common to other EU countries; whether the costs are due to national or external factors; and if the excessive costs are due to national factors, the recommendations, if any, he will make to the Government to rectify this situation. [10685/96]

Minister for Enterprise and Employment (Mr. R. Bruton)

I am aware that a small number of the multinational companies which have made workers redundant in Ireland in 1996 have indicated low cost competition from the Far East as a factor in causing the redundancies.

This redundancy problem relates to low labour costs in the Far East in producing certain lower value-added products which have a high labour content and are therefore sensitive to labour costs.

The EU as a whole has a higher overall cost base than Far-Eastern countries. Within the EU, however, Ireland is in a more favourable position than most other member states. Having said that, my Department and the development agencies are acutely aware of the importance of building and sustaining a competitive cost base in Ireland. In this regard, Forfás continually analyse and draw attention to the need to maintain downward pressure on the full range of production inputs that influence competitiveness. Specifically, the main conclusions of their 1995 report onIreland's Cost and Competitiveness Environment include: cumulative wage inflation in Ireland at a little over 34 per cent over the period 1987-95 was substantially lower than the average of our main trading partners at almost 40 per cent; total labour costs in manufacturing in Ireland in 1994 were on average slightly below the UK level, about half the German average and almost three times the average for Portugal; at the average industrial wage the Irish tax wedge for single workers is higher than in the UK. The gap for single workers is 12 per cent for 1996-97, a significant improvement since 1994-95 when this gap was almost 19 per cent and the appreciation of the punt against sterling since 1991 and the falling gap in inflation between the two countries resulted in a loss of about 3.8 per cent in price competitiveness against the UK, over the 1991-94 period. However, both the punt's devaluation and higher average inflation in Germany have resulted in an increase of about 15.0 per cent in price competitiveness with Germany over the 1991-94 period.

The Government and industrial development agencies are encouraging companies to move towards the production of higher value-added products which are not sensitive to low labour costs. The change programme is there to help firms in low productivity sectors of business to address their competitiveness by repositioning into higher value added markets.

Labour costs are one element only of competitiveness. The overall competitiveness of Irelandvis-à-vis other countries is a key national issue. This relative competitiveness is monitored on a continuing basis and is a central theme of several policy/strategy papers which I am in the process of bringing to Government.

The recently published strategy paper on the labour marketGrowing and Sharing Employment is the first of these.