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Richard Curran: 'No room for hubris as our jobs machine finally splutters'


Setback: Job creation figures from Enterprise Ireland offer some troubling trends for policymakers

Setback: Job creation figures from Enterprise Ireland offer some troubling trends for policymakers

Setback: Job creation figures from Enterprise Ireland offer some troubling trends for policymakers

The better Irish companies are not creating jobs nearly as fast as they were two years ago - and the reasons are worrying.

Enterprise Ireland (EI) supports exporting Irish firms, some of which are pretty big. Others are classified more as SMEs.

They are hugely valuable to the economy because they are indigenous, regionally spread out and they export.

So the job creation figures for EI clients really paint a solid picture of a very important slice of the economy.

A rear-view glance at the figures for 2019 shows that it was a record year for employment creation, with 16,971 new jobs created by clients.

At the end of last year, there were a record 221,895 people working in companies supported by EI. This is about one in 10 of all people working in Ireland.

So the agency has delivered and the indigenous sector has delivered. But the trend is a little more worrying.

Firstly, nearly two thirds of EI clients are in the food sector. Largely, but not solely, because of Brexit, this sector's performance was pretty static.

As a result, 12,265 jobs were lost in client companies, leaving a net jobs gain for the year of 4,706. This was a lot lower than the previous year. It wasn't so much that job losses were a problem last year, as the fact that 2018 had been such a strong year for the entire economy.

And the trend is not so good. EI has warned that the rate of job creation in these firms is slowing.

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Bear in mind that EI firms had to create more than 12,000 jobs last year just to stand still in terms of total numbers.

The problems flagged by EI are also troubling. Brexit hasn't gone away for the food sector. In fact, far from it, as trade negotiations begin.

The agency is also flagging other factors, such as competitiveness challenges for SMEs, skills and talent shortages.

An economy belting along at full tilt will always find it difficult to attract the right number of skilled people for the right price.

But you have to ask other questions about whether the whole economy is beginning to creak, having bounced back so well from the crash.

For example, the number of people working in Ireland in the third quarter of 2019 was 120,000 higher than two years earlier, according to Central Statistics Office figures. Between Q3 2017 and Q3 2018, there were an extra 67,000 people working. In the following 12 months, the number working increased by 14,000 fewer, or 57,000.

This pattern has been happening all around the country. In the 12 months to 2018 in the south region, there were an additional 15,000 people working. In the following 12 months, the figure grew by 1,800.

Even in Dublin, the rate of new job creation slowed sharply in the 12 months to September 2019, compared with the previous year.

The slowdown in the rate of jobs growth is largely due to Brexit, other economic uncertainties, and competitiveness challenges around skills, staffing and wages.

Hoteliers, restaurateurs and other tourism industry operators are not happy about having to pay higher VAT rates.

However, a study by PwC published this week shows that when it comes to Irish firms paying tax, they are not asked to contribute a particularly large slice, relative to profits.

The PwC/World Bank study found that on average, a company here pays just over a quarter (26.1pc) of its profits in taxes.

This consists of 12.4pc in tax on its profits, 12.4pc in labour taxes like social insurance, and 1.3pc in other taxes. This compares very well to an EU average of 38.9pc and a global average of 40.5pc.

Businesses will argue that the real competitive killer comes from other high costs which are not as challenging in other countries.

Rent, insurance, utility bills and other costs affect their profitability.

For example, the study did not say what percentage of Irish firms are actually making a profit and what those levels of profitability are. It did show that Ireland is substantially more competitive on the cost of employing people.

It also found that levels of bureaucracy around paying and filing taxes are very low.

The report found that an average Irish company spends just over two weeks, or 82 hours, dealing with its tax affairs, compared with a global average of 234 hours.

Putting it all together, we get a business picture which says it is getting harder and more expensive to keep growing job numbers and expanding while Brexit is in the air.

There has been a slowdown in the rate of new job creation and the contributing factors are not going to go away any time soon.

Equally, as the economy reaches full employment, should we be using GDP and jobs growth as barometers of performance and success as before? Why not quality of life?

In other words, does it matter if the number of new jobs created is slowing down?

Yes, we are pretty much now at full employment, but the key question is where do companies go from here?

If it takes 12,000 new jobs in EI firms just to stand still, that figure could go into negative territory quite easily. Better R&D and investment in technology will allow more of the better companies to grow, without hiring so many new people.

EI client jobs are especially important because they are spread around the country so well.

Two thirds of the new jobs created last year by EI firms were outside of Dublin.

The capital city is truly creaking. More and more people are being driven out to buy or rent homes at affordable prices.

Twenty years ago, Dublin's commuter belt was Tallaght, Lucan, Blanchardstown or Swords. Now it is Laois, Louth, Meath, Offaly or Wexford.

House price data for last year shows that the total number of property sales in Dublin fell by more than 8pc.

The same was true in places like Carlow, Cavan, Clare and Kerry. The number of home sales last year increased in only nine counties.

Seven of them were the wider Dublin commuter belt counties of Kildare, Laois, Louth, Offaly, Westmeath, Wexford and Wicklow.

This tells us that jobs competitiveness is suffering in Dublin. People are moving out further from, but still within striking distance of, the capital city just to find an affordable place to live.

They are not, however, moving in large numbers to other counties in different regions.

Those regions have performed very well during the recent boom years but are very vulnerable to external shocks.

Many factors impacting on job creation numbers are outside Government control: Brexit, technology, trade wars and growing economic uncertainty.

But other factors should have been fixable - the infrastructural capacity of the country, especially around cities, housing, affordable rents and other quality of life issues - which until they are fixed, will make Dublin in particular a less attractive place to live and work.

The jobs momentum of the last few years is slowing down. Some of that is simply inevitable.

But it should be within our own gift to make sure it doesn't go from top gear into reverse.

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