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Emmet Oliver: Ireland must rediscover art of making things the world wants

While the word construction only appears three times in Finance Minister Michael Noonan's jobs speech, it is this industry that is likely to be the determining factor in whether the package of measures actually works or not.

With almost 440,000 now signing on the live register, the Government is desperate to see alternatives to construction (and manufacturing) expanding and taking up the slack.

This is understandable and in some ways sensible. But the figures that lie beneath the live register underline the terrifying scale of the problem for the Government.

Some 42pc of those signing on previously worked in construction or as operatives in manufacturing. While the data is sketchy, this group is primarily male and older. In a world where the Government is pushing green tech, digital media, medical devices and high-end financial services, this group, who make up the core segment of the unemployment problem, are going to struggle to get fresh employment, at least in this country.

Mr Noonan is trying to tackle this problem with thousands of internships, training places and further education. This is laudable, but the problem is more fundamental. It is a skills mismatch on a massive scale, where employers want a specific skill set which isn't available from thousands of Irish workers who languish at home every day, demotivated.

In some respects there is little the Government can do about this. It is difficult to convert brickies into software engineers, as one economist said recently. The sad reality is that thousands of people who previously worked in the construction sector will never work again in this country.

To get a sense of this one just has to turn to Page 27 of the minister's speech yesterday where he admits that, even after all the initiatives in the package, employment will actually drop this year by 1.5pc.

While some of this is explained by the simple lag one gets between economic growth and job creation, some of it is also explained by the fact that new jobs are simply not being created for people who have been out of work for a long time.

The construction industry was far too big for an economy of Ireland's size. For example, of the 440,000 people signing on, a sobering 112,206 of them last worked in construction and related crafts.

In fact this number is more than likely an underestimate because other workers who relied on construction -- like architects and quantity surveyors -- are counted among higher professionals and not in the main construction figures.

What would help these people is a major public works programme. But the Government has not got the financial resources to go on a spending splurge in the capital area.

Big chunky projects like Metro are already under pressure and instead Mr Noonan is pushing smaller scale "shovel ready" projects like refurbishing schools. These are believed to be more labour intensive, although the Government produced no evidence to back this up yesterday. But there is a wider challenge for Mr Noonan's proposals. Jobs are created in a vibrant private sector, not in an expensive public sector. The jobs are also best created in a private sector that knows how to export.

In addition, private sector manufacturing (as opposed to services) is best at creating a large quantity of jobs. Of course services type companies create jobs too, but services businesses tend not to be as labour intensive as manufacturing businesses.

Think of the jobs that a manufacturer like Intel can create compared to the jobs that even a large accountancy practice can create.

But unfortunately Ireland has hollowed out its manufacturing sector in recent decades and is now paying the price. The main reason Ireland has lost touch with manufacturing is because of uncompetitive wages, but there are other reasons. For some strange reason Ireland's economists have all turned against manufacturing with one particular economist derisively dismissing manufacturing as "metal bashing".

Of course that is not how things are seen in Germany, or even in France. Both countries take pride in their large manufacturing and engineering companies.

While companies like Glen Dimplex are successfully manufacturing from Ireland, government policy is not particularly interested in this sector and wants instead to try newer higher tech services industries. But there is a compromise -- high-end manufacturing, and in recent years the IDA has started to target this type of investment opportunity.

Ultimately Ireland has to start making things again that the rest of the world is interested in buying. This is not just a slogan, it is at the heart of policy in successful economies like Germany, France and the UK.

For Mr Noonan's policies to work there has to be a large, healthy, export-orientated private sector prepared to employ the legions of jobless.

Those companies in turn have to be able to make something the rest of the world truly needs.

Irish Independent