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Brendan Keenan: Party promises ignore realities of job creation


THE political parties are determined to create jobs; but they are pretty keen on reversing the cut to the minimum wage as well.

Will that cost some of the jobs they are so anxious to create?

No one really knows, but there was little sign of the politicians who promised to restore the second most generous minimum wage in Europe giving the matter much thought, before they made their promises.

Job creation makes for more complicated politics than one would think from reading party election pledges.

As for the outgoing Government, at the same time as it was cutting the minimum wage, it was also imposing new charges on the lowest paid.

That alters the financial relationship between work and welfare. To what extent was the effect on jobs taken into account in deciding these policies? Very little, one suspects.

The dilemma was neatly illustrated by Micheal Martin's comments on local authority rates. These are unusual in that they are levied entirely on business. There is therefore no room for doubt that they cost jobs. All taxes do but, equally, business could not prosper without government, local and national. It is a question of balance.

Few think that a typical rate of €5,000 a year on the smallest business is getting the balance right. Mr Martin wants local authorities to cut the their rates by becoming more efficient and therefore having to charge less.

This begs two big questions. Governments -- which in recent years means Fianna Fail governments -- cut the budgets of local authorities by more than that of central government, after they had deprived them of the revenue from domestic rates.

Much of this is meant to change in the four-year plan. There will be a household property tax, and local authorities will have more access to the revenues -- although still bearing heavier spending cuts. This, if it happens, will be deeply unpopular, and there will be little mention of jobs from the critics.

Job creation is anything but a free lunch, but that is generally what people want it to be. The IDA brings in a new foreign star. Enterprise Ireland identifies and develops a domestic one. It's jam tomorrow and no loss of jam today.

High employment requires the right mixture of costs, productivity (which includes skill levels) and allocation of capital. Political manifestos tend to concentrate on the second bit, but all three became badly skewed during the bubble years.

The Croke Park deal is the great elephant in the room. It proposes to take 30,000 jobs out of the economy, in order to protect the pay of those who remain.

One has every sympathy with existing government workers, whose commitments probably increased to meet their incomes (just like most of us). But it might have been worth working out what level of salary for new entrants might make it possible to maintain public job numbers, while reducing the deficit. It would be dramatically lower than present salaries, but there would be no shortage of takers.

That would be job maintenance, not job creation, but it has a role to play in the present dire situation. Many of the parties' job "creation" proposals, such as "interns" combining work and training, represent other kinds of job maintenance. They may lead to more employment in the end, but they should not be confused with it.

The direct creation of jobs through public investment is the most popular approach for the parties but, historically, it is one of the most dubious.

Fine Gael managed a most effective slogan, with its claim to be able to create 100,000 jobs through a massive investment programme. Given that a viable Irish construction industry probably would not employ more than 100,000, this looks an ambitious claim, even allowing for indirect jobs.

Fine Gael's proposed investment was originally even bigger than Sinn Fein's €7bn, which that party thinks would help make us world leaders in just about everything.

The plans for direct investment from the other parties are more modest, and often involve construction.

Politicians are more comfortable with productivity, because it seems painless. It was the turn of Labour yesterday, with its plans to replace FAS with a national agency which would do training, job placement and welfare payments.

Mixing these together seems to work very well in Denmark, but not so successfully in the UK. There is a commitment in the four-year plan to make welfare more conditional on accepting training or jobs, which would be anything but politically painless.

It is also a sobering thought that the failings of the education system were identified right through the 2000s.

Promises were made, and money was no object, but the annual reports from the OECD and the National Competitiveness Council noticed little improvement.

One of the issues in the election is a university for Waterford. One candidate said every region should have a university, because of the jobs they create.

This is another version of the minimum wage conundrum. A university in every region will bring jobs to every region.

Whether having them would create the kind of third-level system which can create revenue-earning jobs for the whole economy must at least be open to doubt.

Irish Independent