Neither of these propositions is at all far-fetched. Year on year, the paid labour force rose by 57,300, or 3.1% in the year to September 30 last. In the calendar year 2000, just as the dotcom boom was coming to an end, employment growth was running at an annualised 4%, though it fell back to just 2.8% in the ensuing year as financial markets beat a hasty retreat. But, taking the last decade as a whole, employment in the Irish economy rose by 50%. There is no reason to believe that with output growth now hovering at more than 5% a year, this dramatic growth in paid employment will not happen again.
Even the notoriously conservative Central Statistics Office (CSO) recently predicted that labour-force growth would average 1.8% in the period between now and 2016 and that it would be higher in the initial years of this period. With the number of live births running at about 60,000 annually, the supply of domestically generated labour is clearly not adequate to meet the needs of the real economy where private-sector employment is already growing by close to 4% annually.
Where will we get the required labour? Clearly, the government’s decision to pursue an open-door policy towards migrants from the European Union’s 10 accession countries is proving to be appropriate, at least for the time being. Such migrants are permitted to work here, but not to claim welfare payments for at least two years.
The Irish (and British) approach differs from that taken by “frontline” economies such as Germany and Austria where restrictions on migration from the accession states will persist until 2011, being reviewed at periodic intervals. The German approach, too, is understandable with 5m Germans registered as unemployed — the highest total since 1932 when 6.2m were officially out of work.
Eastern Europe will act as a source of skilled, English-speaking labour for a growing Irish economy for many years. Although much of the technology used in eastern European workplaces was quite dated until very recently, the standard of technical education was high. Russia for example has 12m workers with third-level qualifications in engineering/technical disciplines and more than 1m workers with scientific doctorates. In addition, many workers from eastern Europe have a strong command of the English language.
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In the period directly after accession about 50,000 people registered for Irish PPS (personal public service) numbers. It is not yet known if these people were new migrants from the accession states or if they were previous migrants simply regularising their position in this country. Perhaps we shall never know.
The government clearly believes that as well as accepting economic migrants from accession countries and importing workers from the previous EU-15, it should now explore the possibility of giving “green cards” to people in third countries. The initial press leaks suggest that the target would be to attract healthcare workers, engineers, technicians and IT professionals and that the number of green cards to be issued would be in the “low thousands” each year.
Several English-speaking countries already operate such systems and they tend to have common features. Applicants are typically asked to have sufficient savings to support themselves for a fixed period (six months to a year), to have proficiency in English, to hold professional qualifications in predetermined disciplines and to have a minimum level of work experience in a related area.
The host country generally categorises all occupations, ranking them according to perceived scarcity of available labour and offering green cards as needed. There is no initial entitlement to claim welfare benefit and where occupations exist that have an adequate or excessive supply of labour within the host country they are classed as “restricted trades”. In such latter instances, no green cards are made available.
Some countries also encourage entrepreneurs and people with business ambitions to apply for work permits. Many countries offer the prospect of full citizenship for the applicant after an initial five-year period.
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The mooted green card system would be far more logical than current arrangements for workers from third countries who must currently apply for work permits or work visas with terms of 12 to 24 months. Because permits are at present held by employers and are specific to individual places of employment, the current scheme has been slated by the left as a form of “bonded” labour which frustrates an immigrant worker’s ability to switch jobs while diminishing his or her bargaining power for wages.
Clearly this sort of arrangement may suit individual employers, but scarcely contributes to the operation of an efficient labour market at a time when registered unemployment is only slightly above the “frictional” level at about 4.3% of the workforce. The number of workers using these rolling work permits is modest, in the context of overall employment of 1.9m people, and equal to no more than 3% of the paid workforce.
The system of work permits has also been attacked in the Dail where left-wing deputies have claimed that workers from countries such as Turkey, working on large public road-building contracts, are paid just a fraction of the minimum wage, currently €7 per hour but set to rise shortly to €7.60. The government is investigating these claims while generally rejecting the more lurid allegations.
The green card system is likely to be of more relevance to highly paid workers than to workers who would take a job at the minimum wage. Consultant hospital doctors and intensive care nurses would obviously be top of the target list for any green card system, as would skilled software engineers, systems managers and so forth. The relatively benign income tax regime here could assist the whole process.
The current tightness in the labour market has permitted many workers to push up real living standards, but the unions will monitor any change in immigration policy closely to ensure that the bargaining power of organised labour is not diminished. The multinational civil engineering company recently accused in the Dail of paying wages of €2 to €3 per hour denied the allegations but also quickly insisted that all of its workers were members of unions such as Siptu and the builders ’ union Batu and that average wages were set at the agreed norm for the construction sector (€12 per hour).
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Adding to the general tightness in the labour market is the fact that female participation rates in key age sectors have probably peaked at close to 75%. The Central Statistics Office holds that four-fifths of labour-force growth in the period from 2004 to 2016 must come from inward migration from EU states and third countries. The period of the Celtic tiger boom saw unemployment drop from 16% to a little more than 4% and saw the participation rate among Irish women rise by perhaps 20%.
That process is more or less at an end and other options such as green cards must now be considered.
PS: The Japanese, German and Italian economies are in recession and the eurozone as a whole continues to struggle with disappointing growth. Not the best of environments you would imagine for equities but stock markets are powering ahead, ignoring this background noise.
Investors have not taken leave of their senses. The post-2000 stock market downturn saw many companies cut their costs and slash capital expenditure. This had the effect of boosting balance sheets that, in many cases, had begun to look overstretched.
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The improved financial state of big corporates is being reflected in share buybacks, increased dividends and a new bout of M&A activity.
There is also some fundamental restructuring going on at company level in markets like France and Germany where bosses are showing the kind of leadership that has not been forthcoming from their politicians.
Politicians have to satisfy many constituencies while chief executives of public companies are only concerned with meeting the demands of the market. The disconnect between economic numbers and international stock indices suggests that the market is winning.