17 - 23 February 2000

Ireland needs immigrants to cope with labour shortage

by Anthony Manduca

Ireland, a European Union member since 1973 which has a population of about three and a half million, is facing a severe labour shortage due to the rapid creation of new jobs and has to rely on increased immigration to make up for this shortfall, according to a report in the Financial Times of last Thursday. Such a scenario could be relevant for Malta, a small EU applicant country, as there is currently a national debate going on about the potential influx of foreign workers into Malta once the country joins the European Union.

The Financial Times says that to some extent, Ireland is a victim of its own success. "With record foreign investment flows and booming domestic demand, the economy has created more jobs in the last three years than in three decades before," it says.

The Financial Times says that such is the strength of the jobs market that loyalty bonuses are being offered to skilled staff. "Deli, the US computer company, has a lottery scheme to persuade workers to stay. And FAS, the government's training agency, has an extensive programme to target overseas labour," it says.

Colin Hunt, chief economist of Goodbody's, the stockbrokers, says: "If there is a threat to the Irish growth story it is that we will run out of workers."

The article in question, written by John Murray Brown, points out that over the long run, labour economists believe shortages are likely to drive wages higher, gradually eroding the country's competitiveness. In the non-traded services sector, some wage pressures are already apparent.

The Financial Times says that much of the thrust of Irish government policy is aimed at addressing this problem of labour supply. Charlie McCreevy, the finance minister, introduced tax changes in his December budget to make it more attractive for spouses to work. He also revised the top rate band to bring it more in line with UK tax rates, a reminder that Ireland and the UK are part of the same labour pool. An estimated 48 per cent of the Irish female working-age population is in work, compared with 53 per cent in the UK and well behind levels in Scandinavian countries.

A more complex challenge is presented by the migration story. "After decades when Ireland suffered from people leaving to find work, since 1996 the flows have started to reverse, with about 65,000 added to the pool over the last four years. Most are expatriate Irish - many of them professionals returning home to good jobs in the booming IT sector and with equity to put in a house, a reason behind the property boom," the article says.

The Irish economy is growing at six per cent. Eunan King, chief economist with NCB stockbrokers, estimates that to sustain a more modest economic growth rate of five to six per cent, Ireland will have to attract net inward migration of 15,000 a year. According to the Irish Central Statistics Office, there were 18,500 more people arriving than leaving Ireland in the year to April.

The Financial Times says that there is evidence that the trend of Irish returnees may have peaked. If that is the case, this puts increasing importance on attracting non-nationals, it says.

One economist said it was not too fanciful to imagine an Ireland as dependent on foreign labour as Germany was on its Gastarbeiter (guest workers) in the 1950s and 1960s.

Should the Maltese economy boom over the next few years as a result of EU membership, the country, which has a very small labour market, could well find itself in a situation similar to that of Ireland, in which foreign labour is needed to make up for a shortage in the local supply of labour.