Tsunami of job losses must be stemmed by retention of FDI

1 May 2009

As unemployment threatens to increase from 11.4pc to 17pc, Ireland must adopt a single-issue agenda of saving jobs, and the retention of foreign direct investment (FDI) in the country will be central to achieving this, the President of the American Chamber of Commerce Dr Paul Duffy said last night.

Addressing representatives of 100 American Chamber member companies in the Residence of the US Ambassador to Ireland in the Phoenix Park last night, Duffy described the scale of job losses predicted by the ESRI this week as a “tsunami” that must be minimised.

He echoed the ESRI’s prediction in its latest quarterly economic forecast published this week that Ireland’s economic recovery will be export-led, and said that with Ireland’s multinational companies as the cornerstone of the country’s export activity – employing 100,000 people directly and a further 250,000 indirectly – creating a climate for the retention of Ireland’s “enviable base of foreign direct investment” must be the focus of IDA Ireland and the Government over the next two to three years.

Reinvigorating Ireland’s competitiveness, with particular regard to labour costs, is also an economic necessity, given the fact that inflation in 2009 is expected to drop by 4.6pc, he explained.

According to Duffy, a central element of labour cost competitiveness is the widening pay gap between the public and private sectors. “The private sector cannot be expected to bear this burden alone and the pay differential between the public and private sectors cannot be sustained at a time of rising public debt and private sector job losses.

“If we are to really do more with less, which the Taoiseach says we must, then we must reduce the public sector pay roll. To preserve public services and public jobs to the greatest extent possible, the Government, and public sector unions, must face the fact that relative to what we can afford and relative to wages in the private sector, our public servants have an unsustainable premium.

“The alternative to reducing public service pay is to levy higher taxes or pay more interest on higher debt or both. In turn, more jobs in the private sector will be made uncompetitive by the higher cost base needed to sustain uncompetitive rates of pay for the delivery of public services. Such an approach will result in more private sector jobs lost, longer dole queues and deeper recession”, Duffy explained.

In order to stem the further haemorrhaging of jobs,up-skilling and retraining programs must be available to those facing redundancy, he said.

While welcoming the extra funding the Government has made available to FAS, Duffy explained that measures which prevent workers from being made redundant in the first place are needed. He cited the example of Singapore, which provides employment subsidies to help keep people at work.

He welcomed the recent steps taken by Government to stabilise the public finances, but also said that Ireland must face up to the reality of the “reputational damage” it has suffered over the past few months.

“The fact is that as we have begun a painful process of economic readjustment, we do have a positive story to tell. The problem is that it is not being told as effectively or as widely as it should.

“The announcement by the Minister for Finance that he will visit key capital markets is welcome but it is not enough. There needs to be a systematic and a whole of government approach to support Ireland’s reputation abroad”, Duffy said.

“As a country, when we successfully campaigned for a seat on the UN Security Council and subsequently held the Presidency of the EU. we fielded a full team to support a joined up and thought through agenda over a prolonged period of time. Nothing less will do to meet our far greater national need now.  

“The current ad hoc approach is inadequate and is failing to address international concerns fast enough or thoroughly enough. We need a unified political response. This is a task in which the Taoiseach and his officials must lead, and in which the Departments of Foreign Affairs, Finance and Enterprise, Trade and Employment must play a major role.”

By Jennifer Yau

Article courtesy of businessandleadership.com