Is cutting the minimum wage a step forward, or a step backwards in re-energising Ireland’s economy?
David Bloch, MD of the Brightwater Group comments:
Frankly, I don’t think the minimum wage is significant for Ireland’s economic future!
There is manufacturing in Ireland, low paid roles in service, distribution… every sector, but the Irish economy is no longer founded on these jobs. It is founded on IT, chemicals, Banking, pharmaceuticals, energy, food and the service sector. It is founded on R&D, innovation and macro efficiencies, not whether someone is paid 50c an hour more, or less. What is important, is how we think of ourselves and our country. Are we a country going forwards, or backwards? Are we a country that is trying to compete with the UK, or Poland?
Let’s start with manufacturing, as an example. Ireland has recently lost workers from Dell, De Beers and other previously low-skilled operations as they’ve moved their manufacturing to developing countries. Dell didn’t move their R&D, they moved their manufacturing. Surely this was inevitable?! Every time a Dyson moved their manufacturing operation out of the UK there was uproar. When the coal industry collapsed, car making etc. Did the UK economy collapse? No, it evolved. It evolved into higher spec, more profitable areas until the UK economy overtook less forward-thinking countries like France, to become the 2nd largest economy in Europe (after Germany).
Let’s look again at manufacturing. The Industrial revolution started in the UK and spread around Europe. There was great fear of this new efficiency that was establishing itself in the first world of Europe. Indeed there was much objection to it (in Holland the workers threw their shoes, called Sabbo’s into the machines (hence the word sabotage, to break them), but manufacturing was the new thing and grew. Manufacturing became more and more diverse and sophisticated. The more sophisticated operations remained in the first world and the more basic operations / hand made / ‘plastic’ operations were moved to cheaper locations like Taiwan, Hong Kong etc. They are moving on again to Eastern Europe, then South America and no doubt they will eventually go to Africa, so that one day our toys will say “made in Congo” on them.
So, are all low-paid jobs to go from developed countries? Well no, there will always be roles for unskilled, or lower skilled people who will be paid in and around the minimum wage, but the basis of an economy the size of Ireland’s is not in these people and these roles. The reason Dell remained in Ireland, the reason all our pharmaceutical, IT and banking companies have remained in Ireland is not for the minimum wage people, it is for the highly educated, high-skilled and well motivated people that can be found in Ireland. These are the people and jobs we need to preserve. In fact, these are exactly the people and jobs that have been preserved through the recession (there are currently about 5,000 unfilled IT jobs in Ireland). Believe me when I tell you that if you’re looking for a J2EE specialists, R&D people or .NET developers you’ll have a great deal of difficulty finding them, and you’ll have to pay them well. You have no chance of finding these skills in Eastern Europe (unless they’re Western trained). Ultimately, we need to continue to attract and retain the highest level roles… and the minimum wage jobs will be there to support the burgeoning economy.
Finally, I like to end with some Good News and I have three comments 1. There is so much good news around that I will have to redirect you to our “Good News Corner” to see all of it! 2. Japan was in as steep a recession as Ireland and have managed to bounce back into positive territory and 3. A special report on Ireland by BCA Research, a Canadian-based investment research company which advises international investors on investing in Europe, found that the Irish economy is “much more flexible than its euro area counterparts” and that Ireland’s economic woes have been exaggerated. Perhaps we can work together in a positive manner, and get out of recession by next quarter!