With just under 400 days to go in the countdown to EMU, the prospect of a single currency is already having an impact on jobs. For starters, demand for IT professionals is at an all-time high as digital systems across the country are adapted to cope with the new denomination.
The fact that much of this work overlaps with the need for Millennium compliancy has only added to the congestion and driven IT salaries sharply upwards. The training industry is also gearing up for an activity boom as more and more companies realise that a successful transition depends largely on staff preparedness.
Such employment activities, however, are purely "ephemeral" in the overall EMU scheme of things, believes John Fitzgerald of the Economic and Social Research Institute (ESRI). Excluding such preparatory work, the institute predicts a medium-term net increase in Irish jobs of 10,000 if Britain decides not to participate in the single currency. With the British in, that figure rises to 20,000. The bulk of this job creation will be effected in the construction industry, he says.
Lower interest rates will similarly benefit those sectors of the economy for whom the cost of capital is particularly important, he says. According to ESRI research, building materials, clothing, furniture and wood products were found to have a particularly high sensitivity to interest rate change. Set against the benefit of lower interest rates, however, is the fact that domestic manufacturers dependent on the British market could suffer from "the gyrations of sterling" in the interim between this State's entry to EMU and that of Britain, he says. While a soaring sterling would be particularly painful to Irish exporters, and lead to job losses, he believes the punt/sterling rate will average out at a less problematical 96p over the coming years. Not every commentator supports this view. According to Jim Power, chief economist with Bank of Ireland Group Treasury, EMU implies three things for Irish companies: "competition, competition and competition." Any shocks, such as adverse movements in sterling, will cause the country to lose competitiveness without recourse to traditional tools, such as currency devaluation, exchange rate mechanisms or fiscal policy. "Consequently the only adjustment instrument open to us will be that of the labour market. In effect, this means either that wages will be forced down or unemployment figures forced up," he predicts.
While the outstanding performance of the economy in recent years has offset some of his worries, he doesn't believe any economy can avoid the inevitable downward cycle. When this happens the labour market will come under unprecedented pressures.
Like many he feels it doesn't augur well that the countries driving EMU are structurally uncompetitive - Germany, for example, has some of the highest labour costs in the world. On top of this, European unemployment figures have also remained obstinately high regardless of which point of the boom/bust cycle they are at. Many EMU critics point to the US's success in job creation as a better model than that which the EU propounds. Raymond Keane of the Commission of the European Union's Dublin office rejects this argument. "It is very difficult to look at different employment sectors individually as regards EMU, so we tend to look at the global picture," he says. "While some specific areas, such as foreign exchange workers in banks, might see a reduction in numbers, overall EMU will stimulate job creation because it will encourage a lower interest rate environment, lower inflation, greater competition and greater transparency to eliminate inefficiencies."
EMU is merely the logical completion of the single market, he says, "which has already shown that it can create economic activity and make a substantial contribution to getting unemployment down."
