Glittering employment data masks worrying underlying trends, writes Paul Tansey.

On the face of it, the employment gains recorded nationally since 2002 should make the Government a shoo-in at the next election. Between 2002 and 2006, the number of people at work in Ireland increased by well over a quarter of a million, while the unemployment rate has remained both low, at below 5 per cent, and relatively stable.

But the employment figures, while glittering, are not pure gold in electoral terms. They are tarnished by three factors:

• the decline in manufacturing employment;

• the instability of construction employment;

• and the fears, justified or not, that Irish workers are losing out to foreign labour.

The total numbers at work in Ireland have risen from 1.777 million in 2002 to 2.039 million in 2006. Thus, over this four-year span, the level of employment has increased by 262,000, a gain of 14.7 per cent.

The level of Irish employment topped two million for the first time in 2006 and women comprise an increasing share of the total numbers at work. By 2006, women accounted for 867,000 or 42.5 per cent of the 2.039 million people at work in Ireland. Moreover, despite recent high-profile job losses at household names like Motorola and Procter & Gamble, the economic forecasters remain convinced that the total number of jobs in the economy will continue to grow during 2007. In its latest bulletin, the Central Bank projects that a further 71,000 jobs will be added to the national payroll this year, with Fás predicting net job growth at 57,000 in 2007.

There was a time when such a prodigious employment performance would have almost guaranteed a government re-election. No more. For a start, the memories of the dole queues and the emigrant trains, boats and aircraft of the 1980s have faded.

As a people, we have become habituated to high employment. Job gains are no longer credited to the Government's account in the process of deciding voting preferences. There is an increasing - and dangerous - tendency to regard additions to employment as automatic, as part of what we are.

However, the Government will face more specific difficulties as it seeks to canvass the good employment news on the doorsteps, and for three reasons.

First, the performance of manufacturing employment - the engine room of the economy in terms of value-added and productivity growth - has been faltering for some time, as can be seen in Table 2. As shown, employment in production industries - where manufacturing is the biggest component - declined by 18,000, or almost 6 per cent, between 2002 and 2006.

Since then, as the headlines proclaim almost daily, industrial employment has fallen further. The major concern at this stage is not the scale of the job losses themselves - there is ample scope for re-employment in an economy still growing rapidly - but the calibre of the companies and the quality of the jobs being lost.

The second problem centres on worries about the future of employment in the building industry. The numbers at work in the construction sector have increased by 82,000, or by more than 40 per cent, since the last election. Employment in the building industry averaged 269,000 people last year, or 13.2 per cent of all those at work.

Fears for future employment levels in the industry centre on the fact that the Irish construction sector is now too big. Central Bank estimates show that spending on building and construction in 2006 amounted to €37 billion, equivalent to 25 per cent of total gross national product.

While the Government's €184 billion National Development Plan will act to cushion any fall in construction spending from 2007 to 2013, rising interest rates combined with satiated private demand will see the industry return to more normal activity levels - and a smaller workforce - in years ahead.

However, in electoral terms, actual difficulties in manufacturing and potential problems in construction are likely to be overshadowed by voters' fears of job displacement and worsening conditions of employment due to the influx of non-Irish workers.

There is no doubt that immigrant workers have been major contributors to the continuing rapid growth of the Irish economy over the past five years. Without substantial immigration inflows, growth would have been choked long ago by labour shortages.

Moreover, the knowledge and qualifications that immigrant workers bring to the State have enhanced considerably the skills base of the economy.

However, both the perception and impact of immigration is heavily influenced by social class. The middle class is, on the whole, positively disposed towards immigration. It means lower-paid workers in their businesses, cheaper personal services in their homes and little direct competition for their jobs. Working-class voters tend to be more wary. They hire nobody, spend far less on personal services and they are more likely to face direct competition both in terms of jobs and wages from immigrant workers.

The size of the immigrant workforce in Ireland is now substantial and is rising rapidly. By the second quarter of 2006, there were 198,100 non-Irish workers employed in Ireland, equivalent to 9.8 per cent of the workforce. In the preceding year, the non-Irish national workforce had increased by 47,800.In terms of their sectoral spread, virtually none are employed in public administration and defence, few are engaged in farming and not many are employed in education. Taken together, these three sectors account for just 11,900 of the total immigrant workforce.

As can be seen, non-Irish nationals account for one in four of all those working in hotels and restaurants; one in eight of those employed in construction; and one in nine of those engaged in industry. It is in these sectors that Irish workers are most likely to fear that their jobs, wages and conditions of employment are at risk of being undermined by foreign labour.

However, the evidence suggests that, to date, these fears are unjustified. A 2005 study by Alan Barrett and others at the Economic and Social Research Institute found that over the years 1997-2003, the average immigrant was quite highly skilled and immigration resulted in reducing average wages of high-skilled workers by 4-5 per cent below what they would otherwise have been. Wages of low-skilled workers were broadly unaffected and employment of both high- and low-skilled workers increased.

More recently, the Fás Labour Market Review 2006 concluded that "displacement is not a major, or widespread, issue in the current circumstances in the Irish economy. The two overriding reasons for this view are the continued low levels of unemployment and the continued rise in wage levels across all the main sectors of the economy".

Both of these assessments were conducted against the background of a rapidly expanding Irish economy. If the pace of economic growth begins to decelerate, is displacement likely to become more pronounced? Fás reckons that "displacement could be significant for low-skill jobs in the event of an economic slowdown".

Whatever the objective evidence, in politics, perceptions trump reality. With manufacturing employment in decline, construction jobs at risk and fears that, in a slowing economy, the jobs, wages and working conditions of Irish workers could be threatened by foreign labour, the Government parties are unlikely to reap the electoral dividends they might count as their due given the country's scintillating employment performance over the past five years.