Faced with the threats and opportunities of globalisation, Congress believes Ireland must establish "high-quality cutting-edge research projects" in industries over the next two decades, writes Mark HennessyICTU submission: Analysis
Following a decade of rapid change, the Irish economy will have to adapt once again to cope with an economic landscape that will look very different in 2013, according to the Irish Congress of Trade Unions.
In the views of optimists, the Irish economy will concede the loss of low-skill jobs to cheaper countries, preferring to benefit from higher-salaried, higher-skilled technology and service jobs.
Little of this, however, will just happen: "The uncertainty about the nature of globalisation makes it difficult to make an accurate call on what the future for services industries may be like," ICTU has warned.
In a submission to the Government's Enterprise Strategy Group, ICTU pointed out that "back-office" white-collar jobs, not just low-skilled manual jobs, are already drifting away from the United Kingdom.
British Airways, British Telecom, Lloyds TSB, BUPA, and a host of other companies, have already transferred call centres to India - some of the very jobs created to replace manufacturing posts lost from the 1970s onwards.
India's capacity to absorb such jobs, and those at higher levels, is immense. Advertising in Bangalore recently for 800 jobs, one technical support company was inundated with 87,000 applications.The ICTU document quotes globalisation writer, George Monbiot, who has warned that the labour forces of the world's poorer nations are "beginning to threaten the security of our middle classes".
In August, the US economic consultants, Forrester Research, predicted that "the US will lose 3.3 million white-collar jobs between now and 2015, most of them to cities in India.
"Monbiot expressed the view that, for the first time in history, the professional classes of Britain and the US find themselves in direct competition with the professional classes of another nation," Congress continued. Low corporation taxes will not, on their own, protect the Irish economy from international pressures. In fact, ICTU argues that Ireland's commitment to them could make the situation worse.
"The Government has made it clear that it will 'die in a ditch' rather than accept any proposal from Europe on tax harmonisation which might interfere with our low corporate tax rate.
"This is supported by business organisations and by the Industrial Development Authority. Congress thinks this is a mistaken policy for a number of reasons," said ICTU, though it accepted the rates are a strong enticement for foreign investors.
"But is 12.5 per cent the critical level? Why did we need to go below 16 per cent? Would foreign direct investment still come at 20 per cent. At present it is not just foreign direct investors who benefit. Banks, hotels and builders all gain. Congress has suggested to Government that it would be more efficacious to have a 20 per cent corporation tax with research and development tax credits."
Such a move would offer a net 12.5 per cent rate, but it would allow the State to apply it "to companies that we really wanted to form part of our industrial base and to put down roots here".
Backing limited EU tax harmonisation, ICTU said there is nothing to stop the EU enlargement countries, such as Poland, Hungary and the Czech Republic, from undercutting Irish rates. Pushing for a EU-wide tax "floor", it said this would require all EU states to keep corporate tax rates within a band, though poorer, or more remote countries could go for the lower end.
"At the end of the day, our judgment is that the Europeans will not wear tax competition indefinitely and it might be better to negotiate a deal now rather than have it forced upon us."
Urging vastly increased investment in research and development, ICTU said "the gaps" in our industrial policy are becoming more apparent as competition increases from India and Eastern Europe.
"While we boasted of the PhDs, engineers and technicians which Ireland could supply, the work which most of them did was not very high up the value chain," it said.
"This is all very well as long as the Estonians, Indians and others do not have the quantity or quality of engineers and technicians required, but that is changing. We have to move a step beyond that."
The Republic must establish "high-quality cutting-edge research projects" over the next two decades in industries in which Ireland can have, and hold, a comparative advantage.
"Finland, a small country on the periphery of Europe, with a similar population and resources, has achieved this with companies such as Nokia, a global leader in mobile phone technology."
Ireland's ability to develop new products and ideas is weak: "We have not invested enough in science and technology and have been content to let multi-nationals import their technology and ride on their success."
An extra 178,000 people should be employed in high-technology software companies and their associated service firms, along with jobs in banking, insurance and other such areas in the next seven years. By 2010, 44.6 per cent of all jobs in the Republic of Ireland will be high-skilled positions. "These activities require a skilled labour force," said ICTU, urging the Government to improve workers' training skills sharply.
Other service industries are expected to employ 110,000 more people in the same period, but the number of manufacturing jobs, such as those provided by Dell in Limerick, will fall from 179,000 today to 164,000 in 2010.
The number of general manufacturing jobs and those in agriculture will fall by 3,000 and 19,000 respectively over the same period, said ICTU, having drawn heavily on figures provided by the Economic and Social Research Institute.
The influence, in fact, of foreign multi-nationals on the Irish economy will decline over the next seven years.
"[It will] contribute about a quarter of the growth in the economy compared with around a third in the 1990s. This is reflected in the fact that currently 17 per cent of employment is in manufacturing, while this could fall to 14 per cent in 10 years time," added the ICTU document to the Enterprise Strategy Group.
Dealing with indigenous industries, ICTU said: "There have been many job losses in these sectors in recent months and this trend is likely to continue. In many traditional sectors the decline may become irreversible unless some urgent action is taken."