Job creation in small businesses is set to remain tight this year as high labour costs undermine competitiveness, according to a new report published today.
The Small Firms' Association (SFA) national employment survey forecast that only 8,875 new jobs will be created this year, marginally up on last year but still a long way behind the 50,243 jobs created in 2006.
Launching the report, SFA director Patricia Callan said it was now clear that the only benchmark for the current pay talks should be competitor economies and that no pay rise can be given where there is not a "clear productivity return".
"Wage rates which outstrip productivity growth and are far in excess of other euro-zone countries are simply unsustainable in the long-term," Ms Callan said.
The report also noted that despite the slower pace of job creation over two-thirds of firms, or 71 per cent, are struggling with skills shortages. Just under half, or 44 per cent of firms surveyed had vacancies, with many having to resort to increased wages to attract staff.
She said those companies looking to expand were being hampered by skills shortages, a lack of response to advertised vacancies and unrealistic wage expectations.
"Serious structural flaws" had emerged in the Irish business model which must be addressed, she said, noting that business confidence is markedly weaker.
The survey also reveals that the number of prospective employees asking to be paid "off the books" has increased for the third year in a row.
"This raises serious questions about the impact of the poverty trap within the social welfare system", said Ms Callan.
Overall she said over 1,300 people were losing their jobs every week and the economy was not producing replacement jobs fast enough.
"The inevitable outcome of this is higher unemployment and increased redundancies . . . In the current national pay talks, there must be an acceptance on all sides that if we want to maintain high levels of employment for all, then pay moderation is the only game in town," she said.
The survey was carried out in the first quarter of 2008 and 1,090 companies from the SFA's 8,000 members responded.
The respondents included companies from the manufacturing, distribution, retail and services sectors.
