State support fails to address realities of labour market and does not deploy resources properly, writes David Begg
The depressing news of job losses at Procter and Gamble (P&G) and Thomson Scientific follows a series of similar announcements in recent months. In an overall context, this bad news has to be set against the reality that Ireland is creating 85,000 new jobs every year. Nevertheless, this is cold comfort to the people of Nenagh and Limerick this week, many of whom are probably at their wits end, wondering how to pay mortgages and raise families in the uncertain climate created by the globalised economy.
The lure of lower costs will probably continue the migration of certain types of manufacturing industry, particularly to other countries in eastern Europe and the Far East. Integration of the global economy has increased labour supply by one and a half billion people and this will put downward pressure on labour costs for the foreseeable future. This is the stark reality.
But the paradox of Ireland's industrial landscape is that the IDA pipeline for new projects is full. There is a broad consensus that we need to significantly improve our skill base to the point where we can achieve a critical mass of industries that will not find it attractive to abruptly up stakes and leave. Investment in research and development (R&D) is a necessary complementary strategy.
It is one thing to agree on the diagnosis. Making it happen is a challenge of a different order. In the current social partnership agreement, Towards 2016, and in the National Development Plan, the Government has committed to making the resources for upskilling available. This may turn out to be the easy part. Motivating employers and workers to improve their skills will almost certainly be more difficult. Thus, it is only prudent to start looking at models of best practice in other countries, particularly in the EU. How have other countries responded to the uncertainty engendered by globalisation?
The Danish model of "Flexi-curity" is attracting some serious attention throughout the rest of Europe. In fact, the European Commission has just published a Green Paper on labour law and made this model the cornerstone of a new approach to welfare.
Consider this: our own model of social welfare is based on providing a subsistence level payment that is aimed at not creating a disincentive to work. It co-exists with, but is not really integrated with, certain active labour market initiatives. It was designed essentially for an era of mass unemployment. As such, it is of little value to the people who lost their jobs in Nenagh and Limerick this week. Their plight is accentuated by overall low levels of unemployment (4.4. per cent).
In other words, our current model is not appropriate to the modern age and does not target resources where they are required. Resources should be focused on those who have lost their jobs, with the twin priorities of finding adequate alternative employment quickly and to cushion people financially, in the interim. This is precisely what the Danish model does.
Danes enjoy a high level of social protection. Under "Flexicurity", the average net replacement rate (what people receive from the state when they lose their jobs, calculated as a percentage of their salary) is about 80 per cent.
This applies in conjunction with a large variety of labour market programmes to facilitate and encourage reintegration of the unemployed into the labour market.
These programmes are sophisticated and expensive, costing about 5 per cent of Danish GDP. The emphasis of "Flexicurity" is on the employability of the person rather than protection of the job per se.
The Danish model came under sustained criticism recently from the head of the OECD, Angel Gurria. He believes it cannot be exported to other European countries because, being the product of 150 years of evolution in Denmark, it would be too expensive in the context of existing high levels of unemployment in Europe and because European labour markets are too rigid to adopt to it.
But it could not be argued that these conditions obtain in Ireland. We already have virtual full employment and our labour market is very flexible.
We now have some critical information on our education and training requirements in the pending report of the Review Group on Future Skills Needs.
That should help us to design our own customised model of "Flexicurity". I don't say that it will be easy to get agreement on this. People will naturally fear that the model will offer all flexibility and no security. But we owe it to people, like those employees of Procter & Gamble and Thomson Scientific, to design a system that is appropriate to our times and that can prevent hardship in a land of plenty. Like in so many other aspects of economic and social activity, the Nordic countries are showing the way.
Confronted by the brutal reality of globalisation, policymakers struggle to find platitudes to offer when factories close, as they will inevitably continue to do. It is our belief we would all be better served if they learned from the Danish experience how waffle and lip service can be turned into engaged delivery.
• David Begg is general secretary of the Irish Congress of Trade Unions and a governor of The Irish Times Trust