Ireland has become accustomed to rapid employment growth during the past decade. Over the last ten years, the level of employment has risen by more than one-half. More than 700,000 jobs have been added to the national workforce as a result. In 2006, for the first time in recent history, the numbers at work topped two million people.
This extraordinary rise in employment has been the most important social and economic consequence of the prolonged boom. Sustained employment growth has reduced unemployment - and even long-term unemployment - to very low levels. The widespread availability of job opportunities at home has put a virtual end to involuntary emigration. Increased employment has been the cornerstone of the very substantial improvement in material living standards seen over the past decade. Moreover, the additional tax revenues generated by the earning and spending of a growing workforce have financed much-enhanced levels of government spending on social services and on State income supports to those in need.
It now appears that this exceptional period of employment expansion is drawing to a close. A series of economic forecasts in recent days has projected a marked deceleration in the pace of employment growth this year and next. During 2006, the numbers at work increased by 87,000 or by 4.4 per cent. In its latest Quarterly Bulletin, published yesterday, the Central Bank anticipates that employment growth will slow to 3 per cent this year and decelerate further to 2 per cent in 2008. Others take a slightly more pessimistic view of next year's employment prospects. Earlier this week, the national training authority, Fás, and Davy Stockbrokers both predicted that employment growth would moderate to just 1 per cent in 2008.
These gloomier prognostications for the labour market reflect both the expected deceleration in the national rate of economic growth and the downturn in house building, a particularly labour-intensive sector. However, it is important to realise that a slowdown in the rate of growth in employment is not the same as a fall in the numbers at work. Even the more pessimistic employment forecasts for 2008 would see more than 20,000 jobs added to the national workforce next year.
Nonetheless, slowing employment growth will cause the rate of unemployment to edge upwards from now on. The economy today is much less cost competitive than a decade ago. The pace of productivity growth has slowed compared to the late 1990s. The housing boom is over.
Those in employment must come to realise that attempts to implement excessive pay claims can only succeed by adding to the numbers out of work. Those running enterprises must come to realise that productivity and efficiency gains rather than excessive price increases are the road to a profitable future. Those in Government must come to realise that spending is no substitute for achieving. With the days of easy money fast disappearing, Government must try much harder to deliver tangible results and value for money to the taxpaying public.