I am delighted to launch the Future Jobs Ireland strategy today.
Dynamic forces such as increased technological change and climate adaptation have the potential to radically reshape the economic landscape both here in Ireland and for our trading partners across the globe.
Future Jobs Ireland focuses policy on successfully adapting to these developments, which is crucial for Ireland in terms of safeguarding our international competitiveness.
Despite the uncertainties on the horizon, our economy is in good shape and continues to record robust growth.
The strength of our economic recovery since the financial crisis has been most clearly evident in the labour market.
Since the low point in 2012, close to 400,000 additional jobs have been created.
However, we cannot take Ireland’s recent economic successes for granted.
One of the key issues for the economy is improving the efficiency with which we produce our goods and services – what economists like to call productivity.
As an indicator, productivity is widely regarded as one of the most important in economics, given that a country’s ability to increase its living standards over time depends almost entirely on its ability to improve its output per worker, in other words its productivity level.
As Paul Krugman once said, “Productivity isn’t everything, but in the long run it is almost everything”.
Despite this, productivity receives less attention than other economic metrics such as output growth, inflation and unemployment.
This probably reflects the fact that productivity is a ‘slow burner’ – while volatile in the short-term, the underlying trend tends to be relatively stable over time.
A glance at the headline figures for Irish productivity, using the standard GDP per hour worked measure, would suggest that Ireland is the most productive economy in the OECD, with a level nearly twice the OECD average.
However, this arises in part because Irish GDP levels are significantly inflated by the activities of parts of the multinational sector, with the exceptional growth we saw in 2016 a clear example of this.
Ireland’s strong productivity performance, along with a number of other economic indicators, is built on a base of highly productive, and mainly foreign-dominated, sectors such as pharmaceuticals and ICT, and within these a small number of firms.
To take construction as just one example, the recently-published ‘Build’ report from my department showed, our construction sector is 25% less productive than the EU average.
This is why the OECD in its most recent economic survey of Ireland, stated that in order to further raise living standards in Ireland, we must raise the productivity levels of Irish firms.
The resilience of the Irish economy and the future jobs market hinges on unblocking the productivity potential of Irish businesses.
This is why productivity is one of the key pillars of the Future Jobs Ireland strategy.
We need to reduce the barriers to entrepreneurship, and ensure that the right financing conditions exist for young, innovative firms so they have the opportunity to expand, thereby driving productivity growth.
We also need to foster the spill over benefits Irish firms receive from foreign multinationals present in Ireland in order to narrow the widening productivity gap between the two groups. Improving upon the level of investment in innovation made by Irish firms is crucial, highlighted by our National Competitiveness Council as being well below the EU average and the UK as a proportion of GDP.
Similarly, low productivity firms often exhibit deficits in managerial skills, limiting the potential for productivity growth.
Taken together, the actions to be set out in Future Jobs Ireland, covering productivity, innovation, labour market participation, the transition to a low carbon economy, and skills and talent, will present us with pathway towards sustainable growth in productivity and living standards, and ensure Ireland’s economy is well positioned to adapt and prosper in the future.
I am very pleased that issues of critical importance to Ireland’s future economic prosperity are given the priority they require in Future Jobs Ireland and I look forward to continued engagement with my colleagues across Government throughout the implementation of this ambitious strategy.
ENDS
Contact:
Aidan Murphy – Press Officer, Department of Finance – 085 886 6667
pressoffice@finance.gov.ie