Fear Spreads as Jobs Exodus Grows

By John Spain

ST. Patrick’s Day is almost here. And there’s new optimism about the North after the election last week. Together, surely a cause for some celebration?

Well, yes, but for other reasons the atmosphere here at the moment is not one of elation. Not many people are in a party mood for Paddy’s Day. Instead, the pervasive feeling in the air here right now is one of doom and gloom.

There’s only one story in Ireland at the moment, you see, the alarming speed at which we have started to lose jobs to Eastern Europe, India, China and elsewhere. It’s what everyone is talking about, usually in worried tones.

Last week it didn’t seem to matter which day you bought a newspaper here, the headlines were always the same 400 Jobs Axed. 300 Jobs Lost. 200 Jobs Under Threat.

On and on it went, day after day. By the end of the week the Munster region had lost around 900 jobs. The trickle of job losses in recent months seemed to be turning into a flood.

What was even more scary than the numbers, however, was the quality of the jobs being lost. These were not low grade jobs they were medium to high skill jobs in prestigious multi-national companies, the kind of jobs that were supposed to be safe here even as the shakeout of low grade manufacturing jobs to cheap labor countries like Poland or Lithuania or India or China goes on.

We have always known that the low skill manufacturing jobs we attracted here 30 or 40 or 50 years ago when Ireland was a low wage economy where it was cheap to do business were vulnerable. We have been losing these jobs to low cost countries for well over 20 years.

The clothing industry was one of the first to suffer with giants like Fruit of the Loom pulling out and today there isn’t a garment factory left in the country. And the shakeout has gone on across all sectors and even up to the more high tech sectors like computers if it’s just component manufacture or assembly it can be done for a third of the price elsewhere.

That shakeout has intensified in the last few years as Celtic Tiger expectations pushed up wage and business costs here. We are no longer a low cost country, even in the European context, particularly since the expansion of the EU to include Eastern Europe brought in really low cost countries like Poland, Latvia, Lithuania, Hungary and so on.

So the loss of manufacturing jobs here was seen as inevitable. Instead of trying to hold back the tide, we were told we had to upskill and concentrate on the really high-end jobs, the kind that could not be done in our low cost rivals.

The problem is, however, that it’s not as simple as that anymore.

Just look at the names of the big multi-nationals who decided to pull jobs out of Ireland in recent weeks. It’s truly scary because the list includes some of the major American corporations, world leaders in their industries.

In the past few weeks that list has grown to include Pfizer, Creative Labs, Thomson Scientific and DCC, and last week Proctor and Gamble, Motorola and Bourns Electronics joined the casualty list.

Okay, some of the jobs were medium skill manufacturing jobs, albeit ones that required a high level of care and commitment by the workers. But in some of the caseslike Motorola, for example the jobs were undeniably high-end jobs mainly for IT graduates. Yet they are being lost as well.

So clearly something new is happening in the Irish economy and it’s something that has a lot of people very worried indeed. The new trend indicates that even if you're in a highly qualified job in a new generation industry you may not be as safe as you think. Even being a software engineer in a successful international IT company may not protect you.

In fact several things are happening all at once. Firstly the young and extremely cheap workforces in places like Poland and India are much better educated now than they were, particularly in computers and electronics and the wonders of IT.

In addition, they are not only half the cost, they are flexible and enthusiastic about taking on new or extra work. Unlike their Irish counterparts, they are not always looking for more money or saying that they don’t really do that kind of work when asked to do something new.

Another factor is that, thanks to broadband, a lot of IT and software work is not location specific it can be done in Bangalore just as easily as in Ballina, and the customer won’t know the difference, even when on an online helpline.

In the European context, there’s another wrinkle. Ireland is no longer the niche location it once was when the EU was smaller. This is especially true now for a multi-national wanting to be a part of the rapid growth in Eastern Europe and Russia.

It was not just wage and business costs that were cited by Proctor and Gamble last week when they chopped 280 jobs here and moved them to Poland; it was the desire to be producing their cosmetic products closer to the burgeoning Russian market.

We can’t do much about the narrowing skills gap or about our geographic location on the far edge of Europe and no one is suggesting (I hope!) that we can all take a 50 per cent cut in wage rates ... so what are we to do?

One hope is that our very favorable tax regime for multi-nationals who set up here will still give us the edge. Because behind all the blarney about the bright young workforce in Ireland, of course, it was always our tax holidays and low corporation taxes for foreign companies that really brought the jobs in here.

But the fact is that what we have done on the tax front has now been duplicated by our competitor countries who are following “the Irish model” trying to create their own versions of the Celtic Tiger.

Putting all this together and the evidence is there from the job losses last week things don’t look great at the moment. Some of the most worried people here are in the government parties who are now saying that Taoiseach (Prime Minister) Bertie Ahern should have seen this coming and should have called this summer’s election last autumn.

Government ministers, however, are trying to take a more relaxed view, pointing out that we are still attracting multinational jobs into Ireland and that our growth rate at around 5% is the highest on this side of Europe.

But in the run-up to an election perceptions are everything and there is no doubt that last week’s job losses on top of all the others in recent weeks has dealt a body blow to public confidence here.

Of course people already know that the Celtic Tiger boom has peaked but they have been floating along on a false sense of security for the past couple of years, propped up by the ongoing annual 5% growth rate.

Once you look into that, however, you find that a lot of it is being generated by the property boom (or bubble?) and the services demand from continuing immigration, not from sustainable long-term jobs in manufacturing industry, or high end IT companies or financial services.

This continuing economic growth has masked what is really going on. Or at least it did until the mask slipped suddenly last week and people got a glimpse of the scary face behind … the face of returning unemployment.

The reason all this is happening is simple Ireland is no longer competitive. And it’s no longer a uniquely attractive place in Europe to base a multi-national business. As that realization started to sink in last week, a palpable shiver of fear swept across the country. Whose jobs would be next to go?

Consumer confidence is sinking and that is already visible in our property market. Houses that would have been snapped up a year ago are sitting unsold for months on end.

The papers are stuffed with full-page ads for new apartments as builders start to get nervous and want to offload fast. Developers are drastically scaling back their plans for the coming year.

And every 10,000 less housing units completed will knock another 1% off the economic growth level.

What is really worrying the government here is the thought that there could be more bad news coming down the line. Xerox Europe, for example, employs around 1,000 people in Blanchardstown just outside Dublin city, and a major review is going on in that company. And Xerox is not the only one.

It’s all down to the way these multi-national corporations operate these days, as competition becomes more cutthroat than ever. Like with Proctor and Gamble and Motorola here last week, it’s not that their Irish operations are actually losing money, it’s that they can now squeeze even more profit out of being somewhere else.

At their annual company meetings every year, these giant corporations announce that they are going to grow profits in the coming year by, say, 10%. This keeps the markets happy and their share prices up and their seven figure executive salaries and options safe. If they have to screw the workers to do it, well tough. That’s capitalism, baby.

Given that Ireland has one of the most open economies in the western world and that we have more than our share of multi-national companies here, we are wide open to all this. It’s not pretty and it may get worse before it gets any better … if it gets better.

Sadly, no one seems to have any answers to our predicament. The Taoiseach is going to need nerves of steel in the coming months as the election approaches.