Economy

We need to do more to tempt people into construction

Ireland is at full employment, but the building industry is now falling in number of Irish workers

We will need to grow the number of young people training in this area, not only in traditional trades like block-laying, but also in modern methods of construction.

John FitzGerald's face
John FitzGerald
Fri Mar 8 2024 - 06:00

The preliminary National Accounts data published last week show very different estimates of how the Irish economy did in 2023, depending on which measure is used.

GDP is fairly useless at showing Ireland’s economic performance, because of the distorting effect of the multinational sector, and the 3 per cent drop in 2023 – a recession – contradicts what other indicators show. Gross National Product (GNP), which removes some of the multinational effect, showed formidable growth of 4.4 per cent.

In Ireland, GNP has now largely been replaced by adjusted gross national income, or GNI*, which strips out additional distorting features of our globalised economy, like depreciation on intellectual property and leased aircraft. However, GNI* will not be available until six months after year-end. The Modified Domestic Demand figure published by the CSO last week probably gives the best read of all the National Accounts measures on how the economy actually did in 2023, showing a growth of 2.6 per cent.

This plethora of different ways of measuring how we are doing is daunting, even for national accounting aficionados. Probably the most straightforward measure of what is happening in the economy is the Labour Force Survey data on employment. These data show that employment grew by 3.4 per cent in 2023. So, no recession here as of yet.

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However, a fall in building employment, and a 7 per cent drop in investment, is a potentially worrying sign for future growth. The increase of nearly 10 per cent in housing investment was counterbalanced by a 4 per cent drop in other investment, leading to a net fall overall. Although some of this drop may reflect the completion of the large Intel unit in Leixlip, and a slowdown in office construction, we know Ireland needs to make big investments in water, energy, transport and healthcare. It will be important that the resources freed up by a decline in office building should be redirected to where they are really needed.

The Labour Force Survey figures also confirm that the economy is at full employment, with no spare capacity: the unemployment rate for Irish-born people last year was a record low of 3.8 per cent, with an overall unemployment rate of 4.2 per cent. Because there will always be people who are between jobs, an unemployment rate of 4 per cent generally signals Ireland is at full employment.

This poses a challenge for an economy that needs many more houses, more infrastructure and better public services. The shortage of workers with the requisite skills is likely to continue to be a drag on growth in the immediate future.

Over much of the 20th century, when unemployment was high, job creation was a clear policy priority for all governments. Today, however, the rapid growth in the economy we are experiencing has depended on recruiting thousands of skilled people from outside the country to live and work in Ireland. Last year, of the 90,000 new jobs, only 40,000 could be filled by Irish people. Increasingly, those coming to staff our economy are coming from outside the EU, as Ireland has become less attractive for EU workers, as our cost of living has risen relative to that in other member states.

In a fully employed economy, pursuing jobs growth for the sake of it runs the risk of attracting workers or job entrants from other important roles for our economy and society. While changes in relative wages will play a big role in moving scarce labour to where people are most needed, such an adjustment will take time, and will have some negative side effects. The public sector – the Irish taxpayer – may need to pay more to ensure a flow of staff such as psychologists or engineers, if new jobs being created elsewhere provide an attractive and well-paying alternative.

It will be difficult to find the workers needed to greatly increase our investment in housing and essential infrastructure. Worryingly, employment of Irish workers in building fell by 5 per cent last year, though balanced out somewhat by construction workers from other countries. While the contribution these immigrants make to tackling our investment needs is essential, they do need to have somewhere to live, at a time when housing supply continues to be tight. So we also need more people who are already living here to pursue careers in building.

We will need to grow the number of young people training in this area, not only in traditional trades like block-laying, but also in modern methods of construction, such as making and assembling prefabricated timber panels. Construction pay rates may also need to rise, if an apprenticeship and career in building is to compete with the abundance of alternative career paths in other sectors.

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