‘Urgent’ action needed to boost Ireland’s competitiveness

Efforts at national level will stop repeat of mistakes, says Competitiveness Council chief

Efforts to boost the competitiveness of the economy need to be redoubled at national level or there is a risk of repeating the mistakes of the past and putting the recovery "under serious and imminent threat", the National Competitiveness Council warned today.

In “Ireland’s Competitiveness Scorecard 2015”, the council, which advises the Government on competitiveness issues, called for the same “urgency and commitment” that went into bringing down the deficit, stabilising debt levels and securing the banking system to work on improving the country’s competitiveness.

Prof Peter Clinch, chair of the council, said that Ireland's improved competitiveness has been "absolutely central" to the country's economic growth and recovery to date.

However, noting Ireland remains “a mid-table performer” across most benchmarks of international competitiveness, and remains a high-cost location, he warned that the recovery is not yet secure, and there is a risk “people will assume the hard work is done”.

“I would be concerned that there is a view out there that we have won the battle on the economy and that everything is ok,” he said, warning there still are threats.

External forces

In particular, Mr Clinch noted that Ireland has benefited from external factors such as a weaker euro and lower oil prices. But, he said, these factors are “shielding us from some harsh truths”, and may quickly change.

“While these factors are currently working in our favour, they can be quickly reversed, eroding the gains made to date,” he said.

This means that despite Ireland’s 6.5 per cent growth in the first quarter, year-on-year, Ireland remains vulnerable to factors such as continued high costs, a dependence on a narrow range of exporting sectors, a series of labour market challenges (relating to long-term and youth unemployment, and labour force participation), debt and credit issues, and relatively weak productivity performance in many sectors of the economy.

Minimum wage

While the council hasn’t taken a position on calls to increase the minimum wage by 50 cent, Mr Clinch said that, in his view, he would be concerned that such a move could pass through to consumer prices.

While he acknowledged that there are very good social intentions behind an increase in the minimum wage, he stressed that it should be done based on productivity improvements.

“I’m not saying it shouldn’t happen – but we need to make sure that if we’re going to raise it, it will be sustainable,” he said.

The council also noted in its report that high-level skill gaps are also becoming more pronounced, across sectors such as science, technology, engineering and ICT.

“Ensuring skills and labour market mismatches do not grow and aligning labour market needs with education and training output remains critical to competitiveness.”

Looming budget

Of the forthcoming budget, Mr Clinch said that the potential impact will depend on how the money is given back.

“The important thing is to incentivise work and business and job creation in a sustainable manner and to incentivise activity in productive sectors,” he said.