Intel sounds warning on rising labour costs

One of Ireland's largest employers has warned the Government it risks alienating the high-tech sector with increasing labour costs.

Mr John McGowan, vice-president and general manager of Intel Ireland, said the technology sector was now at a cross-roads as many of the advantages of operating out of Ireland were being eroded.

In his first major statement since taking the helm at the chip maker's Irish operation employing 4,500 in Leixlip, Co Kildare, Mr McGowan described the Government's decision on employers' PRSI taken in the last budget as a "major own-goal" and urged a U-turn on the issue.

"Our wage costs are moving faster than in many other competing countries and we do ourselves no favours in making decisions that further erode our competitiveness and damage our international reputation," he said.

Speaking at the setting-up of a new association within IBEC representing the hi-tech sector, Mr McGowan said the US economic slowdown was a "wake-up call" for the Irish technology sector. His comments come as several high technology employers in the State evaluate whether they will cut jobs at Irish operations. Announcements are expected shortly from Ericsson and Nortel Networks.

Government figures show that, to the end of April, up to 4,000 people were made redundant in the technology sector this year, 1,200 of them from companies assisted by IDA Ireland. The decision to remove the ceiling on PRSI payments in the Budget has provoked strong criticism from employers' representatives who claim it will cost business an extra £159 million (€202 million) this year.

High technology firms are particularly affected by this measure as many of their employees are paid wages above the industrial average.

But Mr McGowan highlighted several other problems including: the erosion of the quality of life; health services under strain; and the absence of sustainable child-care which inhibited wider participation in the workforce.

"I believe we face enormous challenges in relation to our physical and social infrastructure, our NIMBY [not in my back yard] mentality and the decline in the number of young people pursuing science subjects in third-level education."

As part of a proposal by the new association, ICT Ireland, Mr McGowan proposed a six-point plan to support the technology sector. This would focus on:

Skills availability;

Financial and tax support for research and development;

Competitive taxation policy, including reversing the PRSI change;

Measured emphasis on environment, health and safety;

Supportive legal and regulatory framework;

Developing a physical infrastructure and planning process appropriate to a sophisticated economy.

An IDA Ireland spokesman said last night the Republic remained a competitive nation for technology investment and was doing much better than others in terms of addressing the skills shortage.

However, he said there was still an enormous amount of work required to upgrade access methods such as roads and airports, and telecoms remained a major problem area.