Policies strangle manufacturing jobs

Comment: Public sector dinosaurs are to blame for the loss of Ireland's competitiveness.

The recent announcement by Hospira that it will shut down operations in Donegal over the next 18 months with the loss of 560 jobs illustrates the pressure that Ireland's manufacturing base is under at present. What is particularly worrying is that medical device production is one of the manufacturing sectors which Ireland hopes to grow and sustain in the future. Ireland currently hosts 13 of the top 20 medical device manufacturers in the world and has developed a cluster of skills and training programmes at our third-level educational institutions geared to meet the needs of this sector.

The fact is, Ireland's future economic prosperity lies in its own hands - we can no longer rely on foreign direct investment. We must therefore strive to support all jobs currently in place. We cannot be defeatist about our manufacturing sector and must recognise that policies contribute directly to maintaining competitiveness and our policies are currently out of kilter with this goal.

Despite numerous calls from the business community to address this pressing problem, little appears to have been done. Public service employment numbers and pay continues to spiral - there are now more than 100,000 employees in the public health service - and yet daily we hear a litany of complaints from it.

Quangos continue to be created without regard to the need to abolish jobs within the core civil service previously responsible for the oversight of areas now devolved to these new entities. Public service pensions costs continue to rise, without any moves to control the costs of these pension commitments by switching to defined contribution pensions for recruits.

Our infrastructure continues to creak, with expensive and often poorly delivered projects coming on stream too slowly. All one needs to look at is the delays in construction and delivery of the Luas in Dublin or the Galway to Shannon "road".

Mandatory regulatory changes have also contributed to our loss in cost competitiveness. We neither sought nor secured an opt-out from the EU on the working time directive. Even though this directive once again militates against enterprise and economic development, especially in small start-up companies whose employees may need to work long hours early in its development.

The national minimum wage (NMW) has increased by almost 20 per cent since January 2003. Government signed off on these increases despite the knowledge that many small and medium enterprises (SMEs) employ staff on salaries that are "built on" the NMW. Relativity-based pay increases closely follow on NMW rises and yet we refuse to recognise this fact or acknowledge the significant knock-on effect this has on a company's wage costs.

We still face ideological arguments over subjects long since debated and proven in other countries. All one needs to do is to look at air transport liberalisation. In 1984 a person had to work 6.5 days on the average industrial wage to pay for an airfare between Dublin and London. In 2005 that person works 1.33 days to pay that fare. This is a clear illustration of what can happen when business is liberated to compete. Yet, we are still in a situation where, when we want to bring in change, the old dinosaurs are still at it, trying to stop progress, change and competition.

In doing so, these people are confiscating future wealth creation, impeding future growth opportunities and limiting new sources of tax contributions so needed to fund social programmes in our society.

What of those who moan most about "Rip-off Ireland"? What is the source of these rip-offs? Is it SMEs trying to create wealth and generate profits (and taxes) that will fund the future development of our society? Or is it those in the sheltered public services securing ever-increasing pay and pensions without any downside of job insecurity?

These inflationary pay increases have been funded primarily by stealth taxes and increased costs of doing business in Ireland. To list but three new taxes, we can look at the roll-out of water charges (exclusively charged to businesses at present with wide variations in the amounts levied throughout the country); waste charges (the extensive reportage following the introduction of the WEE directive at the start of August implied that businesses should pay for the disposal of domestic users' white good waste - why?) and planning development levies (again, there are wide variations in how these are charged throughout the country).

There is only limited transparency in how these three taxes are calculated and yet they are mitigating against entrepreneurs acting on their "animal spirits", as defined by Keynes, to seek out new wealth creating opportunities.

Every manufacturing job needs to be cherished in this economy. We must do everything in our power to ensure that our manufacturers can build sustainable enterprises. The only way we can do this is by constantly focusing on limiting and controlling the costs of doing business and reducing the burden of red tape that is cascading down on enterprise from central government.

Combined with a focus on achieving more value for money from our public services and reducing our massive public service pay and pensions bill, we may hope to sustain our manufacturing sector for the future.

Many will respond that Ireland does not need manufacturing as we become a service-oriented economy, but this reeks of complacency. Let us please recognise that you must sell a lot of lattés to justify earning the average industrial wage in Ireland.

Seán Murphy is head of research and public affairs with the Chambers of Commerce of Ireland