ANALYSIS:Latest redundancies will add to the acute economic strain on Shannon and hinterland, writes ARTHUR BEESLEY
ANOTHER OVERCAST summer day, another big employer tells hundreds of workers their jobs are to be scrapped. The latest casualties are 370 manufacturing staff in the Shannon base of Element Six, the industrial diamond firm. The elimination of these jobs comes on top of 200 redundancies from the firm in the past 12 months.
About 80 staff will remain in the operation, formerly known as De Beers Industrial Diamonds. Amid the gloom, the company’s promise to continue its research and development (RD) activities struck something of a positive note. At its height, however, this business employed some 800 people in Co Clare. After four decades in Ireland, its days as an employer of scale are over.
These redundancies will add to the acute economic strain on Shannon and its hinterland, already under severe pressure following the loss of 2,000 jobs from the operations of computer manufacturer Dell. In the State at large, the vista is no less bleak.
Government figures show that 42,724 people were made redundant in the first six months of the year, more than 315 jobs for every working day. The number of redundancies in 2008 was 40,607.
Separately compiled Live Register figures – which include part-time, seasonal and casual workers – show that the number of people signing on the unemployment register rose to 413,500 in June from 215,800 a year previously. According to the Taoiseach Brian Cowen this number will pass the half million mark before 2009 is out and could rise even higher in 2010.
Amid political controversy over the extent of the expenditure cutbacks required to stabilise the public finances, these figures illustrate the dire consequences of recession for tens of thousands of workers in vulnerable industries and for their families. And each redundancy deprives the exchequer of tax revenue, while increasing the cost of unemployment benefits.
With no end to the current spate of redundancies on the horizon, it is a given that the job creation required for a recovery to take hold will be hindered by high business costs. Like Dell before it and many other international companies, Element Six said the cost of maintaining operations here was the prime force behind its decision to stop manufacturing.
“Despite a series of cost-reduction programmes in the past few years, continued production at the Shannon site is no longer sustainable or viable, and the primary business it serves is loss-making.”
Noting that it carries out production and processing in China, Germany, the Netherlands, South Africa, Sweden and Britain, the company said the Shannon operation was the most expensive of all its manufacturing plants.
While an Element Six spokesman declined to quantify the cost differential, the general point is borne out in numerous analyses of Ireland’s slide into economic peril.
Research by the advisory body Forfás shows that labour costs throughout the Irish economy increased by 50 per cent more than in the average in EU-15 group in the years between 2001 and 2008.
Although Irish labour costs remained “relatively competitive” compared to other high income countries for basic manufacturing, they were “significantly more expensive” than the new EU states in the former Soviet bloc, the US and Asia. In science and RD, Forfás said Ireland is one of the most expensive locations.
This situation is compounded by high costs for property, electricity, waste and communications services. Scant surprise, then, that the International Monetary Fund (IMF) took note recently that Ireland’s share of foreign direct investment has fallen faster than in the rest of the euro zone. “In recent years, Ireland has become the most expensive location in the euro zone, with the possible exception of Luxembourg,” the IMF said. Not so, said IDA Ireland. Yet the trend is clear.
In Glenties on Monday, Tánaiste Mary Coughlan pointed to a measure of recent progress in cutting business costs.
For all her optimism, yesterday’s move by Element Six shows there is a mountain to climb before Ireland becomes competitive again. Yesterday, Ms Coughlan expressed regret along with Ibec, trade unionists and other signatories to a succession of social partnership agreements that underpinned the rising cost of doing business.
It is now the backdrop against which the Minister for Finance has raised the prospect of cuts to the minimum wage.