Cliff Taylor: Why minister for jobs will be the toughest role in next cabinet

As the economy reopens in hope and fear, many sectors need support to survive

There are a group of firms which will only be viable in a return to something like the “old” normal – many pubs, for example. We don’t know whether the “new” normal is  temporary or  semi-permanent. Photograph: David Sleator

There are a group of firms which will only be viable in a return to something like the “old” normal – many pubs, for example. We don’t know whether the “new” normal is temporary or semi-permanent. Photograph: David Sleator

 

There will be a lot of challenging roles in the next cabinet. Perhaps the toughest will be minister for jobs, or whatever grand title is given to that role in the inevitable reshuffling of departmental names. In good times this is a great ministry, as Ireland’s jobs market has been an extraordinary performer and the inward flow of multinationals has given great scope for photo-calls for the ministers in charge.

The next minister will face a trickier task – how to save as many jobs as possible in the tens of thousands of SMEs hardest-hit by the crisis. There won’t be many ribbons to be cut as the pubs and hotels along the Wild Atlantic Way and the small town-centre retailers reopen – to an uncertain future. But there will be a lot of rows about who gets State support and who doesn’t.

The challenge will not be creating jobs, it will be saving them. Ireland has spent many years supporting the giants who drive our gross domestic product and export figures. SMEs, who have been largely left to their own devices, now need help. And remember they employ about 1.1 million.

Just reopening is not going to fix the tourist and hospitality sectors, and entertainment businesses remain shuttered

A crisis often accelerates trends already under way. Irish town centres were already in trouble – now we are seeing a string of big name closures from the likes of Debenhams and Mothercare, with many more to follow. And our economy was already overly reliant on the big multinational players, with few domestic players of any scale outside the food sector. Unless we rescue the beleaguered SMEs, the two-speed nature of the economy will become ever more entrenched.

The consumer-facing sectors have the greatest need. Take retail. There has been a massive move to online shopping during the pandemic and some of this will stick, given fears about social distancing. Add in the need to restrict customer numbers and many retailers will find it difficult. Research by Ibec shows how customer-facing SMEs would struggle when business falls below 70-80 per cent of normal levels.

Other sectors dominated by SMEs could be even more challenged. Just reopening is not going to fix the tourist and hospitality sectors, and entertainment businesses remain shuttered. Consumer demand has been transformed, with no overseas tourists for now and customers conscious of advice to avoid indoor spaces and crowds.

Into this uncertainty will step the new minister for jobs. There has even been speculation that if a deal is done it might be Leo Varadkar, though who knows. And here is the first big question for the new minister. What assumption do you make about the path of the virus when deciding who to help?

There are a group of firms which will only be viable in a return to something like the “old” normal – many pubs, for example. But we don’t know whether the “new” normal – with its reopening protocols, face masks and distancing – is a temporary phase or something semi-permanent. So deciding what sectors will look like in 2021 and beyond is impossible. For now, money needs to be pumped in to help this vulnerable group of companies through the first phase of reopening at least, along with those who have a clearer path back to viability. The next government needs to shoot out support and ask questions later – and quickly.

The state of the jobs market gives justification for widescale assistance. Employees who lose their job in normal times can often find another one, but now they have nowhere else to go. We are likely to see a continuation of the wage subsidy scheme, perhaps in time restricted to certain sectors as well as much more active jobs market policies in areas like training, internships and so on.

A paper for the Peterson Institute of International Economics by top economists Olivier Blanchard, Thomas Philippon and Jean Pisani-Ferry on how to support reopening makes another vital point.They instance restaurants, many of which would not survive reopening without significant assistance. If the sector collapses, then there are not only the costs associated with this, but also the economic price of building it all up again when restaurant businesses again become viable. The right answer, they conclude, is to provide support.

The open question is when and in what shape the restaurant business might again be profitable. Is what we are seeing temporary, semi-permanent or what? And if it is at least semi-permanent, how can restaurants be helped not only to survive but to adapt? The same goes for retail – how can more SMEs be encouraged to make the jump to online? Hotels, pubs and entertainment all face their own long-term questions.

As one sector gets supports, all the others will be screaming for the same. In some cases, inevitably, cash will be given to firms which don’t make it

There is a strong case for support packages for SME – via tax and rates deferrals, wage subsidies, loan supports and cash grants. And while companies are already getting some assistance – in relation to deferred taxes and rates and some cash – the big promised loan guarantee scheme vital to support liquidity needs a new government and legislation to make it a reality. More will be needed, too, in general and sectoral supports.

The new minister for jobs will be in the middle of all this. As one sector gets supports, all the others will be screaming for the same. In some cases, inevitably, cash will be given to firms which don’t make it, and others who might have made it will be denied support.

The reopening we are seeing brings hope – and worry. The outgoing government has gone a long way to support people through the crisis via the wage subsidies and the pandemic payment. The next job, helping the SMEs which had to close through no fault of their own, is just as important and a lot more difficult to design and implement. Yet the prize is enormous, too. If we can get the bulk of the SME sector through this, we will be in much better shape for the economic rebound in the years ahead.

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