The Irish Times view on the labour market: a shortage of workers

It is often difficult to get a firm fix on the Irish economy, such is the impact of multinational activity on many new statistics. The first quarter national account figures suggest that the multinational exporting economy remains strong, but that consumer spending – the key component of the domestic economy – has stalled, presumably due to the impact of inflation.

The jobs market remains strong, with many sectors being hit by labour shortages. This crosses from the reopening sectors such as accommodation and hospitality to high-tech industries. Whether a slowdown in economic growth reduces the demand for labour as the year goes on remains to be seen. But for now employers face big challenges keeping and holding on to staff.

There are a number of reasons for this. Many people have chosen to move jobs and in some cases move sectors after the pandemic shutdowns. Others have chosen to retire early, or to work for fewer hours. Layered on top of demands from reopening sectors and skills shortages in many professions, this has led to significant shortages.

There are limited policy levers to address this – at least in the short term. Government needs to recognise the pressure this is putting on many businesses, particularly SMEs. Businesses face additional burdens in the years ahead in areas like pension auto-enrolment and likely increases in employers PRSI. Caution is needed not to increase costs to business too quickly, when many are already facing rising wage demands.

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And the situation again emphasises the wider economic issues caused by the housing crisis. For example the complete lack of rental properties and the high price of housing generally will hinder people moving to take jobs in Ireland.

The strength of the wider jobs market, and the benefits via higher taxes, means that the country faces into the economic uncertainties ahead from a reasonable position. But with the first quarter economic figures suggesting a possible slowdown in the domestic economy, this may in time feed through to tax revenues. So may any hit to corporate profitability. Tricky choices lie ahead.