Rising joblessness a threat to recovery

 

OPINION:The business community has to acknowledge criticism when it is due and earn back trust, writes LEO CRAWFORD

UNEMPLOYMENT IS our greatest challenge and remains one of the greatest risks to Irish economic recovery. Ireland’s business leaders have already laid the foundations of recovery by taking a series of tough decisions to align their companies with new economic realities. However, job creation will require a marked increase in confidence levels and action from government to facilitate recruitment and employment growth.

Business is the primary creator of jobs, but it can only fulfil its role in the right environment. Government can take obvious short-term steps that would not only directly foster employment, but also lift consumer and business confidence to create employment by default.

The PRSI exemption announced this week for new employment is a positive, if modest, contribution. More significant would be a revised capital expenditure programme to enable continued infrastructure development, help sustain and create jobs in key areas like construction and engineering, and incentivise private sector investment in Ireland through public-private partnerships and outsourcing public capital expenditure. This would also send an international signal that Ireland is on its way back and would help reach our deficit targets by stimulating growth.

In the medium term, the boost provided by temporary stimulus and support interventions will need to be replaced with more permanent policies to underpin economic development.

We must honestly review, in conjunction with government and unions, both the cost of employing someone and the interaction between the labour market and the social welfare system. Otherwise we will not be able to get people back working in sufficient numbers to make a real dent in the unemployment figures.

To make recovery sustainable and create stable employment, we must make sure that Ireland regains the competitiveness that it once had. In the 1990s, our growth model was firmly based on competing and trading internationally, but we subsequently lost our advantage. We turned in on ourselves and became reliant on domestic growth; we paid ourselves too much; we invested too heavily in property; we took our eye off our international competitors with their lean cost bases and focus on productivity and we became unfit as a country and as an economy. We cannot let that happen again.

Another critical element of recovery will be the restoration of confidence in business and its leaders, both domestically and overseas. A challenge that we need to address is the loss of trust in business, which is undermining public confidence and continues to occupy the minds of the media and other commentators.

Unhealthy business behaviours contributed to the Irish crisis and have deepened its impact. The vast majority of entrepreneurs and managers despair at the negative backwash from a few high-profile cases of questionable behaviour. However, as a business community, we have to acknowledge criticism when it is due and earn back trust and authority.

We must, whether in business or in the institutions of state, raise our game in the areas of governance, risk management and accountability. We must make the structural changes that will prevent future crises.

The fundamentals of the Irish economy are encouraging: we have significantly improved our infrastructure over the past 15 years; our talent pool remains; our education system has enormous strengths and our cost base has now improved considerably.

Most business leaders have made very serious decisions in the past two years to secure the future of their firms and their employees.

Businesses are only too familiar with the pain of restructuring their pension schemes, eliminating bonuses and fringe benefits, freezing pay, letting people go and working very hard to bring their overall cost base to more manageable levels. This has all been absolutely necessary, but it has been very painful for employees and their families.

The outcome is that, thankfully, business confidence levels are slowly rising and individual firms are seeing and experiencing some signs of recovery. The adjustment process that we have all had to adopt over the past 12 to 18 months will hopefully mean that we will emerge stronger, although it will take time. The real challenge is to avoid a long period of jobless growth.

Exports must now be our primary concern, but a healthy level of domestic activity is necessary to underpin spending and create employment. We must move away from the paradox of thrift. Confidence is key and must be delivered by visible leadership from both government and business.

Ibec, with its 7,500 members, is keen to play a prominent role in an enterprise-led recovery and is eager to work with others to ensure we get Ireland back working again.


Leo Crawford is the incoming president of Ibec, the employers’ representative body, and group chief executive of BWG Group, which supplies retail outlets across Ireland and Britain

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