FREE KIC - NO. 2 NOVEMBER 05

The Celtic Tiger is still competitive

If I see one more article saying that Ireland is becoming uncompetitive I think I will probably throw up! I am sick and tired of every time there is a factory closure another journalist or economist starts to whinge on about how awful it is that we are losing more and more jobs in manufacturing. I thought that having got over the psychological distress of seeing the demise of agriculture as the biggest employer, we were unlikely to get as hung up on the demise of manufacturing as long as jobs were being created elsewhere. The Irish economy is currently creating large numbers of jobs in internationally traded services. The jobs created in Google, Ebay, Yahoo, Merrill Lynch, State Street, Symantec etc are replacing the jobs lost in manufacturing. I just fail to get hung up on the idea that a job in Google is somehow less important than a job in Gateway or Fruit of the Loom.

The great thing about a Google is that they do not compete on the basis of low wages. They can afford to pay the current market rate and still be highly profitable. This is the thing that makes me most excited about the underlying strength of the Irish economy.

The ironic thing about all of this is that Steve Balmer, the CEO of Microsoft on a recent trip to Dublin complained about the difficulty in getting qualified Irish staff. Microsoft in their newest research facility in Dublin had to hire half their staff from outside Ireland. This highlighted to me that education is a crucial issue in making sure that we stay competitive. In relation to education I think that a number of things can be improved:

  • Classroom sizes
  • The numbers of students doing honours Mathematics and the Sciences
  • Diet (Jamie Oliver has highlighted the problems that poor diets have on the ability of children to learn)

The FT this week had an article highlighting how few physics teachers are being trained in the UK. I presume it is the same here. This has to be a worry. If we want R&D to be undertaken in Ireland we have to produce good science graduates. I think that we have to start paying physics and maths teachers more than other teachers in order to address this shortage. The teachers unions will have to help in this process.

I havenft mentioned tax yet but I have to point out that this is central to our current competitiveness. Google and Microsoft are attracted by the low tax. (This is why Microsoft expand here even though they have to get the staff abroad!) 12.5% tax is attracting all sorts of service based industries with high salary jobs for accountants and lawyers and credit analysts and fund administrators etc.

I would love to see the day when we did not need multinationals. I would love to see a time when we created enough jobs in Irish owned and managed companies. There appears to be an entrepreneurial spirit in this generation that may one day allow this to happen but for the time being we are competitive because of our ability to attract multinationals. Long may our success continue. 


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Siobhan Power