Írsko (Ireland)

Abstract

Ireland, is a model example of development for Slovakia and other small Central and Eastern European countries. After a period of stagnation, in the first half of the 1980s the Ireland experienced astonishing economic growth and changes on labour market. In the 80ties there was a slow economic growth, fiscal crisis and living standards below the European average. As a conclusion there was huge and chronic unemployment of over 17%, and strong emigration of about 30-40 thousand persons, mostly highly educated, a year. In the 80ties emigrated 6 per cent of the whole population of the country. Nowadays all has changed dramatically. Net immigration occurred and the unemployment rate is although of about 4.5 per cent. Ireland‘s actual problems are the problems of success. Introduction

When in the end of the 60s and beginning of the 70s the accession of Ireland to the European Union was about to decide, there was a notable fear in the country. The people were afraid to loos the sovereignty, being subjugated or not being successful. Recently Ireland is one of big players in the world. This position the country would never achieve without being a member of the EU. After a period of stagnation, in the first half of the 1980s the Ireland experienced astonishing economic growth and changes on labour market. The Irish economy was very critical in the late 1980s. There was huge and chronic unemployment, decreasing employment, slow economic growth, fiscal crisis of the State and living standards were in long-term below the European average. (See figure 5.1 )

The Ireland’s economy grew rapidly in 2000. The GDP have risen by 10.7%. Employment grew at over 4 % per year, in numbers it grew by almost 35% between 1987-1998 and by about 25% between 1993-1998. Employment is estimated to have risen by 4.5% (it makes 74,000 individuals). Unemployment had fallen to less than 8 per cent (from 16 % in 80´s) - well below the European average, and in 2000 continued to fall at 4.1%. The European Union gave to Ireland huge export facilities, it is the third biggest software exporter in the World. Many of the foreign investors would never come and create the job opportunities the country not being a member of the European Union. A big help for Ireland were the transfers of the EU to the infrastructure and human capital, to the education.
The Irish economy has been transformed by a supply side revolution.

In terms of output and employment growth, Irish economy is well ahead of the average EU economies and OECD countries. The Irish economic success as Celtic Tiger is often being compared with the Asian newly industrial countries. According to some sources, European institutions like to point to Ireland as the success of the European cohesion strategy. How this almost agricultural country with lack of industry, with the GDP of 60 per cent of the average of the European Union has over the thirty years of the membership in the EU converted into one of the most advanced High-Tec economies? One of the key factors of the success was the membership, low taxes and education. There are several more factors which have contributed to the growth of the Irish economy, and which have influenced the decrease in Irish unemployment. To identify and explain the Irish success in conjuncture most of economists use these factors:
(1) Demographic structure,
(2) Investment in education and increase in level of educational qualification,
(3) Economic openness and improvement in competitiveness,
(4) Investment aid from the European Union, and
(5) Domestic policy.

Factors of Irish success
ad 1) Demographic structure
It is useful to introduce little information on population trends in Ireland to better understand the demographic structure.

The trend in the total population of Ireland has been varied over the past fifteen years. The reasons for this are declining natural increase and migratory tendencies. The population grew by about 2.8% between 1981-86, fell slightly between 1986-91, and again grew in the 1990s. (See Table 2.1 total population in 1981-1996) The trend variations can be attributed to net external migration. There were substantial net migratory outflows from 1981-91, when the average net annual outflow amounted to 0.8% (it makes 27,000 individuals). These migratory flows are related to labour market conditions. With the improvement in labour demand in the 1990s, the migratory flow has turned positive. Nowadays, Ireland faced to immigration.

Very important demographic change in Ireland’s population was the decline in the birth rate, which fell from 22 per thousand of population in 1980 to 13.7 per thousand in 1996. The reasons for this can be increase in education of the population and far greater participation in the labour force by women. As we can see, Ireland has a interesting demographic profile, with a strong increase in population of working age and an increase in women's labour force participation.

These two factors together mean that the labour force has the potential to grow further.
ad 2) Investment in education and increase in level of educational qualification
Second important factor was Irish decision to invest in human capital. Thanks these investments, the Irish educational system has expanded dramatically since 1960s. The Irish had introduced free second level education in 1967. This step acknowledged the importance of investment in education for economic growth and development.
Educational expansion resulted in a gradual increase in the stock of human capital of the labour force, a process of upgrading which is still in progress. The older workers close to retirement attained relatively low level of education: about ⅔ are only primary educated and less than 10% tertiary educated. Generation born in the 1960s, which started to work in the 1990s: about 60% are secondary educated and about ¼ is tertiary educated. The amount of tertiary educated people has increased in the 1990s. Nowadays, almost 80% of population have completed the secondary education. The continued increase in educational participation in the 1990s has meant that Irish participation in tertiary education is similar to other more advanced industrial countries. The result of investment in education is: increase in the supply of skilled (or high-skilled) labour and on the other side reduction of unskilled (or low-skilled) labour. The same happened on the demand-side: substantial increase in demand for skilled and a fall in demand for unskilled labour. analysing micro-data on earnings, show that the returns to education increased between
ad 3) Economic openness and improvement in competitiveness
Since the 1950s the Ireland has orientated itself to closer integration with the international economy. Several steps were introduced to remove trade barriers: the conclusion of agreement on free trade with the closest and most important neighbour-United Kingdom in 1965, the entry to the European Community in 1973, participation in the Single European Market process in 1992, joining the common European currency in 2002. This led to shifting away from a heavy dependence on agricultural exports to Britain to a wide variety of product selling into different overseas markets. The second important step to open and more competitive economy has been the active promotion of foreign direct investment in manufacturing. Foreign direct investment transformed the Irish economic structure. The FDI in Ireland are heavily concentrated in modern high-tech product sectors- engineering, instrumentation, computers and chemical industries, but they are becoming important in financial and business services.

Foreign owned firms now employ over 45% of total labour force in manufacturing. The native sector such as clothing, textiles and food processing employs only a small part of labour force. Orientation on the international trade resulted in an uncompetitive native industries, and during the 1980s the total employment in manufacturing declined. But thanks to FDI the Irish manufacturing employment has recovered in 1990s, there was increase in the demand for skilled labour, and FDI imported into Ireland new management skills and technologies which were not present in national economy. ad 4) Investment aid from the European Union, and
Ireland as a relatively underdeveloped region of the EU has benefited from the transfer of funds from EU. This financial aid represents a substantial contribution to Ireland’s income. The transfers from the structural funds significantly contributed to the Irish economic growth. ad 5) Domestic policy
Instruments of these most important elements of domestic policy: industrial policy, fiscal policy, and institutional policy, contributed substantially to maintenance of stable macroeconomic environment with low inflation, low public deficits and surplus in the Balance of Payments. FDI is the major force in the Irish economy, accounting for about 45% of manufacturing employment. Ireland have been attempting to attract investment since the late 1950s, it offered various capital grants and tax-exemptions. The success of this strategy has resulted in significant economic restructuring, which is mainly oriented to export markets and in production of electronics and pharmaceuticals.
In 1980s Irish public finances went out of control. There were a high budget deficits annually. The public debt represented a heavy burden on taxation, which in Ireland, is levied heavily on personal incomes. The key objective in 1980s and 1990s was to gain control over the public finances. Restoration of the public finances and the reduction in public debt meant that tax cuts could be offered in exchange for wage moderation - the central bargain in the national social partnership. Fiscal imbalance, huge unemployment and soaring emigration shifted to changes in behaviour and institutions. The shift was also clear in the willingness of the trade union movement.

They participated in national social partnership agreements, based on a national consensus that laid down the criteria for the definition and the solutions of social problems, moderation of wages.

Labour force trends

Trends in the labour force reflect demographic trends in the population, changes in women's labour force participation, educational levels of labour participation, retirement and, in the Irish case, migration.( Table 2.2 )

The numbers in the labour force grew slowly at an annual average of about 11,000 per year between 1981 and 1991, and very rapidly by almost 30,000 per year between 1991-96. In 1999- 2000 it grew at 35,000 to 38,000. These labour force trends can be attributed to four principal factors. First, there was strong growth in the adult population over the entire period. Second, however, growth in both the labour force and the adult population was reduced by net emigration. Third, there occurred increase in women's labour force participation. Historically, women's labour force participation in Ireland has been low. The female labour force participation rate was less than e.g. 28 % in 1971, and it remained under 30 % in 80´s. The growth in female labour force participation continued to be slow in the 80´s, but it increased dramatically to 35 % in 1991 and to almost 41 % in 1996. The Irish pattern of slow growth followed by rapid increase in female labour force participation rates has been attributed to the removal of discriminatory labour market practices and regulations in the 1970s, increased educational attainment, and rapid expansion in demand in the services sector and in part-time working. On the other side, men's participation in the labour force has been moving in the opposite direction: the participation rate fell from 81 % in 1971 to 76 % in 1981 and 72 % in 1991. Even with the changes in the labour market in the 90´s the declining trend continued to 71 % in 1996. These opposite trends in male and female labour force participation meant that the overall labour force participation rate remained almost unchanged in period of years 1980 – 1991 at around 53 %, although it slightly increased to 55.4 % of the population in 1996. Fourth, the educational level of Irish population influenced the labour market in this way: the total numbers engaged in education increased from 200,000 in 1981 to 283,000 in 1991 and to 340,000 in 1996( it makes 70 % over the period 1981 – 1996). Naturally, this led to reduction of young people in the labour force (the labour force participation rate for the 15-24 year age group fell from 61 % in 1981 to about 45 % in 1996), also it led to increased women’s labour force participation. Employment and unemployment

The numbers at work declined over the first half of the 1980s while the size of the labour force increased, experts say that it is due both to natural population growth and increasing labour force participation by women. Changes in employment combined with labour force growth resulted in an increase in the unemployment rate from 10% in 1981 to 18% in 1987.

In years 1987-97 the Irish economic experienced growth in GDP amounting to 79%, which gave rise to increases in employment, and in the 1990s, to decrease in unemployment. Unemployment today stands at 3.9 % and long-term unemployment stands at 1.4 %( it is over 24 000 people who are more than 12 months unemployed. (See Table 2.3, shows trends in numbers at work, unemployed, and the labour force, as well as net migration over the years 1987-1998.(1))

Three crucial periods in 1987-1998

In years 1987 – 1990 Ireland’s economy experienced recovery. This period is characteristic with strong growth in investment and exports and curtailment of public spending. These instruments can be considered as good keys to transformation in (un)employment policy. In the labour market, employment increased 4% and unemployment fell to 13%. In years 1991–1993 there was only slow growth. In this period Europe experienced downturn in international activity, this influenced increase in increases in interest rates and an exchange rate crisis, also the growth of Ireland’s economy was tackled with negatively growth. In Ireland this led to fall of employment in 1991 and 1992, and with rapid growth in the labour force, to increased unemployment, which was almost 17 % in 1993. In period 1993-1998, very rapid growth. The Irish economy has expanded very rapidly since 1993, annual rates of growth were average 8%. It was also stimulated by both accelerated export growth and by increased domestic demand. These growth rates have given rise to a improvement in labour market conditions. Total employment grew by 25%( over 290,000 people). In the spring1998 the employment rate had declined to 7.8%, which was below the European average and it was lower than at any time in the last twenty years. Emigration has fluctuated in accordance with demand in both domestic and external labour markets. It rose dramatically in the late eighties and was the highest in 1989, when net emigration (in-migration minus out-migration) rose to 3.5% (almost 44,000 individuals) of the labour force. Net emigration had falling tendention, and in 1998 in-migration exceeded out-migration by about 22,000. Comparison with the period of 1998-2002.

Ireland’s economy grew rapidly in this period (the GDP have risen by 10.7%). Several factors contributed to this development. These included the growth of international economy, weak Euro (introduced in the January 2002), rising investment. High employment, increasing earnings, tax cuts and low interest rates stimulated the consumption. The demand for labour has been increased through due to these developments.

Employment have risen by 4.5% (74,000 people), and unemployment continued to fall to 4.1% in 2000.

Problems in employment performance

Ireland's economic and employment performance has been very good. In 2000 the overall employment rate at 65.1 % was higher than the EU average for the second year running and the already low unemployment rates continued to fall for all groups. These developments indicate a further tightening of the labour market and some structural problems still exist:
– Whilst labour supply shortages have increased in recent years and have fuelled wage inflation pressures, the employment rate for women (despite recent increases) has only just reached the EU average (54%) and the gender gap in employment remains high.
– In this context, further effort is also needed to boost the low rates of participation in further learning, especially amongst those in employment.
– Considerable regional disparities – in employment and unemployment rates but also educational levels and earnings – risk impeding sustained and balanced development.

Continued efforts are required in response to the employment guidelines and recommendations concerning:

– increasing labour market
– participation rates, particularly amongst women;
– lifelong learning, especially in-company training;
– regional disparities.

Ireland should therefore:
1. pursue further its comprehensive strategy to increase labour supply and employment rates. Particular efforts should be undertaken to mobilise and integrate further into the labour market economically inactive people, in particular women, by removing tax barriers, increasing the number of affordable childcare places and taking action with the aim of reducing the gender pay gap;

2. pursue efforts to sustain productivity growth and upgrade skills and qualifications in the workforce, through increased emphasis on in-company training and the further development of lifelong learning, including the setting of overall targets, and in this respect promote active involvement of the social partners in implementing the Programme for Prosperity and Fairness;

3. in the context of the Spatial Strategy programme, address imbalances in employment, unemployment, job creation and human capital endowment between various areas in Ireland.
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