Irish recovery underway, but more inclusive growth and job creation needed, says OECD
Ireland’s economy is now showing encouraging signs of recovery from the financial crisis, but more must be done to reinvigorate growth and create the jobs that will get the country back to full health, according to the OECD.
These are the key conclusions of the latest Economic Survey of Ireland and a new report: Local Job Creation: How Employment and Training Agencies Can Help. Both identify employment and social inclusion issues as vital to Ireland’s continuing rebound from the crisis, its prospects of growth and the wellbeing of Irish people.
The Economic Survey, presented in Dublin by OECD Secretary-General Angel Gurría and Irish Tánaiste (Deputy Prime Minister) and Minister of Foreign Affairs Eamon Gilmore, points to an ongoing, gradual emergence from the crisis. Activity is slowly recovering, the external deficit has been eliminated and the country has had success in regaining access to market financing, the report says.
In the context of a continued recovery Secretary-General Gurría said: “What’s needed is a strategic agenda for more inclusive growth that promotes job creation and social equity by harnessing the power of entrepreneurship and innovation.”
While the unemployment rate recently began to decline, joblessness remains a serious concern, according to the report. More than 13% of the labour force remains unemployed, with more than 60% out of work for more than 12 months, among the highest rates in the OECD.
Young people have been especially hard hit by the jobs crisis. The youth unemployment rate is 28.6%, while the number of young people emigrating continues to mount. At 11.3%, Ireland has the OECD’s third-largest share of 15 to 19 year olds who are neither employed nor in education or training (NEETs), only Turkey and Italy. The OECD is working closely with the Department of Social Protection to design a national action plan to implement the Youth Guarantee in Ireland, agreed at EU level under the country’s recent EU Council presidency. Initiatives like this will be crucial to tackling youth unemployment in Ireland.
The OECD recommends that Ireland do much more to assist the unemployed, notably long-term job-seekers. It points out a critical need for support and retraining, to ward against social exclusion and ensure that young people are prepared to work as the recovery strengthens. The local job creation report lays out new strategies to ensure that education and training programmes provide the skills needed in the labour markets of and the future.
The Survey lays out a wide-ranging strategy for boosting growth. Adherence to the government’s current budget strategy should soon put the debt-to-GDP ratio – now approaching a turning point above 120% – on a sustained downward path, supporting confidence and maintaining affordable access to financial markets. Ireland should stay the course on this front.
Fiscal adjustment should focus on social equity and environmental protection. Further pension reforms and reductions in tax expenditures could lower distortions to growth and improve equity. Exports remain the main drivers of growth, but a gradual recovery of domestic demand is expected. Overall, the economy is well poised to benefit from a pick-up in activity of its main trading partners.
Ireland should seek to build on past success in attracting innovative high-tech multinational companies. Improvements to the business environment would help spread innovation and dynamism to the domestic SME sector. Barriers to entrepreneurship are relatively high in some areas. Licence and permit regulations could be made less restrictive by lowering costs and reducing waiting times. Improving access to finance for SMEs will be a key challenge.
Government policies that have helped attract large global firms that create jobs and promote dynamism could be tailored to help smaller domestic companies. Among its recommendations to boost innovation, the Survey recommends consolidating the 170 budget lines and 11 major funding agencies into two groups – one dealing with science and basic research, and another with applied research and innovation. It also recommends better aligning higher education with innovative companies, lowering costs for small cap Initial Public Offerings, and centralising legal processes for transferring intellectual property rights.
Given that Ireland’s CO2 emissions, waste generation and use of fertilizers are among the highest in the OECD, the report also suggests that taxes and user fees be used to help the country transition to a greener model of economic growth.
Source: Organization for Economic Co-operation and Development
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