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FactCheck: Do 700,000 jobs really depend on our "open access" to the EU

Richard Bruton made a big claim about this major issue, on Claire Byrne Live earlier in the week.

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IN THE AFTERMATH of Brexit, attention has turned to our own future relationship with the EU, and there have been calls for Ireland to emulate the UK and leave the Union.

On Monday’s Claire Byrne Live, Education Minister Richard Bruton vigorously rejected this argument, emphasising what he presented as the benefits of our continued membership.

He even claimed that “about 700,000 jobs” depend on Ireland’s “open access” to the EU.

Is that true? We’ve crunched the numbers and analysed the facts.

(Send your FactCheck requests to factcheck@thejournal.ie, tweet @TJ_FactCheck, or send us a DM).

Claim: 700,000 jobs in Ireland depend on our membership of and access to the EU

Verdict: UNPROVEN, but very likely to be a significant exaggeration.

What was said:

Source: TheJournal.ie/YouTube

You can watch the relevant excerpt from Bruton’s comments in the video above, or watch the full episode here. Our focus in this fact check is on this claim:

We’ve probably about 700,000 jobs are dependent on our open access [to the EU].

The Facts

In response to our request for evidence, a spokesperson for Bruton told FactCheck that the number was in fact 713,045 jobs, made up of:

  • 192,223 jobs at Irish, Enterprise Ireland-supported companies
  • 187,056 jobs at multinational, IDA-supported companies

The sources of these figures are the 2015 annual reports of Enterprise Ireland and the IDA. In addition, the spokesperson provided figures for indirect employment:

  • 333,766 jobs whose creation was stimulated by those Enterprise Ireland and IDA jobs

Those figures were reached by applying “multipliers” estimated by the Department of Jobs. (More on that later).

Along with the data, the Minister’s spokesperson provided this explanation:

By open access to the EU, the Minister was referring both to Ireland’s access to the EU common market, and Ireland’s access to the markets of dozens of other countries through the trade agreements entered into by the EU.

There are several significant problems with these figures, and this rationale. Let’s unpack it, piece by piece, as clearly and briefly as we can.

Dependence

Belguim EEC Irish The first Irish contingent at an EEC meeting in Brussels, after we joined the union in 1973: Sean Kennan, Brian Lenihan, and Hugh McCann. Source: AP/Press Association Images

First, a bit of reasoning that undermines the logical premise of the Minister’s contention, as explained by his spokesperson.

A claim that says “700,000 jobs are dependent on” access to the single market and EU trade deals is a claim that is essentially saying that without these factors, those 700,000 jobs would not exist, or would be lost.

This is the definition of dependence. FactCheck asked for clarification as to whether Bruton intended some other meaning, and his spokesperson replied “the Minister’s comments are clear”.

But the claim fails to take into account a number of important factors:

  • Companies and economies are flexible and respond to changes, quickly filling gaps that emerge in markets
  • A significant portion of Irish exports and foreign direct investment goes to, and comes from, countries that are outside the EU and European single market
  • Without EU membership, or even single market access, Ireland could negotiate its own international trade deals, and further cultivate alternative export markets and sources of foreign investment, and therefore retain and replace many of those jobs.

We can’t say with certainty how many jobs might be lost (or for how long) in the event of Ireland leaving the EU, or if Ireland had never joined, but we can say it is extremely unlikely to be all 713,045 purportedly associated with Enterprise Ireland and IDA companies.

Access to the single market and collective trade agreements no doubt facilitated the creation of many of the jobs in question, but this does not mean the existence of all those jobs is dependent on them, or many of them could not have been created without access to the single market and collective trade agreements.

The numbers

Screen Shot 2016-11-20 at 2.39.24 PM Source: IDA Ireland Annual Report 2015

Let’s take a closer look at those employment numbers. The 713,045 jobs cited by Bruton’s spokesperson essentially come in two parts: direct and indirect.

We’ll take a look at the direct jobs first.

IDA

Of the 187,056 jobs at IDA-supported companies in 2015 (pg 10):

  • 137,739 (73.6%) were at companies originating in the US
  • 6,827 (3.6%) were at companies originating in the UK
  • 7,469 (4%) we at companies originating outside Europe and the US.

That’s 81.4% of IDA-backed jobs that are at companies originating outside the EU, in a post-Brexit scenario.

Even if the UK retains access to the European single market, that will be 77.6% of jobs at companies originating outside it.

Of course, the argument could be made that Ireland’s membership of the EU facilitates foreign direct investment by employers based outside the EU (particularly from the US), especially those who have set up European headquarters here.

But the argument could also be made that Ireland’s comparatively very low corporate tax rate, and other factors, also facilitate this FDI, and the creation and retention of these jobs.

Again, the combination of these factors has no doubt facilitated this employment, but it is extremely unlikely that all 713,045 jobs are dependent on two of them, namely access to the single market and EU trade deals.

Enterprise Ireland

5/10/2016 Launch of Enterprise Ireland Internation Jobs Minister Mary Mitchell O'Connor, with Enterprise Ireland CEO Julie Sinnamon. Source: RollingNews.ie

FactCheck’s analysis of data provided by Enterprise Ireland (spreadsheet download) shows that, of the €19.76 billion in exports by Irish, Enterprise Ireland client companies in 2015:

  • 32.24% (€6.4 billion) went to non-EU countries
  • 70.3% (€13.9 billion) went to countries that will be non-EU after Brexit
  • 30.1% (€6 billion) went to countries that would be outside the single market after a “soft Brexit” (if the UK stays within the single market)
  • 68.2% (€13.5 billion) went to countries that would be outside the single market after a “hard Brexit” (if the UK leaves the single market)

Whatever shape the UK’s exit from the EU takes, that’s a significant chunk of Irish exports set to go outside the European single market.

If the UK leaves the single market as well as the EU, the majority of exports by Irish, Enterprise Ireland-supported companies are set to go outside the single market, based on the pattern in 2015.

Again, that doesn’t necessarily mean that access to the single market and EU trade deals isn’t very helpful in facilitating Irish exports, or that Irish companies wouldn’t face significant trade barriers in their absence.

But it does mean, again, that it’s implausible that all 192,223 jobs at Enterprise Ireland-supported Irish companies would be lost.

Or that the number that would be lost, would not be at least partially recovered in due course.

The Ripple Effect

28/9/2012 Google Date Centres Launch Google's data centre in Grangegorman, South Dublin. Around 1,000 workers were contracted to build it. Source: Mark Stedman/RollingNews.ie

The second set of jobs cited by Richard Bruton’s spokesperson are the indirect ones, which – so the rationale goes – were stimulated by the creation of the direct employment at Enterprise Ireland and IDA companies.

This happens through increased demands on a supply chain (subcontracters, materials providers, etc…) and increased spending and consumption throughout the economy by those new employees.

As was mentioned above, Bruton’s spokesperson calculated these by taking direct employment (379,279) and applying a jobs “multiplier” of 0.88, yielding 333,766 indirect jobs.

This is a formula derived by the Department of Jobs, Enterprise and Innovation in the Enterprise 2025 report, which estimates that for every 100 jobs created at an Enterprise Ireland or IDA company, 88 jobs will be stimulated indirectly, elsewhere in the economy.

In fact, this is based on two separate multipliers: 0.84 for IDA companies and 0.97 for Enterprise Ireland companies.

If we apply those multipliers separately (which we should) we get 343,583, a slightly higher figure for indirect employment than the one presented by the Minister’s spokesperson.

This in turn would yield an overall estimate of 722,862 jobs, as opposed to 713,045.

But there are further problems with these multiplier estimates.

Overestimation

Firstly, the multipliers are calculated using (in part) estimates of the additional salaries introduced by employment at IDA or Enterprise Ireland companies.

However, the calculations include an assumption that all those new incomes will be spent. Which we know is also simply implausible.

Indeed, this is something that Jobs Minister Mary Mitchell O’Connor warned about in response to a recent parliamentary question, stating that as a result of this assumption, these multiplier estimates “should be interpreted with caution”.

So the numbers themselves are very likely to overstate the actual “ripple effect” of added employment at IDA and Enterprise Ireland companies.

Dependence (again)

Secondly, there is (once again) an assumption here that because direct Enterprise Ireland and IDA employment facilitated this additional, indirect employment, none of this additional, indirect employment would otherwise have come about.

Again, it’s likely that at least some of this indirect employment would otherwise have been stimulated by employment at non-IDA, non-Enterprise Ireland companies.

So the notion that all 343,583 of these jobs should be included in the total of 722,862 jobs that, according to Richard Bruton, depend on EU access, constitutes a further layer of implausibility.

Conclusion

Source: Claire Byrne Live via RTE One

There is clearly an element of truth to this claim. No doubt some of the “about 700,000 jobs” referred to by Bruton would be lost without access to the European single market and EU trade deals.

But a very significant chunk of Irish exports, and FDI, goes to and comes from outside the EU, especially in the event of a “hard Brexit”.

So a sizeable portion of these jobs would most likely either stay, or be replaced in due course.

Furthermore, employers and companies would have no choice – in the event of Ireland leaving the EU – but to quickly find alternative export markets and sources of FDI.

However, Bruton’s claim fundamentally revolves around an unspoken prediction (if Ireland were to relinquish access to the EU, these 700,000 jobs would be lost) and counterfactual (if Ireland had not had access to the EU, these 700,000 jobs would not have been created).

So ultimately, we are obliged to offer a verdict of UNPROVEN, but the claim is highly likely to significantly overstate the number of jobs that would not have been created, or would be lost, without open access to the EU.

TheJournal.ie’s FactCheck is a signatory to the International Fact-Checking Network’s Code of Principles. You can read it here.

For information on how FactCheck works, what the verdicts mean, and how you can take part, check out our Reader’s Guide here

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About the author:

Dan MacGuill

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