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Column: Cutting wages won't fix the jobs crisis. We need a new approach.

There are 26 applicants for every job in Ireland – so it’s time to stop treating this as an economic problem to solve and instead see it as a social crisis, writes Patrick Nulty.

Patrick Nulty

ON FRIDAY, I met a man in Huntstown in Dublin 15 working on a CE scheme. He had previously worked in construction and had just said goodbye to his son – a carpenter – who had emigrated to Australia. Both these men of different generations were ready, willing and able to work but our strategy for tackling unemployment had failed them.

According to quarterly Eurostat figures, there are 26 applicants for every job in Ireland, a stark reminder of the real employment crisis in Ireland. It is a crisis that can only be addressed with real economic solutions.

Behind the monthly live register figures there are thousands of personal stories to be told and talented people who are being failed by our economy.

Active intervention by the state is now essential to create and sustain employment. And yet, the debate about job creation and employment is hampered by a series of misunderstandings. It is simply not the case that reducing wages further, in the public of private sector, will facilitate job creation.

Understanding unemployment is not just about numbers and figures

Since 2008 the deprivation rate for those at work has increased sharply from 6.6 per cent to 12.5 per cent  in 2010. This causes hardship for these individuals and their families, hardship that cannot be understood simply by referring to numbers and figures

This increase in deprivation amongst people with jobs and indeed amongst the unemployed is stunting our growth. Rising deprivation puts additional strain and costs on social services, reduces productivity, consumer demand and negatively impacts on tax returns. If we are serious about creating jobs we must reject calls to resist calls to lower wages.

Equally, assumptions that exports alone will be our saviour are also off the mark. It is true that exports are vital to economic recovery. However, the reality is that this section of the economy is already performing very strongly.

In contrast domestic demand in our economy is in serious difficulty. High unemployment, austerity budgets, cuts and widespread fear and anxiety have all led to a sharp decline in domestic consumer spending. The domestic economy must recover if we are to experience sustainable growth. An examination of our GDP growth rates from 1994 -2007 show that expansion came largely from domestic demand rather than external demand (exports). The government must implement policies which encourage rather than dampen consumer confidence.

We need to be competitive – but that doesn’t necessarily mean low wages

It is true that as a small open economy with a healthy export sector we need to be highly competitive. However competiveness and low wages do not go hand in hand. A company is competitive when it utilises highly skilled, well paid employees and modern technology. Competiveness relies on good productivity which increases as skills levels and indeed wages increase.

There needs to be a recognition that the current approach to the jobs crisis is not working, and work on a new model must begin.
There must be investment in high quality training and education to ensure a sufficient supply of skills in emerging growth areas of the economy. ·

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Domestic demand and consumer confidence must be restored. Cuts and taxes that hit people on low and middle incomes undermine consumer confidence and must be stopped.

Structural unemployment, which occurs when a section of the workforce don’t have the skills necessary to take up new jobs as they emerge, must be addressed. Unemployed people who have construction industry related skills must be re-trained to take up jobs in expanding sectors such as IT.

These measures can be funded by shutting down the tax reliefs on non residential that cost the Irish exchequer 450 million each year. Also the 4.7 billion left in our National Pension Reserve fund should be used over the next four years to rollout a world class broadband network and national system of childcare thus creating jobs and supporting economic development.

By encouraging job creation and economic growth we will make better progress towards meeting our international obligation to reduce our budget deficit.

Patrick Nulty is a TD for Dublin West

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