Retaining Talent

Yesterday’s QNHS (Q3 2009) release provides a timely update on trends in the immigrant workforce.   In the period from the third quarter of 2008 the number of non-Irish nationals in employment fell by 61,600.   This is equals half the fall in the employment of Irish nationals (123,200), even though non-nationals represented only 13.6 percent of the workforce in Q3 2008.

It is also evident that many immigrants are returning home, with the total population of non-nationals (15 and over) falling by 41,000 over the year.   This might be welcomed in the short run if it limits the rise in unemployment.   But returnees also ease the downward pressure on wages.  Over the medium term, it is not a bad rule of thumb to view a country’s equilibrium unemployment rate as independent of the size of its labour force. 

Looking to the longer term, the return to net emigration is a worrying development.   As is often observed, Ireland’s high degree of factor mobility makes the economy operate more like a regional than a typical national economy.   An expanding skilled workforce gives the economy the scale, diversity and connections to support innovation-intensive growth.   Indeed, the empirical regional/city growth literature points to initial human capital as a strong predictor of subsequent growth (see here).   A truly smart “smart economy strategy” will recognise the value of getting–and keeping—talented people here. 

13 thoughts on “Retaining Talent”

  1. While taking John McHales point about international migration, internal migration is hugely important in Ireland in this regard.

    One of the important reasons we lack ‘scale, diversity and connections’ is that our cities are relatively small, and our rural regions are relatively large. If Ireland has a regional imbalance, it is because too many people live in the countryside. To reach Danish levels of urbanisation would require inward migration within Ireland of 1m from rural to urban regions overnight.

    This rural living model is actively supported by many policy measures (Look West campaign, decentralisation, planning etc). A recognition that Dublin’s sprawl is because of poor planning, not excessive population, is the first area of our thinking needs to change.

    Quite apart from the productivity enhancing issues John mentions, there are important environmental and public service efficiency pay-offs from building successful, larger cities.

  2. Thanks Ronnie. I am more conflicted when it comes to internal migration. I take your point about the productivity gains (probably both level and growth effects). But would Ireland be a better place if a significantly larger fraction of the population lived in (even a better-planned) Dublin? Now vibrant communties would be lost through lack of scale, and I think we would have a less diverse, less interesting country as a result. I am not sure if you would extend your reasoning to the removal of support for smaller cities such as Galway. One way to undermine Galway would be to undermine its university. Again, I can see the advantages of scale of building one or two national universities (though I think much of this could be replicated with a better networked system with geographical specialisations). But I think much would be lost in the process. Today’s Irish Times has a short piece that is obviously relevant to this debate.

    http://www.irishtimes.com/newspaper/ireland/2009/1217/1224260840117.html.

  3. As someone who has had to hire people the answer to getting and keeping people involves: good pay and quality infrastructure and services.

  4. @John McHale,

    “One cloud does not make a winter”.

    Time will have to pass before the CSO has a better idea of just who is leaving Ireland. We know the numbers and if they are national or non national citizens etc. However we have no break down on their skill level or profession etc.

    If 10,000 doctors or primary school teachers left Ireland there would be cause for great concern, however if 10,000 bricklayers departed for better shores then it is something that we can afford to lose as property is currently in oversupply.

    If in 10 years time we are short of bricklayers then I am sure wages will go up and bricklayers will make a return.

    Considering the difficult situation of the country, it is understandable that some people do leave. However more information would be helpful to determine what type of skillset is departing etc.

    As for the “Smart Economy”, I was under the understanding that large salaries were offered for key positions to be filled, i.e. 300K to 500K salary for heads of research etc. High bucks were paid but the return was to be substantial to create, encourage and attract wealth into the economy. So are these people leaving? If so why? Does the CSO show any data on this class of worker?

    I would be surprised if people in this group have started to leave. I do accept a small number of high net worth individuals are moving out to Switzerland, but again these are just a handful. On the other hand there are people who wish to be wealthy, but are currently middle / lower class, then yes it would be of great concern if Gov’t policy is to discourage these people from living in Ireland. Wealth is important, as it is a incentive to encourage people to work hard, create new innovations, start up companies, add value to society. If we discourage the idea of wealth then we may as well stay in bed every morning and just collect social welfare. There has to be an incentive to work, take risks, make personal sacrifices.

    While there has been a sustained campaign in the media against wealth, a lot of it based on black propaganda, it is still too early to say that we will see people who command high salaries depart Ireland. Perhaps 2 years will have to pass before we see a definite trend.

    While the policy’s of Mr Brian Lenihan may not be the most popular, there has to be a dignified counterargument made, which by and large this site offers. But this site contrasts sharply with Irish media which values a bear baiting confrontational role when discussing various Gov’t policies. Effectively Irish media offers an opportunity for ignorant people who cannot express their opinion in a coherent and diplomatic manner to rant, rave and foam at the mouth. At times it can be very embarrassing. I do accept that now and again a piece of journalism is written which is of star quality. But again it is few and far between.

    While I would agree with your article, I would see it as more of a long term strategic concern. More detailed data is required before serious concern should be warranted.

  5. @sporthog

    ‘Wealth is important, as it is an incentive to encourage people to work hard, create new innovations, start up companies, add value to society. If we discourage the idea of wealth then we may as well stay in bed every morning and just collect social welfare. There has to be an incentive to work, take risks, make personal sacrifices’

    The alternative to lying in bed all day is simply getting up to work, and not necessarily taking risks. The prospect of wealth is perhaps not as vital as you suggest. A great variety of folk work hard and add value in all sorts of ways.

    Innovations take place all the time and thankfully not all of them are easily marketable. How much is a new traditional tune worth ? We are certainly wealthy in that sphere.

    Business is just one of many vehicles for social differentiation and development. It is socially dominant at this point in history but is is not the purpose of life.

    Company startups are obviously necessary, but many of our successful entrepreneurs ‘cash out’ at a relatively early stage, with the result that their businesses can no longer act autonomously. We have achieved national sovereignty but we haven’r really learned to leverage political processes to escape our provincial economic status.

  6. Openness implies more sharing of all sorts.

    Divisiveness is the opposite and is employed as a tactic to ensure that those not naturally able retain their power.

    Us and them.

    The fruit of the tree of the knowledge of good and evil. How to rule others 101.

    This will not happen in Ireland!

  7. Sporthog
    Caution was appropriate before the Depression started. We now know what is going to happen. Winter Kondratieff style!

    Waiting for more information is in fact, as you very well know, a vote for letting all of this occur without active intervention. Which may be the best thing for all concerned but does appear to demonstrate a lack of faith in the acquisition and use of wisdom.

    Are you sitting comfortably? Why refuse to acknowledge the obvious? We have been down this path before but this time, it will last longer and traverse rough ground near cliffs!

  8. @John

    The argument isn’t entirely a Dublin one by any manner or means, and Cork and Galway’s success is not because of artificial govt support, but because they work.

    It’s just that Dublin is very small by intl standards, on an island, and geographically at the periphery of Europe. Dublin looks big from Roscrea, but not from anywhere else in the world. In fact, I can name half a dozen Chinese cities bigger than all our cities put together that most people on this blog would never have heard of.

    There is an important policy point here. We still have a disproportionate policy focus on some inconsequential policy issues (getting from 90% to 100% broadband being an obvious one) while issues such as Dublin Port, Dublin transport policy and the Mayorality are treated as parochial issues for Dubliners. Having a successful, large, capital that works is a key national economic priority, and these are important national policy issues.

  9. @ Paul Quigly,

    “A great variety of folk work hard and add value in all sorts of ways.”

    “Business is just one of many vehicles for social differentiation and development. It is socially dominant at this point in history but is is not the purpose of life. ”

    Indeed you are correct, and I would agree with your comments, there are lots of people working in other professions who add value to society, some of these tend to be hidden i.e. carers of disabled people both mental and physical, other are more visible, i.e. a traditional Irish musician. Obviously the reward for these people cannot be in the work itself, as these people have to be able to live in society. Hence we require to pay them in monetary terms.

    However for people who do take calculated risks (and there are many risks in starting up a business) there has to be financial reward. I am not taking about various Irish Banks and their policies which led to self destruction. I am talking about smaller business’s which have been successfully provided a service and employment for others. These companies do pay corporation taxes which are used to provide services for everybody in society.

    But yes your comments accurate and well balanced.

    @ Pat Donnelly,

    In this particular example of the CSO figures about people leaving Ireland. It would be helpful if we had more information about these people. We don’t know if they are bricklayers or teachers etc. Obviously there will be a mix of professions leaving, most probably the majority are related to the construction industry.

    I would agree with your comment partially. Yes sitting back watching the ship go down would be poor management on behalf of the Gov’t. However the Gov’t cannot be changing policy every quarter due to changing quaterly data. In any control system there has to be a balancing point. Too much control tends to cause excessive hunting in a system. In other words the system behaves in a manic fashion, up and down, overshooting and undershooting all the time. This is inefficient.

    The other side of the system is lack of contol, where the parameters are set too wide. This type of control has very poor response time. So it is impossible to attain the correct set point. Again corrective decisions would arrive to late to avert disaster.

    In all control systems there has to be an input, in which the deviation of the process value from the setpoint can be calculated. The more complex the process then it is advisable to have more data feeding into the decision side of the control. This is provided by a terms called Single element control, double element control and triple element control.

    With something as complex as society it would be more prudent to use a range of sources of information. The more information there is available then the more accurate will be our understanding of the cause or causes.

    But yes this time it will “last longer and traverse rough ground near cliffs”!!

  10. It is possible to infer some information about who is leaving from the available QNHS data. Combining data on the age and gender profile of the labour force with data on participation rates yields estimates of the age and gender profile of the population.

    The really big downward changes in this profile over the last year (Q3 08 to Q3 09) are concentrated in the 20-24 age cohort. The number of males fell by 10.5% and the number of females by 7.4% (as estimated).

    At the risk of oversimplifying, for me this points towards:
    – substantial emigration among young construction workers (because the number of males is so high);
    – substantial emigration among recent immigrants (who tend to be young, and who we know something about from other QNHS data); and probably
    – significant emigration among recent graduates (because this matches the age profile, and because degree level graduates tend in any case to be mobile).

  11. @Sporthog, who said..
    “On the other hand there are people who wish to be wealthy, but are currently middle / lower class, then yes it would be of great concern if Gov’t policy is to discourage these people from living in Ireland. Wealth is important, as it is a incentive to encourage people to work hard, create new innovations, start up companies, add value to society. If we discourage the idea of wealth then we may as well stay in bed every morning and just collect social welfare. There has to be an incentive to work, take risks, make personal sacrifices.”

    I entirely agree and have seen examples where this is already a problem. Marginal tax rates on moderate incomes are already so high in Ireland as to enormously discourage investment in potential wealth creation…particularly when combined with Ireland’s huge cost of living.

    For Paul Quigley, who correctly says that business is not the purpose of life, I simply point out that money is the reason that people do things that they don’t already want to do. If people are prepared to compose and play new traditional tunes for free then that’s great. Paul can call me when he finds someone who’s prepared to dig ditches for free, or who’s prepared to invest money in a business when no-one will pay them for the outputs of the business….or who’s prepared to bring oranges and fossil fuels to Ireland without being paid in money.

    For Con, whose thoughts on the type of person leaving the country may well be correct, note that the departure of lots of recent graduates is very bad but it may be even worse if Ireland is no longer able to attract key experienced people to come here to work. Combine high marginal rates with house price problems as illustrated on finfacts (http://www.finfacts.com/irelandbusinessnews/publish/article_10007747.shtml) and you’ve got a recipe for problems.

  12. @ hugh sheehy
    Of course you are correct as far as it goes. That’s the way our society works, but there are still large chunks of the world economy where production is not determined by business relations.

    Property and money have brought Europe and the world to a new plane of development over a period of centuries. That process entailed a very violent disruption of traditional societies, and it was not driven simply by a focus on the accumulation of personal wealth. Politics and history matters.

    The feudal economies were driven by considerations of religion, rank, and duty. Money played little role in most people’s lives. The notion of private property was not really developed, but agriculture and trade was advanced.

    Market relations were illegal, marginal or hidden in the socialist planned economies. People were shot for ‘speculation’ at the height of the Terror, but it’s impossible to stop people trading. Wealth could not be accumulated, but influence could. In a command economy, power is as good as money.

    The ideal of bottom-up rags-to-riches accumulation derives from the US, but it does not fully reflect the realities of US history. The robber barons were, and are, a significant economic force. We could do with a bit more analysis of the transfer pricing phenomenon, as it is becoming the elephant in our economic drawing room.

    Unemployment and deflation are steadily taking a grip, so the prospect of security, let alone wealth, is receding for the majority here. There are already too many capable folk feeling like ‘losers’. That is sad to see..

    Good luck to anyone who feels the need to emigrate in the New Year. The rest of us can dig in and consider how we survived the Great Famine.
    Happy Christmas

  13. Hi,

    It would be a good idea to post a new thread on recent migration statistics and the economic implications – short and medium term.

    Population stats over the past two years have not been in line with expectation and recent estimates show that the population is still growing (albeit unremarkably).

    A breakdown of the emigration and immigration stats is much warranted. Rumour of braindrain and over-subscription to our benefit system make this a topic that some prefer to avoid.

    Peter

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