MODERATORS!
Might be best moved to a new post?

This end, the bias to larger markets, can be achieved by individual countries, lessening their CT and increasing their VAT. It does not need EC intervention! What is really going on?

What I think the Brits introduced was called IR35 which I don’t think is quite the same thing as making contractors just PAYE (and I believe employers/agencies found ways around involving themselves in paying any kind of employer taxes with very precise wording on contracts).

However, it is true that you can mitigate/avoid (rather than evade) tax as a contractor in Ireland by ‘employing’ your spouse, paying dividends rather than salary, etc. All the things TD’s and other well off people do all the time anyway!!

It’s a bit of a moot point/useless piece of legislation though if said contractors aren’t actually earning any money……

http://www.sbpost.ie/news/government-planning-paye-crackdown-on-contract-workers-46695.html

bjg

That’s interesting. And a big % too.

So I’m at least right about one thing then…… “I’ve no reason to believe HR practices aren’t fairly universal these days”

Temporary contracts were/are one of those great wheezes brought to us by the HR ‘profession’ - along with things like the kind of performance related bonus schemes where 90% of the employees in a company think they are in the top 10% of the performers (only to be in for a shock at the end of a hard working year)!

About 35% of the worforce in Japan are temps and they earn less than the Irish minimum wage in a high cost country.

http://www.finfacts.ie/irishfinancenews/article_1017442.shtml

Many industries use ‘contract’ staff (freelance, one man limited companies - for employer tax reasons/contract staff agencies won’t touch you unless you are a limited company - usually) these days. In particular the IT area but also areas you wouldn’t immediately think of such as the media (e.g. almost all journalists these days are freelance).

It’s the same in both the UK and Ireland and is a very convenient way for a company to shed staff at no cost as there is usually no notice period build into any contract (the best I have ever seen is a week) and of course, they don’t have to be given the same benefits and rights as permanent employees. I can’t speak for the rest of the world but I’ve no reason to believe HR practices aren’t fairly universal these days.

I know from my own research that the IT side has been chronic since early-mid 2008 with large numbers (hundreds) removed at a time from many large companies, particularly financial services. The situation for contract staff is grim today as there are no permanent roles to find a ’safe harbour’ in and there are literally several hundred people applying for each contract vacancy that comes up.

I have had people in recruitment companies tell me that the minimum number of applicants they get for any vacancy on a platform such as jobserve.co.uk is 400 within the first couple of hours of it going on and all they do is look down the list until they get 3-4 suitable looking CV’s to send on to the employer then don’t bother with the rest. These days they try to be very specific about experience, qualifications etc (and over specifiy) because if they just put in something generic like ‘project manager’ the replies would number well over a thousand. I have also had several tell me that they post phoney roles on these job sites but that’s another story.

The situation gets even worse in downturns like this because as permanent staff are also made redundant (and suddenly realise there are no other permanent jobs for them to go looking for) they also decide to apply for the few contract roles that are advertised and you end up with even more people chasing fewer openings. A bit of a shark pool really.

As you pointed out, contract staff get culled regularly when the going gets tough but as the individuals are usually classed as ‘company directors’ they don’t qualify for benefits and don’t appear in any unemployment stats. They just sit at home all day wringing their hands, living on their savings and hoping that something comes up (lots of mental health problems, etc. in that occupational sector I am told and not surprising I guess).

I’m not sure anyone has an exact figure for the number of people in Ireland and the UK that are in this position but they are a large number (well into six figures across both countries by my reckoning and possibly even into seven figures). As downsizing has grown (what an oxymoron!) but the amount of work still to be done hasn’t shrunk (anything but), the pool of these one man limited company contractors has simply grown and grown over the years. They’re a kind of ghost dole queue, along with the many thousands who have gone back to full time education or who have simply given up looking/taken early retirement/taken something part time and are now no longer on the official unemployment figures.

Domestic demand might be needed. However, I believe that people in industries with wages that are competitive across Europe simply do not have the wage to increase their spending. Competitive salaries are in this context low salaries

Low salaries and limited access to credit rarely leads to high spending….

As a side note, I can also mention that had I stayed in Ireland then I’d probably be spending the same amount of my salary. The main difference would be that I’d be getting a lot more value for money, especially when it comes to housing costs.

My company, as I said has increased output, but had very little CapEx spend in 2009 as there are no new drugs coming any time soon. This resulted in a cull of contract staff (dozens). Where those people go and how those numbers are handled statistically I have no idea

When I came to Dublin in Jan 2000, my first job paid 12,500 Irish punts. The same/similar job is now advertised at 22,000 EUR. It was export of services. The job had high turnover so in this case, similar jobs haven’t become more expensive to have in Ireland. However, until the property crisis that kind of salary made it difficult to afford to live in Dublin.

Even with the low increase in salaries, I see that at least some of the growth of jobs for these kind of services has taken place in the new EU countries. The jobs that are here will probably stay but don’t count on people on these salaries to give much of a boost to domestic demand

I endorse Ronnie O’Toole’s point.

It’s great to get such a contribution from an industry insider.

Employment in the pharma/medical devices sector has hovered around the 40,000 level for the past five years, despite the big jump in output.

2009 2010 2011 2012 2013 2014
9.7 12.2 11.2 8.8 6.5 4.2

So, they foresee contined falling investment driving aggregate private sector balance further into the black this year (so agreeing wth you Calan), falling thereafter. However there will be a significant reduciton, though people of course can argue as to whether it will take to 2014 to get to 4%. However, the mnoey is there, and it will happen.

@dealga,
Understanding the dynamics of specific industries is very important in small countries, so informed comments like yours are very welcome.

In 2009 our plant manufactured more bulk pharmaceuticals in dollar terms than any other year since the company moved to Ireland. In 2010 we’re due to be even busier.

Two miles from here (I’m on night shift right now) another big pharma company is running at about 25% capacity, is engaged in a stand-off with the unions over over-time and shift-rates and is rumoured to be considering a three month shutdown.

The reason for the difference between the two is pipeline. We’re ok for another couple of years; they have had two expected blockbusters, that would have filled their plant for years, fail at Phase III in the the last two years.

If a pharma factory closes in Ireland it will not be ‘Ireland’s’ fault, it will be the fault of failures at R&D and sales (neither of which we in Ireland have any control over) Simply put there will be no new drugs to make.

The American pharmaceutical companies have been closing their American facilities because we in Ireland can do the cheaper, a lot cheaper. But we were already-established, FDA approved plants. We have won the game of musical chairs for the time being.

Assuming the big pharma companies have product to make and are selling it, it would take at least ten years for them to relocate to brand new facilities in ‘lower cost locations’ now and receive FDA approval. Puerto Rico has 0% tax (I think) but the American companies still won’t move production to the existing facilities there. Maybe we’re better than we give ourselves credit for.

Similarly with job growth in the sector and knock-on job growth in the associated service companies. It all depends on pipelines.

The value of pharmaceuticals manufactured in this country per employee is in the millions of dollars. The so called competitiveness drop since 2000 that I saw Morgan Kelly write about is simply a red herring in our industry (within reason, obviously.

When Pfizer closed its legacy Pharmacia plant in Little Island the journos and politicos went through the usual charade about how it was the government’s fault, loss of competitiveness etc. Utter rubbish. Pfizer bought Pharmacia for its oncology candidates, which all failed. Pfizer sells one solitary legacy Pharmacia compound now. They literally destroyed the value of that company.

Firstly we have to know what level savings are at in Ireland at the moment, which is quite a difficult figure to pin down.

M.Hennigan,
‘Facts’ are filtered through a certain ideological prism.

As Stiglitz writes in his latest book:

“As we peel back the layers of ‘what went wrong’, we cannot escape looking at the economics profession…economics had moved-more than economists would like to think-from being a scientific discipline into free market capitalism’s biggest cheerleader. If the United States is going to succeed in reforming its economy, it may have to begin by reforming economics.”
Joseph E. Stiglitz, Freefall, W.W. Norton, 2010, p.339

There is money there. Given a CA in balance in 2010, and a Govt deficit of 10%+, means that the private sector is net saving to the tune of 10%+. This will stay somewhat elevated in the medium term, though not at this level.

Last Sept at the Farmleigh diaspora forum (another gabfest that has produced nothing?), Brian Cowen asked for help to establish a “European Silicon Valley.”

However, the high hopes in the 1990s of the indigenous tech sector have not been realised and the jobs impact in the coming decade will be negligible.

There should be a stronger orientation of public R&D towards the food and drinks sector.

Baileys Irish Cream is an example of a once inconceivable use of milk.

Swiss group Nestlé, the world’s biggest food group, has 5,000 working in R&D.

It would be a big help for an amalgamation of the main Irish food companies that would result in a significant world class company.

There should be a goal to develop markets in Europe, in particular.

There will always be markets for food and last September, the United Nation’s Food and Agriculture Organisation (FAO) said global food production will have to increase 70 per cent for an additional 2.3 billion people by 2050.

Glanbia was the 20th biggest milk processor in 2007 with NZ’s Fonterra at No. 1.

The Green Party goal to declare Ireland a GM-free zone is both anti-science, stupid and not in the national interest.

Consultants Prospectus recently updated a 2003 report on the dairy industry, which says it still compromises a multiplicity of processors, many of whom lack the efficiency to compete.

http://www.ifa.ie/LinkClick.aspx?fileticket=NJCDGlrKPX8%3d&tabid=606

@ Michael H

taking the Kiwi’s as a comparable example (lets assume they are great at indigenously generated dairy production), what would be required for something similar to be created here? Is it more innovation focused than investment? Is this something the IDA should be tasked with? Kerry Group are surely an example of how we are at least in some part getting this ‘right’.

Can you please stop spamming this thread. You have added 8 off-topic posts so far.

This is abuse of the blog and moderators should delete them.

@ All

On depending on domestic consumption, in the construction sector so far, employment has fallen 130,000 from the 2006 peak and average pay excluding ‘lodge’ add-ons etc, was more than 20% higher than the average industrial wage.

Adding in the impact of fiscal measures in coming years and the permanent increase in unemployment, there will be an impact on consumption for many years.

The debate so far on exports, highlights a reality that it is uncommon for people to accept facts that jar with existing perceptions.

Last week, US journalist Robert Samuelson, in his critique of modern journalism in Newsweek, wrote: ‘”Never underestimate the difficulty of changing false beliefs by facts,” the economist Henry Rosovsky once said. People do change their minds, but experience has more influence than argument.’

http://www.newsweek.com/id/228550

It is an issue of relevance for policymakers and their advisers.

Of course there is also a relevant question as to what is a fact?

The statement that a 10% devaluation of the punt in 1993 was followed by an export boom, is factually correct and has been used as an argument for exiting the euro.

However, it is ludicrous to claim that the export boom was triggered by the devaluation.

So JohntheOptimist, given your trenchant response to my earlier post, I await your response to my analysis of the Irish dairy sector output.

Then, without any self-awareness they accuse NAMA critics of scaremongering and wonder why people aren’t shopping (while they also refuse to reform leases so retail rents can fall).

Did I mention we would probably die on the way to the shops anyway?
That many live in houses that were flooded with sewage 2 months ago (I don’t thank God)? That university fees are coming back, no they aren’t, maybe…? That interest rates may rise? That the international recovery is uncertain? That the bankers who are worse than Cromwell are all still in place?

And the biggest threat of all: NAMA will lose €65BN.

Ronnie O’Toole,
An increase in consumption to solve the unemployment crisis is also doubtful, given the indebtedness of the private sector, falling wages and employment, and the knock on effect on consumption of austerity budgets.

In terms of spending, for you, it is a simpler proposition (as I believe you are in de Nort). You can buy in an economy that is not charging you a 40% premium on big ticket items (after consumption taxes have been considered). Me? I have to decide whether to shop local and pay through the nose (when shop local involves going to the same private equity owned chain as you do) or buy over the internet, pay the Irish VAT price, shipping etc. and still save 35+%

For the last few years the domestic economy hasn’t been much more than a a property bubble and a credit/bling bubble driven forward by the property bubble.
This is gone and will not return IMO.

Consumers have taken on so much credit that spending will be muted for a chunk of the next decade as we struggle to repay the accumulated debt.

And with so much of the domestic economy employment coming from construction and its related bling industries(retail) I cannot see the domestic side economy generating much jobs for quite some time.

Good questions. I can only reply very briefly, as I’m off in a few minutes to my cousin’s holiday home near Malin Head for the weekend. BTW, according to the Met Eireann website, the temperature there at 10am this morning was a balmy plus 4 degrees centigrade, compared with about minus 6 degrees centigrade everywhere else in these shivering islands.

So, just briefly:

(a) If exports remained flat during the global recession, I don’t see why they shouldn’t grow rapidly after the global recession. They grew in volume by over 8 per cent y-o-y in 2007, the last pre-global recession year. For the reasons I gave in my earlier post, Ireland is considerably more competitive in 2010 than in 2007.

(b) How increased exports, and increased incomes among those doing the exporting, gets converted into increased domestic spending depends on a number of factors, not just credit and lending. I myself never use credit, and neither do most people. The fact that I spend more domestically now than I did in, say, 1986 is because my real income is higher now than then, as indeed is nearly everyone’s in Ireland.

(c) Being a ‘domestic for the international workers’, as you put it, makes it sound as though all these ‘domestics’ earn a lot less than ‘international workers’. The ‘international workers’, such as myself, are not exactly jet-setters. Its not as glamorous as you might think. I work in a humble office, just like most people. It just so happens I’m employed by an MNC, and most of our customers are abroad. Some of the ‘domestics’ I spend my income on may earn less than me, but some of them earn more. I’m sure my doctor and and my lawyer earn a lot more than me, yet they are what you would call ‘domestics’. So, I don’t think its a two-tier economy permanently in that sense.

Without the wonderbra of credit, the number of employees in the MNC sector is going to be able to support only a flaccid domestic economy, no?

And I believe you need to expand more on how an international pickup is going to lead to higher exports for an economy where exports have not really contracted. A return to normality would leave us in the same position we are currently in, as we haven’t moved from normality?

So what is the difference? Credit, perhaps?

“Given the obvious strength of the Irish exporting sector it clearly shows how poorly the domestic economy is performing.”

Your analysis is 100 per cent correct. Absolutely spot-on. I recommend you for a senior position in government immediately, as at least you have identified the problem correctly, which is more than can be said for a lot of politicians and economists in Ireland.

Given how Dreaded_Estate has now corretly identified it for them, would it be too much to ask all the political parties and all our leading economists to address the real problem, namely the sharp fall in consumer spending in Ireland in the past 2 years, and not the mythical problem of a collapse in exports, which simply has not happened. It looks as though Ireland’s share of EU exports in 2009 was at all-time high, surpassing by a long way the previous peak in 2002. But, as Dreaded_Estate implies, consumer spending has been falling for about 2 years. Yet, I’d say 99% of economic commentary, both from politicians and economists, has revolved around a mythical collapse in competitiveness and a mythical fall in exports. The best analogy I can think of so early on a Saturday morning is that of a football team that loses a series of matches 8-7, yet the manager and the pundits focus all their attention on the supposed deficiences of their attack rather their defence.

I’m not suggesting for a moment that competitiveness should be neglected or that Ireland should not do everyting possible to increase exports. To suggest that would be silly. But, as it happens, virtually everyone agrees that competitiveness is now improving rapidly, and has been for about a year and a half, and that this improvement will accelerate through 2010. This rapidly improving competitiveness is coming through from lower inflation than in other EU countries and through wages falling while rising by 3% to 4% in other EU countries. Even the IEA said that in their report yesterday. But, the bad news is that, as Ronnie O’Toole points out, improving competitiveness and increasing exports is never going to create a lot of jobs directly. The jobs are created when those employed in the exporting sector get real income increases, in line with real productivity increases, and then start spending that increased income in the domestic economy, whether it be on houses, cars, eating-out, mobile phones, ice-cream, day trips, furniture, carpets, or whatever. So, the first priority of the government should now be to get consumer confidence up and get people spending again. In a paper that John Fitzgerald of ESRI posted here a few months ago, he suggested that a tough budget, that was well-received by the markets, might do the trick in that respect. There are a few straws in the wind that that might be happening (for example, media reports of increased Christmas/New Year sales, claims by some car dealers that their sales are up on last year, and so on), but it is too early to be certain if these amount to anything.

The concluding comment is an echo of the ignorant cheerleaders of the bubble.

There is a difference between googling for data and understanding it.

Countries that have a high dependence on MNCs, tend to have a high trade or export ratio to GDP or GNP.

Singapore had an export ratio of 186% in 2008; Ireland’s ratio was about 90%.

So having higher exports than some other country, in itself, is no big gaisce.

A capital intensive sector such as batch chemical production can result in some impressive figures but very little change in employment as a result. The import content can also be high.

IDA supported jobs in 2009, were below the 2000 level and new big job creating projects are hard to come by.

We can of course shut our eyes to the potential of the food sector and ignore why we cannot sell in Europe while Asia is foolishly regarded as an easy target.

Prof. Seamus Grimes would no doubt tell you that trying to break into the Chinese high tech market for example, is some challenge.

What the Irish dairy export data do not tell you is that it is mainly low margin commodity based (butter, powder, casein and bulk cheese).

Reports over the past decade have highlighted the reliance on EU intervention; economic added value to raw milk is lower than the industries in countries such as Denmark and the Netherlands and Irish companies have developed very few internationally branded consumer products.

Eurostat, provides comparative country data on for example cheese production  –  which gives the potential for significant value added  — and shows that Ireland’s output in 2004 was as low as Sweden’s. There is no Irish data for the years after 2004 - - other country data is up to 2008.

Despite being the 24th biggest milk producer in the world, Ireland’s cheese output was lower than in Spain and Greece while production in the Netherlands was almost six times the Irish level.

New Zealand’s Fonterra is its equivalent of Nokia and has 10,000 directly employed in the home country.

Business consultant Mazars,  highlighted in 2008 how New Zealand was taking advantage of markets in Europe.

It said: “The food industry in New Zealand developed specific measures and worked with external partners to develop new technologies and new products. They created specific products for specific markets and created best practice dairy markets in Asia. And despite being 12,000 miles away from European markets, New Zealand has become increasingly competitive for its chilled lamb and their lamb exports to the EU have increased 40 per cent in the last two years”.

God keeps trying to tell us this. They were the Evil Triangle of FF/Developers/Bankers. But FF as Prime Time showed are all developers.
The bankers are all developers. Now we have to face the fact that they are the Evil Developer Blob - with a very small interest in running the bank system and no interest at all in running the country properly, just in parasiting on it.

Don’t let FF destroy the country for the next decade.
NO TO NAMA.
BANK INQUIRY NOW.