Is This As Good As It Gets?

By Aileen O'Carroll, Workers Soldarity, No.56, March 1999

The Celtic Tiger is special. It differs from our European neighbours in a number of ways. Firstly, since 1993 it has had an average annual growth rate greater than 8%, that makes it one of the fastest growing economies in the western world. Secondly, while in Europe employment in manufacturing has decreased, in Ireland it has to proved to be one of the main areas of growth. Employment growth is double that of the US and four times that of the EU. The economy is growing, more people are in work.

Where has this economic success come from? Much of it is due to the Tiger's ability to attract foreign investment. In the last two decades the amount of money available for global production has multiplied. In 1996 it was estimated that $3,200 billion was available for foreign direct investment. This is the money that the Celtic Tiger has been eager to attract. Ireland has received 40% of all American investment in European electronics since 1980.

The levels of this investment can be illustrated by comparing OCED figures on investment pr capita in four European countries: the US invested $3,000 per capita in Ireland, $2,000 in the UK, $500 in France and $200 in Spain. According to figures cited in the Economist magazine, foreign owned companies now account for 30% of the economy and nearly 40% of exports. Forty-five percent of Irish workers are now employed by Trans- National Companies such as Intel, IBM, Compaq and Sandoz.

And while Irish industry still sells mostly to the Irish market, the percentage which is being exported is rising. In 1986 27% of the output from Irish companies was exported, in 1992 the figure was put at 35%. The fruit of such high levels of investment is that after the USA, Ireland now ranks as the second largest exporter of software services in the world. It is, according to some commentators, one of the most open economies in the world, and this openness to external trade is a key factor in underpinning the competitiveness and innovation that characterises the Irish economy.

Tax Free (for them)

Why has our little island been chosen above all others? What do we have to offer? Firstly a location in the EU that allows multinationals to avoid EU trade barriers. Secondly our rate of company tax, which can be as low as 10% in some zones, is one of the lowest in Europe, something our neighbours have noticed and are not happy about. Furthermore we have no wealth tax, limited Value Added Tax and the top rate of income tax is only at 48%.

Companies locate here in the knowledge that most of their profits will stay in their pockets. A final incentive is that, thanks to successive Partnership agreements between employers and trade unions, companies do not have to fear costly industrial action and do not have to significantly increase wage rates. The rate of return on capital has almost doubled from 8.7% in 1987 to 15.4% in 1996. In fact, Ireland experienced the largest increase in the profit share over 1987-96 than the EU member countries, the US and Japan.1

Pay Peanuts

Profitability is up, but our pay packets barely keep in line with inflation. For many of us the Celtic Tiger economy means no more than we have a job not that we have a good job or a well paid job, simply that we have a job. For the worst paid 10% hourly pay has either stagnated or fallen since 1987.

Furthermore, changes to the tax system have increased the amount paid by those of us earning the least, while decreasing the amount paid by those earning the most. The proportion of income paid in tax has increased by 7.86% for the bottom ten percent of earners. Tax has increased by more than 12% for the lowest thirty percent of earners. Yet it has decreased by almost 6% for the top thirty percent of earners. Does this seem fair to you?

Living Standards

So lets not talk about the Celtic Tiger bringing prosperity, because prosperity seems to imply living in comfort, free from financial worries. Pay levels have stayed the same, tax rates have increased and a further by-product of the Celtic Tiger has been the massive increase in property prices throughout the country. A third of todays wage earners can no longer afford to buy a home of their own.2

Instead we are forced to live, always insecure, in rented accommodation. Of those who can afford to buy, many can only do so on the basis of two salaries, so that couples with children are both denied the option of caring for their children on a full-time basis and are forced to pay the cost of private childcare. In Ireland today, parenthood has become a logistical and financial problem.

A problem that is made more difficult by the fact that Irish men work on average longer hours (46 per week) than men in our neighbouring EU countries. In Dublin, even more time is wasted getting to and from work, as the city's traffic system spirals out of control.

No Jobs for All

And yet the Celtic Tiger hasn't even meant a job for all, more than one in ten is still out of work. More than one in five 15-24 year olds are jobless. Although more people are working, not all of the jobs that have been created are full time. One-third of the workforce are either self-employed, part-time or in temporary jobs.

We are told that things have never been better, yet between 1972 and 1994 the number of people living on 60% of the national income rose from 24% of the population to 35%. A third now live below the poverty line. This is the Celtic Tiger.

It could get worse. Companies could pull out, as Fruit of the Loom did in Donegal. Jobs could be lost. Is this then as good as it gets? If there isn't a downturn in the global economy, if there isnt a knock on effect from the collapse of the Asian Tigers, if Europe decides it doesn't mind our low corporation tax rates, if everything goes our way—is this as good as get gets? If the economy continues to be organised according to profit motives, the answer is probably yes. Are you happy with this? I certainly am not.

Additional Statistics:

Social Policy in Ireland—Principles, Practice and Problems edited by Sean Healy and Bridget Reynolds, Oak Tree Press, 1998

1. Lane, P (1998) ‘Profit and Wages in Ireland, 1986–1996’, Technical Working Paper No. 14, TCD Economics Dept.

2. ‘Economist asks why authorities do not build more social housing’, Irish Times, 22nd March 1999