Business leaders warn of future productivity problems

Human resource managers heard two major business figures express concerns that Ireland may face a challenge in boosting its productivity and in adapting to necessary changes, at a conference for managers involved in employee and labour relations held in May 2007.

Calls for a major effort to boost productivity across the Irish economy were made by executives of two leading companies at the recent annual conference of the Chartered Institute for Personnel Development (CIPD). The ‘new world of work’ was the central theme of the conference, which took place on 21 and 22 May and which was attended by over 400 managers in the employee relations field.

Boosting productivity an economic imperative

In a presentation addressing the immediate issues facing the Irish economy, Managing Director of Microsoft Ireland, Joe Macri, pointed out that high costs do not automatically mean low competitiveness. According to Mr Macri, productivity must now represent Ireland’s ‘economic imperative’.

Mr Macri outlined that, over the past few decades, Ireland has experienced increased labour force participation with a falling dependency ratio – a trend which is the opposite of that observed in many European countries. However, he argued that such a process cannot last as, even with increased inward migration, the rate of labour force growth will inevitably tail off. ‘So, the conclusion is that we cannot continue to depend on labour force growth to drive economic growth,’ he added.

In his speech, Mr Macri also pointed to the fact that productivity growth has been slowing down over the last three years: for example, in the construction industry, which has experienced the highest growth of recent years, productivity growth is falling. Some areas have the highest productivity: information technology, pharmaceuticals, traded services – particularly traded financial services – and communications. However, tourism, which he believes is Ireland’s ‘most important industry’, is suffering from the lowest productivity in the EU.

In addition, Mr Macri outlined that zero productivity growth has been recorded over the last 20 years in areas such as transport and wholesale and retail services. He added that if the private sector had received the same level of financial input as the public sector, it could produce the same output for 57% of the investment.

Challenge for social partnership

Niall Saul, the Human Resources (HR) Director of McNamara Construction, one of Ireland’s leading construction companies, also addressed the theme of productivity and change at the CIPD conference. He set out a challenge for the trade unions and the social partnership process: although previously a strong backer of social partnership, Mr Saul believes that it has become something of an ‘illusion’. The HR director also addressed harsh words to the trade unions, accusing them of living in denial.

Mr Saul is a former senior executive of the Irish Business and Employers’ Confederation (IBEC) and has been the head of employee relations in three major Irish companies – National Irish Bank, Waterford Crystal and Irish Life and Permanent. He believes that Ireland needs to introduce a three-year experiment with binding arbitration as part of its next national partnership agreement – a change that he believes could diffuse current tensions in relation to the issue of trade union recognition.

According to Mr Saul, legislative change driven by the EU is helping to ‘ossify the European model’. For example, he claims that working time regulations, with their consequent need for keeping records and servicing new working time systems have added to employer costs. Mr Saul also suggests that information and consultation rules have merely added a layer of bureaucracy to companies.

Key role of partnership

Also addressing the future of social partnership was special guest, Kieran Mulvey, Chief Executive of the Labour Relations’ Commission. Mr Mulvey stated that no-one who had been involved in the first round of negotiations on the first of the current set of national agreements, the [Programme for National Recovery (PNR) (756Kb PDF)](http://www.taoiseach.gov.ie/attached_files/Pdf files/Program for Nat Recovery.pdf) in 1987, could have envisaged the success or longevity of the process. He maintained that the contribution of the partnership agreements was undeniable, ‘despite recent attempts to detract from their value’.

Mr Mulvey regards the current agreement, [Towards 2016 (2.86Mb PDF)](http://www.taoiseach.gov.ie/attached_files/Pdf files/Towards2016PartnershipAgreement.pdf), as a radical and ambitious programme for the next decade: ‘I have previously described it as a “cradle to the grave” perspective, covering all aspects of our society.’ However, the labour relations’ executive warned that it would ‘appear grossly irresponsible that when we have achieved the highest levels of political peace on this island, that we would indulge ourselves domestically in some elements of political and economic strife, indecision and procrastination on key elements of structural, fiscal and policy reform’.

Brian Sheehan, IRN Publishing