Labour and skill shortages intensify

With unemployment standing at 4.6%, and the labour market continuing to tighten, the demand for labour and skills is exceeding supply across diverse sectors of the Irish economy in mid-2000. Many companies are finding it increasingly difficult to recruit and retain workers. The government and the social partners have developed a number of measures in an attempt to address the issue, although it is likely that additional action will be required in the future.

Over recent years, the Irish socio-economic context has changed from "managing economic crisis" to "managing economic growth and rising expectations". While the Irish economy was burdened with mass unemployment and huge debt during the 1980s, there has since been strong economic growth. The expansion of the economy has resulted in continual employment growth and a substantial reduction in unemployment. While the unemployment rate stood at 12% in January 1996, by May 2000 it had fallen to 4.6%.

An important consequence of the substantial increases in employment and reductions in unemployment - as well as of the structurally embedded nature of residual "core" long-term unemployment, the declining birth rate, and a levelling-off of the increase in labour force participation by women - is that the demand for workers is exceeding supply. The labour market has tightened considerably, and there is increased evidence of labour and skill shortages across many sectors of the Irish economy. Companies are finding it increasingly difficult to recruit and retain workers. There has been an increase in labour turnover, as well as problems with labour "poaching" and a certain degree of upward pressure on wages. In connection with this, employee expectations have risen substantially in the context of an economic boom and the promotion of the image of Ireland as the "Celtic Tiger" economy.

These problems are more acute in some sectors than in others. They are particularly apparent in the information technology, construction, clerical, call-centre, retail, tourism and catering sectors. The information technology sector is particularly affected by a shortage of highly-skilled labour. However, low- and medium-skilled employees, such as clerical workers, sales assistants, and call-centre workers, are often as much in demand as high-skilled workers. For instance, labour retention problems are clearly evident in the call-centre industry, which has an annual employee turnover of 20%. As this industry is projected to expand in the future, the problem of retention is likely to loom large. Retention problems in low- and medium-skill sectors have been exacerbated by low wages.

The government and the social partners have attempted to address the problems associated with labour and skill shortages by introducing a number of measures at national and enterprise level.

Action at national level

At national level, measures to tackle labour and skill shortages are contained in the current national agreement, the Programme for Prosperity and Fairness (PPF), ratified in March 2000 (IE0003149F). Many of the measures in the PPF outlined below coincide with measures contained within the National Development Plan (NDP) (IE9911146F), and the National Action Plan (NAP) on employment (in response to the EU Employment Guidelines) (IE9905137F).

Broadening access to the labour market

The PPF contains measures to improve access to the labour market for potential suppliers of labour such as women, long-term unemployed people, disabled people, and travellers. For instance, there is a commitment to process the recommendations of the report of the "working group on access by women to the labour market", which was established under the previous agreement, Partnership 2000 (P2000) (IE9702103F).

In addition, the government and the social partners are increasingly looking outside Ireland to immigrants as a source of skilled labour. The Tanaiste (deputy Prime Minister) recently announced her intention to attract 200,000 skilled immigrants to Ireland over the next seven years to address labour shortages and achieve targets set out in the NDP.

Improving training, adaptability and employability

There are a number of initiatives contained in the PPF relating to training, adaptability and employability.

The PPF incorporates a commitment to evaluating active labour market programmes (ALMP s) in order to increase the integration of groups such as women, long-term unemployed people, disabled people, and travellers into the labour market. A particular emphasis is placed on increasing training provision and resourcing.

There is also a commitment to developing a raft of measures to promote "lifelong learning". This includes "all forms of learning, whether formal or informal, with the aim of improving knowledge, skills and promoting personal fulfilment". An important emphasis is placed on strengthening the link between the education system and the world of work.

An important recent training innovation is the development of a government-funded enterprise-based training network called "Skillnets". Skillnets is an independent company whose board is comprised of government, employer and trade union representatives. The project involves collaboration amongst companies to develop training networks in different sectors. It also incorporates trade union involvement.

Improving the work-life balance

The PPF contains a number of measures to improve the work-life balance. In particular, it is stressed that "policies to support childcare and family life are a cornerstone of future social and economic progress". Objectives in the PPF include: increasing childcare places in both the private and community sectors; increasing out-of-school hours childcare services provided by community groups and school management; and further national fiscal and social policy measures to reconcile work and family life. This last objective involves the promotion of "family-friendly" policies at enterprise level, such as job-sharing, parental leave, flexitime, homeworking, and term-time working.

New forms of financial involvement

The government and the social partners have recognised that a greater emphasis needs to be placed on diffusing new forms of employee financial involvement at enterprise level, such as gainsharing and profit-sharing schemes. These schemes allow employees to share in productivity gains at the workplace. The PPF contains a "partnership clause" that builds upon the provisions of P2000, and provides for the voluntary establishment and deepening of financial involvement schemes, as well as various other enterprise partnership issues.

Action at enterprise level

Some employers are adjusting to labour shortages by utilising measures such as increasing overtime and workloads among existing employees, and/or using temporary/contract/subcontracted labour (as reported in Industrial Relations News 23, 2000). There is also evidence, however, that some employers have been concerned with developing "innovative" recruitment and retention strategies that incorporate the various pay and non-pay incentives recommended in the PPF (Industrial Relations News 3, 2000). This is particularly evident where companies are competing to attract and retain the services of highly valued skilled workers, most notably in the pharmaceuticals, electronics and information technology sectors. Some of these "innovative" initiatives have been developed on a partnership basis with trade unions and employees.

New forms of financial involvement

Some employers have introduced a variety of new types of pay incentives outside the terms of basic pay, such as profit-sharing, gainsharing, and performance-related pay.

Non-pay incentives

Some employers are also offering a wide variety of non-pay incentives and "fringe benefits" such as training and educational assistance, career breaks, homeworking, "family-friendly" policies such as childcare facilities and parental leave, and so on.

Commentary

With unemployment continuing to fall and the labour market continuing to tighten, the demand for labour and skills is far exceeding supply across diverse sectors of the Irish economy. In this climate, many companies are finding it increasingly difficult to recruit and retain workers, and are experiencing problems with labour "poaching", high levels of labour turnover, and growing wage pressures. These problems are frequently interlinked, in that labour and skill shortages may persuade companies to "poach" labour from other companies by offering more attractive incentives to attract and retain employees whose expectations have risen in a booming economy. This, in turn, has promoted increased labour turnover and a degree of upward pressure on wages.

With the economy continuing to grow, the problems associated with labour and skill shortages are unlikely to diminish for some time. Although the government and the social partners have developed some important initiatives, it is likely that additional interlinking measures will be required outside and inside the workplace. Measures will be required to diversify the labour force by extending labour market opportunities for women, older people, long-term unemployed people, disabled people, travellers and immigrants. Sustainable long-term improvements and investments in external and in-company training and skill development, and lifelong learning programmes, are required both for people who are already in the workforce and for those seeking to enter it. Furthermore, a crucial issue is that "traditional" forms of work may no longer be suitable for accommodating the variety of modern lifestyles. To this end, measures to improve the "work-life" balance, such as childcare facilities and various forms of "employee/family-friendly" flexible working such as job sharing and flexitime, will need to be examined further. As yet, forms of "employee-friendly" flexible working are not very common in Ireland. At present, the flexibility agenda is largely geared round employer interests. In addition to "employee-friendly forms of flexible working", Irish employers may increasingly find it necessary to introduce various other pay and non-pay incentives in order to address skill and labour shortages and associated recruitment and retention problems. (Tony Dobbins, UCD)

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