strategy statement03 - 05

During the previous strategy period, a new Consumer Advisory Council was established, while the new Irish Financial Services Regulatory Authority (IFSRA) will also have a strong consumer focus. These developments are an important step towards fulfilling the OECD recommendations and giving life to the general principle of competition and regulation, namely, that improving and protecting the welfare of the consumer should be the ultimate goal of policy. Nevertheless, addressing consumer issues continues to be an important strategic challenge.

The trend in unit labour costs is a measure of wage competitiveness that incorporates the effects of differential productivity growth rates. This measure, as published in the OECD Economic Outlook, shows that since 1998, unit labour costs in the Irish economy have increased by more than the euro area average. In 2001, unit labour costs increased by 3.9 per cent in Ireland compared to an increase of 1.6 per cent for the euro area, while for 2002 there was an increase projected for Ireland of 3.8 per cent, compared to the euro area of 1.8 per cent. This measure includes the full benefits of the very high productivity growth of particular MNC-dominated sectors. Unit labour costs in sectors with lower productivity growth would have increased by more than these average figures. Sectors particularly affected in this way would include tourism and indigenous manufacturing. Until recently, the effects of relatively higher growth of unit wage costs in Ireland has been partly offset by the weakening of the euro, but this effect is now being reversed with serious potential consequences for enterprise cost competitiveness.

Figure from page 13

Figure from page 14

Table I shows the broad sectoral composition of employment in Ireland and the key changes over time.

Table 1

Employment Growth by Sector

Annual Percentage Change

1961 1973 1979 1987 -73 -79 -87

Agriculture -3.3 -2.4 -3.7 -2.1

Industry 2.3 1.4 -2.4 0.6

Manufacturing 2.0 1.2 -1.7 1.3

Building 3.4 2.3 -4.3 0.0

Utilities & Mining 1.6 0.7 -2.2 -4.4

Market Services 0.6 1.7 1.1 2.3

Wholesale and Retail 0.5 1.2 0.7 2.0

Insurance, Finance and Business 3.8 6.5 2.9 2.7

Transport & Communications 1.4 1.1 -0.5 0.7

Other Services -0.4 1.8 2.1 3.5

Non-Market Services 2.8 4.5 2.0 0.9

Public Administration2.6 4.1 0.0 -0.7

Health and Education3.0 4.8 3.0 1.5

Total Employment 0.2 1.2 -0.6 0.9

Source: Calculated from ESRI Databank (1999 Edition).

In terms of broad sectoral change, the following trends are in evidence: a very strong growth in services, this applying both to market and non-market services; a lower, though still healthy growth in manufacturing employment; and a long run trend of declining employment in agriculture.