As the economy boomed in the late 1990s, the Irish labour market began to change. Not only were our emigrants returning to work in Ireland, but increasingly other Europeans came to work here, too. Just as Irish people over the past two centuries went abroad for better economic prospects, today inward and outward flows are driven by people seeking to improve their living standards.
EU enlargement in 2004, along with a booming economy, was an important milestone in boosting large-scale immigration. A Lithuanian or Pole who came to Ireland to work in the hospitality sector could earn twice to three times what they could at home, allowing for differences in price levels. So, not surprisingly, the result was a big influx of workers from these countries.
However, since 2004 there has been very rapid growth in the economies of the states that joined the EU at that time, increasing the earnings of those who stay or return home. While a hotel worker from Poland might earn 50 per cent more here today, the cost of rent makes the net gain of migrating here unattractive. Lithuanian hotel workers can earn almost as much at home. The dramatic increase in the number of Lithuanians with high skills has meant fewer want to work in low-paid jobs, so these jobs have had to pay more to compete for staff.
Pay in sectors such as IT, financial services, pharmaceuticals and medicine are much higher in the Republic than in eastern Europe. However, these jobs require proficiency in English, favouring countries where English language proficiency is more widespread.
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So, in more recent years, skills shortages in the State have increasingly been met from outside the EU. Our ageing population is leading to greater demands on our hospitals and social care system. We would not be able to staff these without immigrant nurses and care workers, with countries such as the Philippines a major contributor of these vital workers.
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While EU workers can work here freely, most migrants from outside the EU require work permits. A third of the current inflow of migrant workers on such permits come from India, as the ESRI has reported recently. Most have high qualifications, and excellent English, and tend to work in areas such as tech or medicine.
Reflecting their concentration in high-paid sectors, Indians have the highest average earnings of any nationality here, including Irish. As a result, per head, Indians are also probably the highest contributors to the tax system.
The high-productivity, high-pay sectors of our economy have grown rapidly, increasing the demand for skilled staff, and attracting immigrants and returned emigrants. Not only do we rely on the corporation tax receipts from the few firms involved, but we also rely on the disproportionate share of income tax their employees pay.
Our population has grown by almost 800,000 since 2016, with inward migration of Irish and others the main driver. This has put significant pressure on the supply and the cost of housing. This is best addressed by expanding the supply of housing and related infrastructure – with immigrant builders playing a part in delivery.
Just as high rents here choked off the supply of eastern European workers, and induced many to return home, the same pattern is being seen with migrant workers from further afield. A study by the Department of Finance, albeit with quite a small sample, showed that more than half of people who came to the State on work permits have left after five years.
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If we can’t build housing supply quickly enough, the alternative would be to ease demand pressures by slowing down the pace of economic growth. Higher taxes or slower public spending could halt some of the galloping growth, slow the demand for labour, and dampen the rate of population growth.
Cutting off work permits, while economic growth and demand for labour continue to race ahead, would be the wrong approach. Better to lower the demand for labour rather than face labour shortages resulting in significant cost pressures.
There’s a limit to how much the health and social care sectors can be cooled down, with the number aged over 80 forecast to grow by about 100,000 over the next decade. We are unlikely to grow the workforce needed at sufficient scale or pace without inward migration.
There’s a balance to be struck between meeting labour shortages through relying on migrant workers, or letting wages rise to signal to people already living here to train for and enter the sectors experiencing shortages. Better pay and conditions have a role to play in encouraging more home-grown building workers and nurses.
