A more targeted immigration policy focusing on skills shortages in the labour market has been called for by FÁS, the State training and employment agency.

In its annual report for 2002, published yesterday, FÁS says labour supply will have to grow to meet an expected increase in employment opportunities in the medium term.

"This will be difficult to achieve given that the main domestic contributors to employment growth over the last decade, namely the outflow from the education system, rising female participation rates and reduced unemployment, are all forecast to decline in importance," the report says.

Despite recent rising unemployment, it says measures will be needed to increase the size of the workforce.

The report says there are three national "sources" which can be drawn on to boost labour supply: the unemployed, the economically inactive who are not unemployed and the older employed who are likely to leave the workforce.

Immigration provides another option for increasing labour supply, it says.

"However, a more targeted immigration policy than has previously existed will be needed, focusing on skilled immigrants for occupations where there are demonstrable skills shortages."

Policies to increase the numbers at work will need to be complemented by enhanced productivity, the report adds.