Labour shortages pose a serious threat to the future growth of the Irish economy, a confidential Government report has warned.

The report outlines serious labour shortages in the construction, tourism, call centre, transport and contract cleaning sectors.

It adds that unless more women are encouraged to enter the workforce and the transition from unemployment to employment is made easier, foreign investment will dry up and there will be harmful wage inflation.

The report was produced by the Expert Group on Future Skill Needs, established by the Government in November 1997 as part of efforts to develop a national strategy to deal with the issue of skills shortages. An earlier report dealt with technology skills in software and electronics.

The expert group is chaired by the chief executive of Iona Technologies, Dr Chris Horn, and includes business people, public servants and several members of State development agencies.

The report says the Irish workforce is becoming more professional, with significant increases in the number of managers, professionals and associate professionals between 1983 and 1997.

It adds that, with rising education levels, it may become more difficult to get young people to accept "low status or low-paid jobs". The report bluntly warns that urgent action will be needed to prevent labour shortages slowing the economy down in coming years.

Against this background it suggests that high tax rates which inhibit people entering the work force should be reduced. Physical obstacles to participation in the workplace, such as the lack of childcare facilities, should be addressed.

"Unemployment traps, which destroy the financial attractions of work for many amongst the unemployed, should be reduced," it states.

The report claims that the Economic and Social Research Institute's 1997 forecasts underestimated the extent of the employment expansion.

"In short, employment has been advancing three-quarters of a percentage point a year faster than predicted since 1995," it states.

It says labour scarcity will manifest itself in four ways - reduced levels of applications for advertised jobs; a rise in the number of vacancies; increases in the turnover of staff; and upward pressure on wages. It points out that in 1994 some 27,000 people applied to take the clerical officer grade entry examinations for the public service. In 1998, there were only 9,000 applicants for the same positions and only 6,000 people eventually took the exams.

It says one way of dealing with the problem - encouraging Irish workers overseas to return home - may not be viable because of "house prices and the escalating cost of property rental".

Included in the report is a detailed occupational profile of the Irish workforce showing the vast increases in the number of managers and associated professionals. Between 1983 and 1997, there has been an almost 60 per cent increase in the number of associated professionals, for example.

Even larger increases were recorded for the number of people engaged in catering (89.4 per cent) and cleaning (125.9 per cent). It states that rising income levels and the scale of tourism expansion is behind the increases in both these areas.

In the period between 1983 and 1997 there was a reduction of 25 per cent in the number of people engaged in agriculture and a 5.5 per cent drop in those working as labourers.