Fears about lowering standards in worker and social protection are as common as they are misplaced but the evidence shows that standards rise, not fall over time, writes Dan O'Brien
It is a constant in life that change causes insecurity and, because Ireland is facing new sources of economic change, uncertainties about jobs and livelihoods have grown.
The sources of change are well known: immigration; companies relocating to lower-cost sites; outsourcing of jobs; and intensifying competition from eastern Europe, from China and from other developing countries.
These globalising developments, it is frequently claimed, mean that high standards of protection in Ireland and other rich countries will be undercut and that governments are impotent in the face of such forces.
Everyone is on a slippery slope, the argument goes, as existing rights are eroded and tax competition reduces revenues needed to fund the welfare state. No matter how plausible these arguments sound, however, the evidence globally, past and present, shows that trends in workers' rights, environmental standards and equality are rising, not heading to the bottom.
The most topical aspect of these changes in Ireland is the impact of immigration. Although the greatest challenge this presents is non-economic - some problems inevitably arise as different cultures get used to rubbing along together - there are economic aspects to the question.
The most important are the effects on the rights of those in the workforce, including immigrants already established, and the effects on their wages and incomes.
Rights first. The opening of the Irish labour market in May 2004 to citizens of new EU member states was a major change. The market is still in a period of transition and, as in all such periods, opportunities for the unscrupulous to exploit the vulnerable have increased.
The solution to this is straightforward: more rigorous enforcement of existing laws and, if necessary, more onerous penalties for those who flout them. Provided this happens, there is no logical reason whatever to suggest that immigration need erode standards.
The effect of immigration on wages is more mixed, in theory at least. An increase in the supply of labour will put downward pressure on pay levels. This helps maintain competitiveness (to the benefit of everyone), but some see their wages rise by less than they would otherwise have done. Even here, though, the latter effect is usually limited and temporary, and the net economic benefits of immigration are considerable over time.
While it was curious that Pat Rabbitte recently talked of immigration causing "displacement" at a time of full employment, he was right to call for closer study of what is going on. Currently, data on the impact of immigration on the labour market are not being gathered.
They are needed to cast more light on the phenomenon and to allow scare-mongering about immigration to be authoritatively dismissed or real problems with wage developments, if any exist, identified and addressed.
Acknowledging that immigration can possibly have negative consequences does risk giving ammunition to those who viscerally oppose it, but this is not a good reason not to be fully informed of the facts.
Problems rarely go away by ignoring them. In the unlikely event of a real problem arising, it would be easier to face down any bigotry by honestly facing up to the facts and dealing with them.
It is not only labour issues that proponents of the "race to the bottom" thesis worry about. T
hey fret that other standards will fall too, health and safety and environmental protection most notably, claiming that countries with lower standards will gain competitive advantage, forcing everyone down to their level.
While this may sound plausible, worriers are unable to provide evidence that this is happening. Indeed, in Europe at least, the opposite is the case.
New national and EU legislation is being enacted all the time and business believes that it is being over-regulated, not given free rein. Employers' organisations across the continent are pleading for a break from more new and ever more stringent laws and it is easy to find small firms at their wit's end struggling to implement them all.
Another claim of the pessimists is that tax competition among states will undermine governments' ability to raise revenue for social spending. Again, however plausible the assertion sounds, it is not supported by the facts.
In the developed world taxes rose in the post-1945 era until the mid-1980s. Since then, tax and government spending across the entire rich world (the 30-member countries of the OECD) have remained at about that peak of 40 per cent of GDP. Those countries that chose to tax heavily, such as the Nordics, have not been compelled to change their ways.
Despite much breathless talk of the supposed dominance of "neo-liberalism", the welfare state (one of the great social achievements of the past century and more) will not wither for want of tax funding.
What of the effects of ongoing economic changes on inequality? It is asserted frequently that Ireland has become more unequal in recent times. This is bizarre given that the evidence shows the opposite.
The most comprehensive, comparative and up-to-date numbers, published by the European Commission, show that between 1995 and 2001 (the most recent available data), relative income inequality in Ireland not only fell sharply, but that the narrowing was by far the greatest of any EU-15 country.
The result was that by 2001, Ireland had converged on the EU inequality average.
The commonly believed notion that Ireland has become more unequal is simply not supported by any robust data according to the country's leading authority on the subject, the ESRI's Prof Brian Nolan.
While Ireland may be unusual in the magnitude of its decline in inequality, it is not in the general direction - 12 of the EU-15 countries saw a narrowing of relative income inequality between 1995 and 2001.
These trends should not surprise. Empirical evidence across the world over decades suggests that when countries begin to develop, relative income inequality tends to rise, but then falls. So frequently is this pattern observed it has been named; economists call it the Kuznets Curve.
There are a number of reasons to explain this, but one is vital because it also explains why the "race to the bottom" claim is unfounded.
Universally, people seek security. As economies grow and more wealth is created, the scope for protection and welfare increases. Because it is possible and desired that standards rise, that is exactly what happens. Economic history shows that developing countries raise their standards towards rich country levels as they advance (not vice versa), and fails to provide a single example of any country undergoing a sustained reduction in standards owing to outside economic forces.
There is no "race to the bottom" - for those who believe in progress, the direction the world is going is as heartening as it has ever been.
Dan O'Brien is a senior editor at the Economist Intelligence Unit in London