Economist Jim O'Leary's recent article (The Irish Times October 14th, 2005) gave an insightful analysis of the Irish economy in recent years, our loss of international competitiveness and the changing sources of growth in output and employment.
That was fine until he lost it in the final paragraphs and gave the sub-editor his headline: "building boom resembles pyramid scheme". His article pointed out that more than one in two of the additional private non-farm jobs added in the past five years are accounted for by construction and related activities.
All of this is a very big change from the jobless growth in the Irish economy of the early 1990s when GDP was growing strongly but the rate of unemployment was four times as high as at present, with a smaller workforce and a smaller population. Instead of lamenting the growth in construction output and employment, let's celebrate it. Without it, overall economic growth would have been lower, unemployment higher and government revenues very much lower (and with it lower current expenditure as well as capital on health, education and welfare). Yes, construction employs a large number of people, 233,000 currently - greater in percentage terms than the US and Britain. This is what you'd expect.
The US and UK are both mature economies, well serviced with a better quality infrastructure than ours, a good deal of it put in place in the 1950s and 1960s.
We built 77,000 houses last year and are building similar numbers this year. That's four times the European average and eight times that of the Britain. But our housing stock is 391 houses per 1,000 people, against an EU average of 428, and a British figure of 452. (These are EU sourced figures. Others - eg those used in the 2005 National Competitiveness Report - indicate we have even more catching up to do).
Household size in Ireland is well above the European average at 2.94 people per house. The EU average is 2.6, and the UK figure 2.4. Income and social changes are moving towards EU averages or above. Irish demographics are much stronger than European norms. CSO population forecasts are for a population of five million by 2020, and 5.5 million by 2030.
We are likely to continue to have net inward migration of perhaps 30,000 per annum, almost irrespective of how the economy performs. These migrants are young, hardworking, flexible and, despite Jim O'Leary's final paragraphs, only a percentage of them enter the construction industry. According to the CSO, 93,000 jobs were added in Ireland last year, of which 54,000 arose from migration and an increase in the population of working age. Of these, 36,000 were migrant workers and one-third approximately are working in construction.
Yes, the construction sector is open to migrant workers, but also to Irish workers. In the traditional skilled sector alone, 7,000 young Irish people were employed as first-year apprentices last year, and the apprentice pool totals 22,000. At every level, the industry is investing in its future.
Of course, the construction industry cannot grow faster than the overall economy in the long term. In Jim O'Leary's terminology, the locomotive of manufacturing and internationally traded services needs to regain its steam. A necessary part of improved competitiveness is a world-class infrastructure.
Expanding the capacity of the economy requires a continuing high level of investment in public infrastructure. As the current National Development Plan comes to its final year, the State should reflect on the huge changes that have taken place, for the better, since it commenced in 2000.
We have now the framework of the national inter-urban motorway system in place. Before year's end a further important western link (Kilcock-Kinnegad) will be open. The Luas is up and running, the Dart has been upgraded and mainline rail is being improved.
The infrastructure for third-level education has been added to. Many quality public buildings, new and restored, are in use. New hospital buildings have opened and major water treatment investments are in place.
But a great deal more remains to be done. The 2005 National Competitive Council Report stated the level of infrastructure in a country affects competitiveness, performance and growth potential. This impacts on existing businesses, quality of life, and a country's attractiveness as an investment location. Despite investments to date, the NCC Report ranked Ireland 13th of 16 countries in terms of perceived quality of infrastructure, and 11th of 12 in a factual assessment of the level of infrastructure stock relative to national income. This is the challenge in moving to a knowledge-based economy.
We look forward to a new ambitious National Development Plan 2007-13, as well as a 10-year rolling transport infrastructure plan (including Luas extensions and airport metro and the completion of the inter-urban motorway network), a proper solid waste infrastructure for domestic and business waste, as well as health education, energy, telecoms, port and airport investment.
And that's before we talk about the National Spatial Strategy, balanced regional development, and the wealth of private sector investments sought by a growing and more affluent population, in sports facilities, leisure and other amenities, and further retail development. This is no pyramid scheme. It's real, and it's needed.
Liam Kelleher is director general of the Construction Industry Federation
