The labour shortage could "destroy" the Republic's economic growth, the Tanaiste, Ms Harney, has warned.

Ms Harney's concerns were underlined by Xerox, the US copier maker which employs 2,300 in the Republic, and by an Irish-owned IT firm, Massana.

She said: "If labour was to become a problem, that would be as big a disadvantage as trebling our corporate tax rate."

In an interview, Ms Harney said the Government would consider in the Finance Bill applying the standard income tax rate to gains from employee share ownership plans.

She said the principal concern of multinationals considering investment in the State was the availability of skilled workers.

Xerox plans a $500 million (€548.2 million) expansion at its Dundalk plant, bringing employment there to 2,100 from 700. While the company faces a financial crisis - and last week began divestments - the general manager of its Irish division, Mr Joe Browne, said his primary concern was staff retention.

"We have no plans to reassess the scale of development in Ireland in the long term," he said.

"Retention and motivation is my absolute priority for the next three months.

"The market is definitely tightened and we would ask our [recruitment] agency to fill more than 90 per cent of vacancies every month. They're struggling to meet it," he said.

Massana makes semi-conductors enabling high-speed communication between computer systems. The firm employs 30 and wants to double its Dublin staff in the next year, but chief executive Mr Paul Costigan said it may set up outside the State if new workers were not available in the Republic.