The labour market sends vital signals to policy makers about the state of the economy. At present, employment growth is booming and unemployment is low - at least apparently so. As Fás notes in its latest review of labour market trends, published earlier this week, the number of vacancies is rising and this pattern is set to continue next year.
However this is due to growth in sectors like construction, where productivity is low, or the public sector, where it is hard to measure. Figures published by the Central Statistics Office yesterday confirm the picture of an economy characterised by falling productivity.
Against this backdrop, globalisation is taking its toll on manufacturing employment. Nonetheless, outgoing Fás chairman Brian Geoghegan is correct to say that the phenomenon presents more of an opportunity than a threat. But his call - in today's Recruitment06 supplement - for an upskilling of the Irish workforce sits somewhat awkwardly with evidence that job-creation is increasingly in lower-skilled areas. His contention that immigrant labour should be given access to jobs in a wider range of sectors will be welcomed by business.
However, the case of Irish Ferries has shown how downward wage pressure, driven by immigration and globalisation, can generate strong emotions. Exposing more workers to such competition could be justified in order to create a competitive labour market. But since many workers - including public servants and those in the professions - are protected from the pressures involved, the approach will pose many questions for the social partnership process.
A less controversial proposal is the Fás suggestion for a Wage Insurance Scheme to top up the income of workers displaced from higher to lower-paid employment. It is a good strategy, the practicalities of which need to be worked out. Other proposals to examine how Disability Allowance and One Parent Family Payments can be improved to encourage recipients to pursue employment opportunities should be handled sensitively.
The central message from Fás is that the labour market is increasingly flexible and dynamic. As a result, workers must become more agile. It could have gone further in its review by examining how Government policies could assist worker mobility. There is a case for extending tax relief on costs incurred by workers who engage in adult learning and for looking at the role of stamp duty in penalising workers who need to sell their houses in order to change employment. Education policy, particularly at post-graduate level, must be addressed also. As well as providing academic courses, the third-level sector increasingly needs to facilitate the rapid acquisition of job-relevant skills.
A more difficult issue is whether social partnership and collective wage bargaining can survive increasingly divergent trends in employment and earnings as different sectors of the economy continue to go their own way.