Micheál Martin (Cork South Central, Fianna Fail)

Both are lumped together implicitly or explicitly as generating what is being referred to as a "race to the bottom". The irony is that this is happening at a time when the economy was never more successful. On the one hand migratory inflows have been an essential ingredient in meeting our labour supply needs which has helped generate the levels of economic growth we have been achieving. Every respected economic commentator recognises that such inflows will be needed into the foreseeable future, as Deputy Eamon Ryan and Deputy Finian McGrath have acknowledged. This is apart from the moral entitlement of the newly acceded member states to the freedom of movement provisions of the EU treaties.

On the other hand services are very much where our future lies, where the knowledge economy manifests itself and where human capital comes into its own. The enterprise strategy group identified the potential for Ireland to create a substantial number of new, quality jobs in sectors such as intellectual property, franchising, international marketing, creative services, shared and outsourced business processes, supply chain management, construction related services and consultancy services. We will not succeed in doing this on the basis of relying on our national market. We need to be able to develop and sell these services on a European and world platform.

The Government's commitment is a race to the top. The investments we are making in human capital, in our education system, in research and development, in attracting high value added inward investment, in our high-growth potential indigenous companies, are about putting in place the conditions for sustainable growth. The high-value services sector is an increasingly important part of that landscape.

It is ironic that this muddled thinking between immigration policy and the services directive is being identified with assertions of wage undercutting and displacement. The empirical evidence, such as we have it, does not back this up. Between 1998 and 2003 nominal compensation, or wages, in Ireland grew by 37%, in contrast to Germany where it grew by 8.7%. By 2004 gross annual average compensation in Ireland was just over €38,000 as against an EU average of €34,600. For 2005, the figure is €40,010. Employee costs in 2005 grew by 4.9%, the fourth highest among 16 countries benchmarked by the National Competitiveness Council. This is not a manifestation of an economy in which significant wage undercutting is taking place.

On the matter of displacement, we have the lowest unemployment rates in Europe. There is however some structural change taking place of which we need to be wary. Ironically it is not in the services sector but in the exposed and traded manufacturing sector where the pain is being felt most and competitive pressures apply. If there is a concern about potential displacement this is where it will be felt first. Our cost base, including our labour costs, are in danger of getting out of kilter. That is why it is essential, as we hopefully head into a new social partnership agreement, there must be moderation in wage demands.

Ireland, and this Government, has been a supporter of the objective of developing a single open market in services in Europe. I was glad to hear Deputy Harkin say more or less the same when she said we need a social services directive.

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