Willie O'Dea (Limerick City, Fianna Fail)
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Question 95: To ask the Minister for Jobs, Enterprise and Innovation his policy on tackling labour market costs; and if he will make a statement on the matter. [13170/12]

Willie O'Dea (Limerick City, Fianna Fail)
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Question 96: To ask the Minister for Jobs, Enterprise and Innovation his policy on increasing labour market flexibilities; and if he will make a statement on the matter. [13171/12]

Richard Bruton (Dublin North Central, Fine Gael)
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I propose to take Questions Nos. 95 and 96 together.

Employment policies that promote labour market flexibility together with tax and benefit systems that reward work and provide a pathway to employment, education and training opportunities for those who have lost their jobs are a necessary prerequisite for progress. The measures in the Government's Action Plan on Jobs together with those to support the unemployed to return to the workforce in Pathways to Work are consistent with the European Union's policy of flexicurity as an integrated strategy for enhancing, at the same time, flexibility and security in the labour market. Measures to combine flexibility and security represent a crucial element of the annual Employment Guidelines and the European Employment Strategy as a whole.

As a result of successfully shifting taxes away from labour, towards areas less detrimental to employment growth, Ireland's tax wedge on income earners is the lowest in the EU 27. This is consistent with the aim of developing a tax system that supports competitiveness, employment and enterprise. According to the latest OECD Taxing Wages report, based on wage and tax levels for 2010, Ireland had the eight lowest tax wedge (29.3%) of the 34 members in the OECD for a single worker on average earnings (€39,555).

Ireland has been able to bring down its unit labour costs substantially from 2008. Unit labour costs measure the average cost of labour per unit of output. Declining unit labour costs mean that productivity has increased faster than earnings – thus indicating an improvement in competitiveness. While the rate of growth in Irish unit labour costs significantly exceeded the OECD and euro area averages between 2005 and 2008, unit labour costs in Ireland have been falling consistently since then. Meanwhile, average OECD and euro area unit labour costs have continued to grow, albeit slowly. Therefore, at an economy wide level, Irish labour wage rates – when adjusted for productivity – are becoming more cost competitive. Unit labour costs are improving faster in the internationally trading manufacturing sector than in more closed sectors of the economy.

In its recent European Economic Forecast for Autumn 2011, the European Commission anticipates that Irish unit labour costs will fall by a cumulative 14.4% over the period 2009 to 2013. This decline reflects a recovery in productivity coupled with a decline in compensation per head. Unit labour costs in the euro area as a whole, by comparison, are forecast to increase by 6.6% over the same period. Therefore, Ireland's relative position will have improved by around 21% vis-À-vis the Euro area since 2009.

Labour costs remain a significant component of overall competitiveness; international benchmark data show that labour costs account for as much as three quarters of location-sensitive costs in manufacturing and that Ireland still has the tenth highest total labour costs in the OECD.

Ireland's labour market flexibilities are acknowledged as a valuable accompaniment of our open economy, high level of human capital and business friendly environment. The quality of Ireland's labour market ranks highly in international comparisons. In the 2011 IMD World Competitiveness Yearbook, Ireland is ranked first in terms of availability of skilled labour and seventh for the flexibility and adaptability of people.

The Action Plan for Jobs identifies the scope for reducing the cost of business and easing new recruitment through a series of initiatives, including:

o Simplifying and extending the Employer Job (PRSI) Incentive Scheme, which exempts employers from liability to pay their share of PRSI for certain employees. The scheme will be extended to cover the first 18 months of employment

o The National Internship Scheme provides internship opportunities of 6 or 9 months for unemployed individuals in organizations in the private, public and community & voluntary sectors.

o The Revenue Job Assist Scheme provides incentives to employers through a double deduction and for employees through additional tax allowances for those unemployed for at least 12 months.

o The new incentive scheme to encourage foreign mobile talent (SARP) will allow multinationals and indigenous companies to attract people to create more jobs and facilitate business expansion in Ireland.

High unemployment remains a difficult challenge and requires resolute action through appropriate reforms in the labour market, including measures to reform statutory wage setting mechanisms to ensure that they are responsive to changing economic conditions and the transformation of labour market activation policies along the line outlined in the Government's policy statement Pathways to Work.

Willie O'Dea (Limerick City, Fianna Fail)
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Question 97: To ask the Minister for Jobs, Enterprise and Innovation his policy on tackling competitiveness; and if he will make a statement on the matter. [13172/12]

Richard Bruton (Dublin North Central, Fine Gael)
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The Government has an ambition to make Ireland the best small country in the world in which to do business by 2016. To achieve this objective, we must improve our international competitiveness and the competitiveness of companies based here. Competitiveness is determined by a variety of factors, including business costs, increased productivity, the availability of skilled labour, good infrastructure, the quality and intensity of innovation and research, and regulation that supports enterprise growth.

Since 2008, Ireland has regained some of the competitiveness it had lost. However, more must be done to ensure that the improvements we have achieved are structural in nature and sustained in the longer-term. The Government's Action Plan for Jobs, which was published on 13th February, includes a range of initiatives to improve our competitiveness including measures to:

· promote investment in innovation and research,

· reduce costs for businesses,

· align skills with enterprise needs,

· prioritise infrastructure investment, and

· Reduce costs through sensible regulation.

Details of the specific actions to be taken in each of these areas are available in the Action Plan.

One of the key actions to be undertaken by my Department and Forfás this year is to identify a set of competitiveness indicators where Ireland's international performance can be improved through domestic policy action. In the areas identified, we will quantify the level of improvement necessary to place Ireland amongst the five most competitive economies in the OECD, and we will set out the policy actions required to achieve this goal.