Clare Daly (Dublin North, Socialist Party)
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109. To ask the Minister for Jobs, Enterprise and Innovation his views on whether it is appropriate for the chief executive of the Industrial Development Agency to laud Ireland's low pay as a selling point for multinationals. [17470/14]

Richard Bruton (Dublin North Central, Fine Gael)
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I have not seen any of the comments to which the Deputy could be referring to. IDA Ireland competes globally for high quality mobile foreign direct investment (FDI). There are now a growing number of global locations that are competing for mobile investments including Asia Pacific and Eastern Europe on the basis of low costs but also future market potential. The effect on Ireland now is that we are competing for a bigger pool of investment but against an increased number of potential locations with attractive product offerings.

Cost competitiveness is a key factor particularly related to property and construction costs, energy costs, wages and salaries, local authority charges and services where competition may be limited. Continued flexibility in responding to changes in both local and international economic conditions is essential.

The report of the National Competitiveness Council “Costs of Doing Business in Ireland 2014 Report”, which was launched just two weeks ago shows that Ireland’s cost base has improved across a range of metrics over the last number of years making Irish firms more competitive internationally and thereby making Ireland a more attractive location for firms to base their operations. However, the Report also finds that, despite these improvements, Ireland is still a high cost location for a number of key business inputs.

Taking labour costs as an example, labour costs are rising again following a number of years decline. Although growth in labour costs is now below the Euro area average, gross earnings are the 8th highest in the Euro area while net wages are the 6th highest.

The importance of wage competitiveness in future economic development is illustrated by the status of the Manufacturing Sector in Ireland. In light of the serious decline in employment in that sector over recent years, with 50,000 jobs having been lost in the decade to 2010, I arranged for Forfás to undertake an in-depth study of Manufacturing in Ireland and I launched that Strategy early last year. A very wide range of issues and solutions were identified and analysed, including an assessment of various cost competitiveness factors for the sector. The study found that average pay levels in Ireland were higher than those in Germany and the UK and that hourly labour costs for Manufacturing were almost 50% more expensive here than in the UK. Further recent research shows that there has been a decline in labour costs in the years since 2009 but this trend is now being reversed with recent growth over the last year or so. Our Manufacturing Strategy has set an ambitious target of creating an additional 20,000 jobs in this sector by 2016 but we need to be mindful of the significant impact that our labour cost competitiveness will have in achieving this target.

While Ireland’s competitiveness has improved in recent years, we must continue to do more, to ensure that these competitiveness gains are not eroded as the economy begins to recover and that we continue to address the structural imbalances which had built up over the lifetime of the previous Government. Ireland’s continued success in attracting foreign direct investment requires a clear focus on improving and enhancing the national competitive environment, easing the impediments to business investment and encouraging job creation.