Thursday, December 8, 2011

08/12/2011: An even greater threat

Here's an even greater threat to Ireland's 'economic model' - the one based on attempting to attract into this country a new generation of FDI - FDI that is increasingly based on human capital-intensive activities.

BBC report here covers increasing mobility of skills across the borders (link). And I co-authored recently a report on this (here).

But Ireland, folks, is not a serious contender for this capital due to the confluence of the following trends here and abroad:

  1. Our taxes on top earnings - earnings associated with higher human capital, once we remove the egregiously high salaries at the top of the public sector bureaucracies and in sheltered private/semi-state sectors;
  2. Our quality of public services that can be meaningfully utilized by people with higher human capital is not up to scratch - in health, education, transport, urban amenities, cultural amenities and Government services;
  3. Our quality of promotional opportunities within the country is restricted, especially for foreign talent due to archaic promotion practices and cronyism; and
  4. Our quality of public discourse, when it comes to higher earners is toxic - in part justified by absurdities of our top public sector brass who enjoy earnings well in excess of their talents, and in part justified by our absurd 'bankers' whose performance in the past is also unmatched to their earnings.
So we are witnessing an outflow of key talent from Ireland. In recent months a large number of high quality academic researchers have packed up and left (or currently leaving) this country. In a number of sectors - including the 'flagship' ICT services sector - we are seeing jobs moving after key workers (not key executives, as our Government mistakenly thinks, judging by the special measures in the Budget 2012, but key skills-holders). In a number of sectors, we are failing to develop critical mass of skills and activities due to lack of talent - one example would be funds management in IFSC, the area where policymakers have been trying to build activity for some 5 years now.

Now, we might think that these issues should be priority number 734 or so on the list, given the gravity of our crisis, but they are not. Long term competitiveness no longer rests on simplified harmonized indicators for brawn labour, but on yet-to-be-compiled indicators of our human capital pool. And here, mass-produced degrees with plausible-sounding names of poorly ranked institutions on them won't do the job. Ireland is facing two roads ahead: one road leads to a low wage, low income autarky of skills, another to a high wage, high income open skills economy. So far, our policy wheels are pointed firmly in the direction of the former.

1 comment:

Alan O'Brien (@alanob2112) said...

Which is why it is so disappointing to see economically literate TDs like Stephen Donnelly pandering to this toxic public discourse -

In the preceding link he argues for a further temporary levy on high earners, originally quoting incorrect effective tax rates until I gently remind him about the impact of PRSI/USC.

Even then, he still refuses to concede that his argument is counter-productive to the type of economy he has previously said he wants.

Like I said, disappointing.