Future Skills and the External Minimum Wage
4 Dec 2006
We Should Pay non-EU Workers What They are Worth - Is is time for an 'external minimum wage'?
By David Begg - Published in Irish Independent, 4th December 2006
There has clearly been some leaking of the impending report of the Expert Group on Future Skills Needs. The recommendations, if accurately reported, should be broadly welcomed.
Some hold to the belief that the future of work in Europe is one in which only 15 percent of jobs will be low-skilled. The problem is that 30 percent of the European workforce is actually in the low-skill category.
The situation in Ireland is worse. Here, notwithstanding how we pride ourselves on our educational achievements, some 33 percent have low level qualifications, rising to an alarming 40 percent for male workers.
The Future Skills report correctly identifies the paradox of our labour market, in that we require almost one million high-skilled new entrants by 2020. The report forecasts that 640,000 of those will be school leavers, with the remainder made up by increased participation rates (particularly of women) and inward migration.
There will be strong support for the report's recommendations on upskilling workers currently in employment, equipping them to move up the employment value chain. Indeed, there is already agreement on this in Towards 2016.
Delivering on that agreement will be the challenge. Assuming the required resources will be made available, the key to success will lie in motivating people. It would not be easy for someone who had a bad experience in the education system to go back a second time. Overcoming this will be difficult, but initiatives like paid educational leave and the refunding of fees would help enormously.
The second challenge will be to increase the participation rate of women in the workforce, from its current rate of 60 per cent (the rate for men is 72 percent). The main obstacle to increased participation is the caring responsibilities women undertake on behalf of society. These include care of the elderly and children.
Current government policy is to create conditions where the supply and cost of caring services are functions of an 'assisted market'. This will not work because, as more women enter the labour force, demand for caring services will increase, and correspondingly fewer people will be available to provide them.
There is another connection which needs to be made in this regard. It is a well documented reality that early learning is the key to how well a child progresses through the entire educational system. We have to acknowledge the linkage between early learning and childcare and invest in it as a 'public good.' Markets will not accomplish this. It requires public service provision.
Ireland, and indeed Europe, is in competition with countries like the US, Canada and Australia for highly-skilled immigrants. As the report of Future Skills Needs group points out, many highly-skilled immigrants in Ireland are not working in jobs commensurate with their skills, but are concentrated at the lower end of the scale. A recent ESRI paper revealed that immigrants from 10 new EU member states were earning 45 percent below what their qualifications would entitle them to earn.
There is a real danger that increasing tensions in the labour market arising from pressure on the lower income levels will inhibit the achievements of best social and economic outcomes from immigration.
So, in that context, I would put forward one additional proposal for consideration. We already recognise the desirability of a skills-based migration policy operated via a green card system. Why not complement this with 'an external minimum wage'?
This would mean that those coming here to work - from outside the EU - would have to be paid a core, or basic salary close to the average industrial wage.
The clear advantage is that the economy would be able to access a supply of highly- skilled people who would have to be employed at the appropriate level to remunerate the investment in them. It would also ease the pressure on wages at the lower end of the labour market. Most importantly it would force Ireland to take the high road to a high productivity knowledge economy, as distinct from the low cost, low skills, low productivity model.
This is a choice Irish business will only make if it is given a firm push in the right direction. The aforementioned report is good, but it will require a catalyst to make it work. The concept of an external minimum wage might well be that catalyst.
The real danger lies in viewing immigration as a tap that can be turned on or off at will, to satisfy labour market needs. It is a much more complex than that. Indeed, Eastern Europe will not be a long term source of labour supply. Its demographic profile is no better than the rest of Europe. In 5 to 7 years the European Baby Boomers will be retiring and with that will come fierce competition for highly-skilled people. Ireland, by virtue of its better demographic profile, has a slightly longer window of opportunity to get things right. But we need to start now.
David Begg is General Secretary of the Irish Congress of Trade Unions