Business Week International Spotlight on Dublin
MORE THAN A TEMPEST IN A TEA BREAK...AS IRISH JOBLESSNESS SWELLS
Nestled at the foot of the Dublin mountains, Tallaght is the border between the old Ireland and the new: small stone cottages with back gardens large enough to feed a family and a horse sit next to rows of identical white houses fronted by cars and neat, pocket-sized lawns. But a pall has been thrown over this nascent modern industrial Ireland by a month-long labor dispute that for a while centered on a 10-minute tea break. Workers at General Motors Corp.'s Packard Electric Div. almost chose to see their factory closed rather than accept measures aimed at keeping its costs competitive with Eastern Europe.
Trouble began in the summer, when Packard, Tallaght's largest employer and the 10th-largest multinational employer in the country, lost 25% of its business to a Hungarian rival. Packard demanded savings of $6.3 million a year from its workers, to be paid for by two additional working hours a week, a two-year pay freeze, and the end of one of two 10-minute tea breaks. The workforce twice rejected the company's proposals until an 11th-hour government intervention restored the tea break.
Packard, which makes wiring for GM cars, is part of an Irish Industrial Development Agency (IDA) success story in which a car-components industry, beginning in the mid-'80s, has been created from scratch. The industry now employs 10,000 workers and has an annual turnover of $837.5 million--all in export sales. In 1994, Irish exports of $34.75 billion equaled 73.6% of gross national product, providing much of the oomph for a growth rate of 4.8%, the fastest in the European Union.
The issues that are encapsulated in the Packard dispute have sent a chill through Irish industrial policy. Ireland has sought to offset the problems of being a late-developing economy on a sparsely populated island by courting foreign investment with its moderately priced, technically literate, and well-educated workforce. But countries in Eastern Europe with a long tradition of manufacturing are now able to compete, with educated workers costing approximately 10% as much as their Irish counterparts. Gerry Dempsey, director of the powerful Irish Business & Employers' Confederation (IBEC), says there are 100,000 jobs that might be lost or affected in the new competitive situation.
POPULATION BOOM. Dempsey is anxious that Ireland not see Packard as a signal to get out of labor-intensive industry. What else, he asks, is going to solve Ireland's massive unemployment problem? Not only is unemployment for 1994 put at 15.25%, second-highest (after Spain) in the European Union, but "we have a big influx into our labor force each year," Dempsey says. In the 12 months ending in April, 1994, Ireland's population over the age of 15 increased by 25,000.
Continuing unemployment in the face of sound fundamentals has been one of the puzzles surrounding Ireland's good economic news. In early 1993, the number of unemployed hovered around the 300,000 mark out of a workforce of 1.3 million and a total population of 3.5 million. Some estimates placed unemployment at 400,000 by the end of the decade, despite emigration that has reached almost 1% of the population in some recent years. Worse yet, 39% of those out of work have been unemployed for three years or more.
So why would the Packard workers be "voting themselves out of a job," as one member of the right-of-center Progress Democrats Party put it? PDP leader Mary Harney, who happens to represent Tallaght, is more sympathetic to the workers. She thinks the answer is an income tax system that she feels "removed the incentive to work" by taxing anyone earning more than $13,000 at 48%. Harney explains the dilemma the tax system creates for one of her constituents, a Packard worker: "She earns $332 a week, but after tax and social-welfare payments, she takes home $225. Out of this, she pays $63 to have her child minded." Harney adds: "For her, being on the dole is not a bad option."EDITED BY JOHN E. PLUENNEKE By Carole Craig in Dublin