A perennial trope of the Irish economic debate is that of the “Smart economy”. This is to be contrasted one imagines with the “dumb politics”. So how smart is the economy?
Persons in employment are classified according to where they work, among other categories. These get quite detailed, allowing a fairly high granularity. At a higher level a standard international classification is used. One of these is NACE2, from the French Nomenclature Statistique Des Activités Économiques Dans La Communauté Européenne. Thus NACE code M on Professional, Technical and Scientific activities contains Code 72, Scientific Research and Development, itself divided further down to say 72.11 Research and Development in Biotechnology. Each coding contains a fairly exhaustive description of what exactly is and is not in that section.
The CSO collect data on a quarterly basis on employment, including details of where, in the above sense, people work. This gives a great picture of where we are and as it is longitudinal, where we have come from. Starting in 1998 it gives us now a 16y picture over the end of the tiger, through the boom, the crash and now into the nascent recovery. It is important to remember that although in popular terms the Celtic Tiger is now seen as the boom, credit fuelled and bank led, the actual period of the Celtic Tiger was the late 1990’s.
First, the overall picture. Employment now is 30% more than it was in Q1 1998, some 400,000 persons but still remains some 10% below peak, approx. 200k persons. It is when you dig into the sectors that the changed landscape becomes clear
First, every sector is down from its peak, around the 2007 period for most. Some sectors have seen small changes, such as education, essentially unchanged. Others have seen massive changes, notably construction but also manufacturing. Compared to their sectoral peaks we see some massive losses in construction : Construction of buildings and Specialised construction activities are down over 75k jobs each from peak. Other areas that have seen losses of over 20k employment since peak (remember, different sectors have different peaks) are crop and animal production ( 33,000), retail (20,400) and perhaps surprisingly manufacturing of computers (21,000 losses). Other big losses have happened in wholesale trade, warehousing, and public administration.
However, change in structure is to be expected. The boom, we can argue, was somewhat artificial in its credit basis. If we look at the structure of employment , in terms of the % of total workforce employed by sector in the Irish economy since 1998 some interesting facts begin to emerge. Trade remains the largest employer, with 14% of the workforce, agriculture has almost halved from 9% to just over 5%, manufacturing has fallen from 18% to 11%. Despite its pivotal role in the fuelling of the boom the finance and real estate sectors together are not major employers, rising from 4% to 5.2% of the workforce. By contrast, employment in health and social work has almost doubled from 7.5% to 13%
But the story doesn’t end there. Within these sectors, as we have seen are subsectors. Some are ostensibly more skilled than others, at least at the EU classification level. They classify sectors into high tech, medium tech etc. When we look at the structure of employment through these lenses a less than rosy picture emerges.
We are less high tech now than we were in 1998. The percentage of persons employed in the high tech manufacturing sector has fallen from 4.1% to 3.4%. A fall in the manufacturing area, concentrated in computer manufacturing, has not been picked up by increased employment in the chemical industry. The employment in knowledge intensive high tech services sectors is slightly up from 3.1% to 4.4%. Again however when you dig into this the picture is less rosy. Computer programming etc apart, the other main component is around communications – TV and radio production, telecoms etc. This area has remained essentially static, as a proportion. Through the lens of employment, we do not have a high tech economy.
What we do have perhaps is a knowledge economy. Employment in knowledge intensive market services has risen from 6.4% to 7.1%. Knowledge intensive market services consists of activities such as legal and accounting services, PR, management consultancy etc. These have remained unchanged in aggregate but the main change has been an increase in the sector comprising Architectural and engineering activities; technical testing and analysis. Given the state of the construction and manufacturing industry it is reasonable to assume that this proportional increase is driven by technical testing etc. The sectors in Knowledge Intensive Other consist of, in the main, state activities such as health and education.
In summary, the Irish economy, when viewed from the lens of where persons are employed, is not especially high tech. It is knowledge based, but a large part of this is not immediately export orientated.
Published as a column by the Irish Examiner, 4 April 2015