Competitiveness

The enormous growth of recent years has seen a corresponding change in our labour market, with record numbers now working in Ireland. With a tight labour market looking set to continue for the foreseeable future, we must ensure as many people as possible are supported into a diverse and inclusive labour force, our taxation system is reviewed to ensure Ireland is an attractive place to live and work, and that capacity pressures in areas including childcare, healthcare and security are addressed to deliver on quality-of-life issues.

With employers of all sizes across every sector now reporting difficulties in recruiting to fill vacancies, we must facilitate an in- crease in our labour force both through attracting skilled labour from abroad and further activation of our existing working-age population not yet in employment. This will require significant investment in areas such as childcare, transport, and education to remove the barriers which prevent people from seeking employment and ensure that Ireland is an attractive place to live and work. Improving our tax offering will be key to ensuring work is re-warded and Ireland continues to be a draw for international talent.

Recommendations:

• Ensure supports for rising employment costs are fit for purpose: It is critical that the State puts in place a comprehensive support programme for companies who are struggling with the transition to the living wage and other government imposed employment costs. While the support package for labour costs in Budget 2024 are welcomed and will provide relief for some firms facing substantial increases including the 12% in National Minimum Wage (some Ibec companies are facing increases in labour costs of up to 25% by 2026), however, more targeting of supports will be needed with a multi-annual approach between now and 2026. In the immediate, it is crucial that this scheme becomes operational as quickly as possible, remains easily accessible and available to those who need it, and serves as the starting point for a broader conversation about the transition to significant labour market changes over the coming years.

• The Government must also produce a clear roadmap on other tax (PRSI, USC, IT) and social welfare (Working Family Payment, Housing Assistance Payment, SUSI grants, childcare subsidies, etc) to ensure that the introduction of the living wage does not lead to high marginal effective tax rates for workers. s outlined in the 2022 University of Maynooth report a move to a €12.30 Living wage could lead to loss of between 29% of the increase through increased taxation and lost social supports (single earner, no kids) and 76% of the increase (dual earner, 4 kids). Budget 2024 must set out a plan to ensure an increasing wage floor does not interact with the tax and welfare system in such a way as to impact on people’s incentive to work.