Ireland Relies on Immigrants to Drive Economic Growth

Due to limited slack in the domestic labour market, Ireland's economic growth will rely on immigration and productivity improvements, according to the Department of Finance's Economic Insights series. The post-pandemic recovery was driven by inward migration and increased labour force participation, but the domestic labour supply is reaching its limits due to an ageing population and the widespread activation of the available pool of workers. The analysis highlights the importance of increasing the labour pool through immigration and driving more productivity from the existing workforce.

Key Takeaways:

• Ireland's domestic labour market is reaching its limits due to an ageing population and the widespread activation of the available pool of workers, with barriers to participation for the inactive cohort of potential workers preventing many from joining the workforce.
• The country relies on immigration to drive economic growth, with the share of foreigners in the labour force reaching 21 per cent at the end of March, up from 16 per cent in 2021.
• Employment growth for non-Irish nationals was 8 per cent in the first three months of the year, while for Irish nationals it was just 2 per cent.
• The appetite for foreign labour is being fed by a work permit system that issued a record 39,390 authorisations last year, with over 17,000 issued this year.
• Indians are the largest national cohort among work permit holders, taking up nearly 30 per cent of the permits, followed by workers from Brazil and the Philippines, with about 10 per cent each.
• The department also examined options for reducing the slack in the labour market by reducing underemployment, unemployment, and inactivity, but finding more workers among the unemployed has limited scope for impact.
• Labour demand is greatest in the highly skilled sectors of the economy, whereas the unemployed population has a generally lower skill level than the working population.
• The total hours worked has only increased by 10 per cent over the past five years, suggesting a decline in labour output per worker.

Statistics:

• The share of foreigners in the labour force reached 21 per cent at the end of March, up from 16 per cent in 2021 (CSO).
• Employment growth for non-Irish nationals was 8 per cent in the first three months of the year, while for Irish nationals it was just 2 per cent (CSO).
• The work permit system issued a record 39,390 authorisations last year, with over 17,000 issued this year (Department of Foreign Affairs and Trade).
• Indians account for nearly 30 per cent of work permit holders, followed by workers from Brazil and the Philippines, with about 10 per cent each (Department of Foreign Affairs and Trade).
• The total hours worked has only increased by 10 per cent over the past five years, while employment has risen 18 per cent (Department of Finance).

Sources:

• Department of Finance, Economic Insights series, analysis published last week.
• Central Statistics Office (CSO).
• Department of Foreign Affairs and Trade.