Monday, April 26, 2021

Ireland's FDI over-dependence and surging population

In the first two decades of the current century, the populations of the Netherlands and Denmark grew by 8 and 9% respectively; Sweden's population grew 14% and Switzerland's expanded 23%. The Irish population grew by 29%.

The peak year in modern times for immigration to Sweden was 2015 (Swedish migration laws changed in 2016) and the peak in Switzerland was 2008.

In the last decade, the Irish population grew by about 450,000 but in 6 of the 10 years, housing completions were in single-digit thousands following the collapse of the Irish construction industry from 2009.

For example in 2013 the annual housing completions were at 4,575 and the total in the decade was at 113,000.

Whether the issue is the Dublin housing crisis or meeting climate change targets, the rising population compared with other European countries is an issue. For example, the national population has grown by 43% since 1990.

The average annual population growth in the recent 5 years has been 1.19% in Ireland; the Netherlands 0.23% France 0.25%; Denmark 0.35%; Sweden 0.67% and Switzerland 0.79%.

Even during the property boom of the second decade of the century the dwellings per 1,000 population did not come near to 500.

According to the Central Statistics Office (CSO) the two counties, Dublin and Cork, account for 50% of inward Foreign Direct Investment (FDI) employment. The agency noted "It is important to highlight again that these figures refer to how many employees are residing in these counties. Dublin and Cork may have additional FDI employees residing in neighbouring counties and commuting into the cities."

Given that the County Dublin population and its commuter belt comprise about half the national population, it would not be surprising that Dublin and Cork account for up to two-thirds of inward FDI employment.

From high emigration to high immigration and fertility

In the period 1960-2020, the population of the current EU- 27 grew from 354.5m to 447.7m — an increase of 93.2m people or 26.3%. Ireland's population grew by 78.8% in the period 1961-2021.

The Irish population of 2.8m in 1961 was the nadir in the period of 1841-2021. In 1841 in the territorial area that would become the Irish Free State in 1922 and the Republic of Ireland in 1949, the population in the British administered census of 1841 was 6,528,799. It was 5,111,557 in 1851 after the devastating Potato Famine and 2,971,992 after decades of emigration, in 1926 when the first census of the Irish Free State was held. In 2021 the Irish population is about 5,040,000.

The 1970s (465,000) and the noughties (870,000) had the biggest rises in population and immigration of Non-Irish began in particular from 2004 when the former communist states of Eastern Europe joined the European Union.

Census 2016 reported 535,475 foreign national residents and the CSO estimated that the number was 644,400 in 2020.

The Economic and Social Research Institute (ESRI) has estimated that 153,000 naturalisation certificates were issued to foreign residents in the period 2000-2018 (this shouldn't be confused with residents of Northern Ireland and foreign residents overseas who have a parent or grandparent who was Irish and had been granted citizenship).

An EU national automatically acquire the right of permanent residence in another EU country if a person has lived there legally for a continuous period of 5 years.

In 2020 the number of Non-Irish from outside the EU and UK was 183,500. The number would be greater if naturalised people were included.

The annual population change was 64,500 in April 2019; 55,900 in April 2020. Net migration was 33,700 and 28,900 (of which Irish nationals amounted to -2,100 and 500).

Source: OECD

The Irish foreign population accounted for 12.9% of the population in 2020 and the foreign-born population in 2019 was 17.8% of the population.

The CSO said "The number of births was 58,300 while the number of deaths was 31,200, resulting in a natural increase of 27,100 in the year to April 2020. This is the lowest level of natural increase recorded since the 2001 population estimates."

Foreign-born women resident in Ireland accounted for 27% of births in 2019.

County Dublin has added 156,000 people since 2011 and 22,000 in the year 2019/2020. The Mid-East Region which comprises the 3 contiguous counties to Dublin — Kildare, Meath and Wicklow — added 76,000 people in the decade.

The City of Dublin (administration area of the Dublin City Council) added 27,000 people between the 2011 and 2016 censuses while the occupied dwelling numbers did not change.

The foreign-born population covers all people who have ever migrated from their country of birth to their current country of residence. The foreign-born population data include people born abroad as nationals of their current country of residence.

FDI

A long threatening comes at last and likely changes in the international corporate taxation regime come at a time when the indigenous SME (firms up to 249 employees) sector is not only struggling during the pandemic.

SME employer firms (with at least one employee) have one of the lowest export rates in Europe at about 7.5% (and that ratio includes foreign firms).

In January 2020 LinkedIn, a subsidiary of Microsoft announced plans for over 4,000 jobs in Wilton Place in Central Dublin. Last July the company announced that it would shed 960 jobs globally or 6% of the workforce.

In 2013 I reported that 70% of Google Ireland's 3,000 mainly administration/ sales support staff in Dublin were from other European countries, providing support to users in their countries of origin.

I was contacted by the press shop of IDA Ireland, the inward investment agency, querying the source of the claim. It had been stated by the head of Google Ireland and normally the agency would not reveal the local/foreign staff ratios.

In 2016 Google Ireland said it had 6,000 staff but it was not clear that besides contractors, staff of foreign subsidiaries of the Irish holding company were included in the total.

The NACE (Nomenclature Statistique des Activités économiques dans la Communauté européenne) category ''Information and communiation" in the chart on top includes sub-sectors such as newspapers, broadcasters and books publishing, besides broad ICT (Information and Communication Technologies.)

In 2002 Richard Florida, an American academic focusing on urban issues became famous following the publication of his 2002 book “The Rise of the Creative Class” which provided a template for revitalising the decaying downtown areas of post-industrial cities. His recipe was to attract young talent in computer programming, engineering, finance, media and the arts to urban centres where new economies could thrive.

In 2017 on a panel promoting his new book "The New Urban Crisis: How Our Cities Are Increasing Inequality, Deepening Segregation, and Failing the Middle Class-and What We Can Do About It," he said.

“We are cramming ourselves into this limited amount of space. And at the same time that the super-affluent, the advantaged, the creative class — we could go on and on [with what to call them] — the techies, global super-rich, absentee investors, invest in these cities, they push others out … and it carves these divides ... It became increasingly clear to me that the same clustering of talent and economic assets generates a lopsided, unequal urbanism in which a relative handful of superstar cities, and a few elite neighborhoods within them, benefit while many other places stagnate or fall behind.”

Rather than engaging in innovation, Big Tech has centralised its European sales support and administration in Dublin with multilingual staff from across the Continent. Apple has a shared services operation in Cork with several thousand staff.

Before the onset of the pandemic, it was reported that developer Johnny Ronan had offered Google an option to secure all 1,000 apartments his company was planning to build on lands in Dublin’s north docklands. More recently, Google offered 46 apartments it acquired as part of the Bolands Mills development in Dublin to key workers in the local area at a reduced rent.

In 1890 the Guinness Brewery was the biggest employer in Dublin and Edward Cecil Guinness (1847-1927), great-grandson of Arthur Guinness and 1st Earl of Iveagh, established the Iveagh Trust to provide housing for workers and other residents of the city. Still, the 1911 Census reported 23,977 one-room family dwellings housing 69,796 people or 23% of the population of Dublin.

According to the CSO County Dublin is home to half the ICT firms in the country and 62% of the employment.

Conclusions

In 2019 the CSO estimated that the Irish population could grow in the range of 5.33 to 5.81m by 2036 — 15 years from now.

Ronan Lyons, the Trinity College economist, who compiles the Daft housing reports, noted this year:

"The last two decades have seen highly suppressed household formation in Ireland — that’s policy jargon for people having to stay at home with their parents longer or, alternatively, live with friends or strangers in three- and four-bed houses because too few homes for one — and two-person households exist. This may seem like a very particular point but falling household size is adding about 10,000 new homes needed every year in Ireland … for decades!"

Following the Brexit referendum in the UK, the big professional firms (law and accountancy) in Dublin welcomed the prospect of the exodus of bankers from London to Dublin while the Government tried to get the European Medicines Agency to move to Dublin along with its almost 900 employees.

I remember thinking that these aspirations were crazy during a housing crisis in Dublin and fortunately both moves did not materialise.

Wealthy Switzerland is one of the most innovative economies in the world while Ireland ranks 19th among the 36 member countries of the OECD area.

In Ireland just over a third of private-sector workers have an occupational pension while about 85% of the employed workforce in Denmark are covered by such schemes.

Ireland will never become a knowledge economy if it continues to rely on foreign firms, despite it being the most profitable location for US firms!

Retooling Ireland's economic engine - look to Denmark & Netherlands

If there is an opportunity to develop the indigenous international trading sector, it would likely take 15 to 20 years to make a difference.

With the expanding population, the taboo subject of tax hikes to pay for an expanding commitment to housing has to be considered.

Irish households paid a mean (average) price of €296,606 for a dwelling on the residential property market in the 12 months to April 2020.

The CSO says the mean price in Dublin (€438,554) was the highest in any region or county. Dún Laoghaire-Rathdown had the highest mean price in the Dublin region at €597,931, while South Dublin had the lowest at €362,614.

The price of new houses in Dublin in 1975 was the equivalent of €13,137, while the national price was the equivalent of €13,254.