Tech gap shows Ireland’s two economies
A short report published in the business section of the Irish Times caught my attention this morning. Peter Burke, Minister for Enterprise, told the Dáil that Irish small businesses “have a lot of work to do” on adoption of digital technology, including what can only be described as the fairly basic process of getting a presence on the Internet.
This is interesting firstly because most Irish businesses are small businesses, and secondly because Ireland projects an image of itself as Europe’s home for digital technology.
Burke said he believed “digital transformation is key to the SME sector but it is one area where I would be quite alarmed because some SMEs have a lot of work to do in that regard”.
It’s hard to disagree, at least with the part about the lack of engagement with digital technology by small businesses. Whether or not digital transformation is the key to anything is another matter, though. Nevertheless, leaving aside the nebulousness of the concept and its potential for hoovering up otherwise productive capital and diverting it to useless consultants, what has really been unmasked here is a significant economic issue – one with significant social and political consequences.
Ireland’s economy is odd, and everyone knows it. Such is the distorting effect of foreign-direct investment (FDI), that the Central Statistics Office had to invent its own ‘modified gross national income’ (GNI star) metric to measure the country’s economic performance because Irish gross domestic product (GDP) figures are useless.
Interestingly, even things like aviation leasing have been accused of warping the headline figures in Irish economic reporting. Without a doubt, though, it is US Big Tech that has the biggest impact on the economy – and, indeed, our self-image as a high-tech country.
Foreign-direct investment, which hit €1,284 billion in 2022, is welcome, of course, but its impact is not just on macroeconomic statistics. In reality, Ireland has two economies, or at least one that is partitioned.
Looking at wages alone, by 2021, 33% of the national wage bill in the economy was earned by those working for foreign-owned multinationals. And while things like the housing crisis can hardly be pinned on well-paid tech workers, the tech salary money firehose certainly did its part to mask the country’s problems.
However, workers in domestic outfits, even tech ones, are certainly not as handsomely remunerated. When the FDI tech sector went on a firing spree in 2022 and 2023, many people I spoke to in senior management positions said that, despite claims the contrary, indigenous companies would not be able to mop up the staff as they would be unable to pay the enormous salaries enjoyed by erstwhile FDI employees.
Figures from the Organisation for Economic Cooperation and Development (OECD) make the point starkly: while almost 30% of workers in Ireland enjoy high pay, more than 15% are low paid. Some sectors are worse than others, indeed some such as hospitality are notorious, but there is a general trend in that the indigenous component of the economy lags behind FDI. Indeed, a 2014 Department of Finance report, for instance, noted “foreign-owned firms are consistently more productive and remunerate employees higher than Irish-owned ones”.
Anecdotally, it is also obvious that Irish businesses are investing less in technology, something visible in the persistence of the asset sweating of on-premise infrastructure. It’s hardly a surprise: if Irish companies are paying less, surely it follows that they are also investing less.
However, what the Minister for Enterprise has pointed out – that Irish small businesses are weak adopters of digital technology – is a symptom of a broader failure: the arrival of Big Tech in Ireland – to which it came simply to get a toehold in the EU, let’s not kid ourselves – has not resulted in the creation of a high-tech economy.
Subscribers 0
Fans 0
Followers 0
Followers