Degrees of flexibility

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18 September 2018 | 0

Billy MacInnesI was interested to read articles in The Sunday Business Post and The Irish Times recently detailing some of the grants made by IDA Ireland to multinationals. Both papers reported that IDA Ireland had given in excess of €100 million to pharmaceutical and technology giants such as Abbot Laboratories, Microsoft, Intel, Red Hat, Pivotal Software, Analog Devices, Xilinx and SAP.

IDA Ireland was quick to defend the payments, with director of corporate communications Kevin Sammon describing them as “standard and used by all countries, including Ireland, to compete for and ensure the stability of the inward flow of FDI”. He argued FDI was “an extremely competitive sector internationally” and stressed that all IDA Ireland funding was “in compliance with EU and Irish legislation”.

And that’s a fair argument. We all know Ireland has a very aggressive FDI strategy and has been very successful at attracting large multinationals to set up operations here. But that won’t stop people complaining about taxpayers’ money being used to provide grants to US multinationals.

And you can understand why because there are issues with how the FDI regime operates. Principal among them is the question: Does Ireland have to offer quite so much to those companies to entice them to come here? Not only does it give them grants to set up in Ireland, it provides them with one of the lowest corporation tax rates in the EU. It even went so far as to provide tax relief of €5,000 for foreign executives to send their children to private school.

Ireland also provides generous tax reliefs and credits to companies that can help them significantly reduce their effective tax rate. Many of the largest multinationals have a true tax rate that is closer to 1% or lower.

The other side of this argument is that without the low corporation tax rate and generous tax breaks and instruments which have led some to label Ireland a tax haven, the country wouldn’t have most of the tax revenues it currently generates from those multinationals because many of them wouldn’t have chosen to site their European headquarters here. For an extreme example of this, you only have to look at what U2 did when the Irish government introduced a €250,000 cap on its artist tax exemption. So you can understand why people would believe that it’s better to have 1% or 2% of a lot than 15% of very little. Even if that means shelling out €100 million or more of taxpayers’ money.

No longer a question of degrees?
Another interesting story that caught my eye, especially given the skills shortage that seem to be afflicting so many technology businesses in Ireland, was a report by Glassdoor listing 15 large US companies, including Google, Apple and IBM from the IT industry, that it claimed no longer demand prospective employees have a university degree for some of their top jobs.

Among the positions Glassdoor listed as available at Google were product manager, software engineer, product marketing manager, research scientist and SAP cloud consultant. Glassdoor quoted former senior vice president of people operations Laszlo Block, who said: “When you look at people who don’t go to school and make their way in the world, those are exceptional human beings. And we should do everything we can to find those people.”

Among the roles Glassdoor said Apple was recruiting for were design verification engineer, engineering project manager, apple technical specialist, part time reseller specialist and AppleCare at Home team manager.

Glassdoor also quoted Maggie Stilwell, Ernst and Young’s managing partner for talent, who stated that while academic qualifications were an important consideration when assessing candidates as a whole for her company, they would “no longer act as a barrier to getting a foot in the door”.

There has to be a degree of scepticism around how many of those jobs would be truly open to someone without a university degree or qualification and it’s hard to quantify just how widespread this practice is. Nevertheless, there are good reasons for employers to start looking beyond a university education for potential recruits. In the US especially, the cost of a third level education is starting to act as a deterrent to many potential students, particularly when the salaries on offer after graduation frequently fail to deliver a return on the cost of their education.

This is not as pronounced a trend here in Ireland but there’s no doubt the growing cost of education and the burden it places on students and their parents, allied to the uncertainty over the value of that education in obtaining a well-paid job, is putting some people off. This is also fuelling an expectation from graduates of a higher salary to justify their degree which is making it more expensive for businesses to employ them.

So, why not take on people for some of those jobs at a lower salary and train them up? Done well, that can be a good way to engender loyalty in an employee as well. It’s all a matter of degrees. Or not, as the case may be.

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