Job losses hit information technology sector

In 2001, there have been a number of job losses in the Irish information and communications technology (ICT) sector, with the vast majority affecting the subsidiaries of US-based multinationals. The job losses are a reflection of a downturn in the US technology sector. The announcement by Gateway in August 2001 that it is to close its European headquarters in Dublin, which will involve the loss of 900 jobs, represents the biggest single closure of an ICT company in Ireland since 1997.

From the late 1960s, the pattern of foreign investment in Ireland shifted towards technologically advanced, capital-intensive industries like electronics, computer hardware and software, machinery, pharmaceuticals and medical equipment. In recent years, the state has placed an important emphasis on attracting foreign-owned information and communications technology (ICT) companies, particularly those based in the USA, and this has contributed greatly to economic growth. As a result, the Irish ICT sector has experienced considerable expansion, much of it resulting from inward investment by large US-owned multinationals.

Some of the major companies in the Irish ICT sector, and the number of employees in each firm as of January 2001, are outlined in the table below.

Major companies in the Irish ICT sector

In 2001, however, a serious slowdown in the US technology sector has prompted a host of profit warnings. In response, a number of American ICT multinationals are implementing cost-cutting measures, redundancy programmes and even full-scale closures amongst their various worldwide operations in a bid to boost profitability. This has had, and will continue to have, substantial implications for Ireland, which is a major European base for US-based ICT firms. In 2000, Motorola made 750 workers redundant, while between January and August 2001, there have been a number of cost-cutting plans and redundancy announcements, some of which are outlined below:

• in May 2001, Dell Computers announced a voluntary redundancy package for 200 workers in its Limerick plant;
• in June 2001. Dell announced that it expected 125 workers in its Bray and Dublin plants to opt for a voluntary redundancy package;
• in June 2001, Nortel cut 800 jobs at its Belfast plant and 90 in Galway;
• in June 2001, 400 job losses were announced at Xerox in Dundalk;
• in July 2001, Intel announced that it wanted up to 170 voluntary redundancies;
• in July 2001, Compaq announced sharply lower profits, and that it was reviewing its Irish operations. This could result in job losses; and
• in August 2001, Gateway announced the closure of its Dublin plant with the loss of 900 jobs.

Gateway announces closure of Dublin plant

The announcement on 8 August 2001 by Gateway, the US-owned computer manufacturer, that it is to close its European headquarters in Dublin, which will involve the loss of 900 jobs, represents the biggest single closure of an ICT company in Ireland since the infamous closure of the Seagate factory in 1997, which resulted in 1,600 job losses. Gateway's Dublin plant opened in 1993 to manufacture personal computers for markets in Europe, the Middle East and Africa. According to company management and employer representatives, the closure has been prompted by a decline in profitability resulting from decreased customer demand for personal computer equipment, as well as increased competition from low-cost producers. It appears that the company has decided to boost profits by 'exiting' its other markets and concentrating on the US market.

Under EU law, as implemented in Ireland, the company has to consult with employee representatives over the planned collective redundancies. To this end, company management was to engage in a 30-day consultation period, during which time it would examine redundancy terms with an eight-person employee representative council recently elected by secret ballot. It appears that the only compensation for employees due at this stage amounts to statutory redundancy pay of half a week's pay per year of service for each employee under the age of 41 years, and one week's pay per year for those over 41. It remains to be seen if any extra compensation will be provided. In April 2000, 200 workers who were made redundant by Gateway received five weeks' pay per year of service, including statutory entitlements.

Although Gateway is non-unionised, and like the majority of US-based multinationals operating in Ireland, is strongly opposed to trade unions, the Irish Congress of Trade Unions (ICTU) and the Services Industrial Professional and Technical Union (SIPTU) have offered to assist workers facing redundancy. An ICTU representative stated that it was important for workers 'to get the best deal possible. Obviously not having a union will add to their difficulties and if they want advice or assistance we will help them. But there is no substitute for having an organisation on the ground.' He urged other workers in the sector to join unions 'before the horse has bolted'. SIPTU, meanwhile, has promised to provide advice and free administrative assistance to workers. It offered a similar service to the 1,600 Seagate workers who were made redundant in 1997. Like Gateway, Seagate also refused to recognise unions.

Commentary

In recent years, buoyed by substantial investment from large US-based multinationals, the ICT sector in Ireland expanded considerably and has contributed to high rates of economic growth and impressive job creation. In recent months, however, there have been a number of job losses in the Irish ICT sector, primarily as a result of the downturn in the US technology sector. It seems likely that the current fragility of the US economy, and, it seems, the whole global economy, will provoke a degree of further 'restructuring' and job losses in the Irish ICT sector in the months to come.

However, some companies are more exposed to this possibility than others. Technologically advanced companies such as IBM and Apple are less exposed because they employ skilled workforces who manufacture a complex range of products. It is more costly to relocate such operations. By contrast, less technologically advanced companies such as Gateway and Dell employ less skilled workforces who assemble computers, and it is easier and less costly to relocate production. Moreover, there is a danger that what is happening to companies such as Gateway and Dell will produce a knock-on effect by endangering the prospects of the many small indigenous companies which supply them.

These factors illustrate that the previously booming Irish ICT sector is not immune to downturns in the wider global economy. Indeed it is the large size of the ICT sector in Ireland that increases its susceptibility to such a downturn. As history shows, the economic system is subject to periodic crises of profitability caused by increased competition, which leads to over-production, and, then, an eventual 'shake-out' characterised by cost-cutting, redundancies, and even plant closures. This 'adjustment' is what appears to be unfolding in the ICT sector at the moment.

Significantly, the events of recent times illustrate just how vulnerable workers are to company 'restructuring' in an economic context where there are very few restrictions placed on the activities and movements of multinationals. This vulnerability is particularly pronounced in powerful US-based multinationals such as Gateway which are strongly opposed to trade union recognition, and indeed, have made any inward investment conditional on unions not being recognised. (Tony Dobbins, CEROP, UCD)