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By | Chris Mellor 11th January 2009 08:02

There's no riddle to Dell's Limerick move

Ireland picks up the pieces, counts the cost

Comment As the shockwaves of Dell's dreaded but expected withdrawal from Limerick manufacturing reverberate around Ireland's mid-west region, some lessons are emerging.

The big theme emerging in many reports and commentaries is that the boom in semi-skilled assembly line jobs is well and truly over. There doesn't appear to be any other business likely to come to Ireland and employ 1,000 plus workers on an assembly line. It's cheaper to do it elsewhere, in a low-wage economy, and ship the goods to the geographies that would be served by an Irish base.

For suppliers like Dell that need a responsive assembly/manufacturing operation in the EU, the accession of Poland and other east European countries into the EU was a godsend; for Ireland, it has been a disaster. Where Dell is going other hi-tech employers may follow - Intel has a chip plant in Ireland, and HP makes printer cartridges there too.

For both of them the annual cost of an Irish worker will be more than the annual cost of a Polish worker. They too will be looking at the numbers and doing a what-if-we-moved-to-Poland spreadsheet calculation. The EU wants a level playing field, and limits what member countries do in the way of bribing businesses to come to them via grants, subsidies and tax concessions.

Unfortunately the EU does not enforce such a level playing field in pay, and that means new and low labour cost countries that join, like Poland, enjoy a few years of competitive employment advantage until their labour costs are equalised with the rest of the EU.

A matter of degree

Ireland knows this, which is why government ministers and Irish Development Agency (IDA) staff are talking of keeping Dell R&D jobs in Ireland and hoping to expand them. They know hi-tech assembly line jobs are just not hi-tech enough. Having a semi-skilled workforce doesn't cut it any more - it has to be fully-skilled, to degree level.

This means that the Raheen semi-skilled workers need to get themselves certificated-up if they want that kind of work. Obviously this is a nonsense for the majority of them, and the chances of them finding similar jobs to their Dell ones are slim, because we're heading into a recession with no light at the end of the tunnel yet.

For some of them they will be like the laid-off miners in English villages dominated by a closed pit in the 1980s and early 90s. It's into service industries for them - mini-cabbing, becoming a plumber, doing small-scale building work.

At least they will have their severance package. As the reality of the difficulty of getting replacement jobs sink in there is some anger at the package, which is six weeks' pay for every year worked, excluding bonus and overtime, up to a limit of 52 weeks pay. Long-term employees, typically older and thus less likely to find alternative work, are said to resent this.

The workers are also said to feel that Dell has lied to them about its intentions, ever since the Polish plant was built. Dell Limerick staff went over to Lodz to train workers there and help get the plant up and running; the thinking is that Dell was preparing to move jobs to Lodz all along, and has used the recession as an excuse.

Companies like Dell, meaning large companies, will always be running scenarios through spreadsheets. If notebook and PC demand in the EU had held up, even continued growing, then both Lodz and Limerick would have been needed to satisfy that. But Mark Hurd came along and Vista killed the hoped-for PC/notebook upgrade cycle.

Mark Hurd revitalised HP which ramped up its PC business and succeeded Dell as the number one shipper. That was one thing that cramped Dell's business. The second was Vista, Microsoft's dreadfully mis-executed upgrade to XP which required more PC resources - the traditional Microsoft O/S upgrade disadvantage - without offering enough performance and functionality improvements.

Vista is a dog and Apple's Leopard OS is reaping the benefits while Dell charges a fatuous $150 to downgrade Vista PCs to XP. Oh Microsoft, just how stupid is that?

The rise of netbooks has placed a floor under notebook demand, and the total EU demand for Dell computers now only needs one plant, and the one in Poland is it. When Irish workers benefitted from Ireland being a lower-cost place to put plants than the UK or France or Germany, they sipped their Guinness with relish. Now that Poland is doing to Ireland what Ireland did to other western European countries, they are crying into their beer. It's just how it goes.

A numbers game

The IDA is reported to be looking at whether Dell should repay any of the grants it has had over the past few years, nothwithstanding Dell saying it has fulfilled all its obligations in that area. But this is likely to be IDA bluster; you don't try and negotiate with a company to keep R&D and supervisory jobs in Ireland and bring new R&D work in while simultaneously clawing back previous grants - like, just how badly do you want these new jobs?

A dawning realisation in Ireland is that it will have to expand university and technical college education. If it's a white collar future and not an assembly-line one, then that means the current generation of semi-skilled workers have had it. There's more of them than the country currently needs and they'll have to do the best they can whilst the country educates their children for the hi-tech R&D jobs.

These jobs will come in dribs and drabs, 20 here, 40 there, not in thousand-plus lumps. The IDA has got to attract many more firms to Ireland. For every Dell with almost 2,000 workers the IDA will need to attract, say, 50 businesses to provide the same number of jobs, and the Irish education system will have to provide 2000 graduates in the right disciplines to gain the jobs.

There's safety in these numbers though, because individual firm moves out of Ireland won't be as damaging as the Dell Limerick assembly plant shutdown.

The numbers are inescapable, the Dell move inevitable, and an Irish future involving semi-skilled assembly line work just isn't viable. It will be a shock and the government will have to be pragmatic, move with the times, and do what it can for the semi-skilled whose job prospect future is diminishing and look to a degree-led employment future. ®

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