Shifting workers into the health and construction sectors to meet labour market shortfalls could have “significant” implications for the rest of the economy, the Department of Finance has warned. In a paper published on Tuesday, the Department found that demand for labour in healthcare and construction is likely to outstrip supply growth, meaning the State could face growing shortages if more of the workforce is not directed towards these areas.Additional workers in these sectors will be essential to care for an ageing population and to address housing and infrastructure needs. Given their importance, the report says it is plausible that their needs could be prioritised in some form in the decades to come.“In that case, the implications for the rest of the economy would be significant,” it states. This could cause a “dampening” of the availability of labour across all other sectors – “some of which are crucial for elevating Ireland’s productivity levels and provide a significant portion of tax revenues”. The paper estimates that prioritising sectors like health and construction could leave the available supply of workers for the rest of the economy over 20 per cent lower than now by 2065. The 9 per cent VAT rate has been welcomed by restaurants but does the hospitality sector actually need it? Listen | 39:12The Department has previously projected that labour market growth may stagnate from the mid-2040s onwards. It is now warning that if it happens earlier, due to workers moving into health and construction, “it may have considerable economic and fiscal impacts”.It calls on policymakers to be aware of trade-offs in addressing labour market challenges, confirming Ireland will require more workers in health and construction but noting that “meeting these demands will inevitably constrain the capacity for further expansion in many other areas of the economy”. Prioritising labour allocation to meet social needs would be a shift from the “current and long-standing assumption that market forces alone should balance labour supply and demand”, it acknowledges.Policy responses to shortfalls could include education and training programmes aligned with national needs, direct incentives to attract workers into priority sectors, or targeted immigration policies. However, it says that “prioritisation carries consequences” and that high value sectors could face constraints on their growth if workers were diverted elsewhere “with implications for innovation and competitiveness across the economy”. The paper also suggests that a re-examination of how progress in the Irish labour market is measured may be prompted, including a shift away from the quantity of jobs created “to the quality and societal value of employment”. The paper also looks at the issue of overqualification in the labour market, which it says is widespread in some sectors. This, it finds, could mitigate the negative effects of a shift in the labour market to meet the demands of healthcare and construction. With a significant share of third-level educated workers in Ireland overqualified for their current roles, it suggests that, hypothetically, they could be replaced by less qualified workers in their current roles.The report urges the Government to “facilitate rather than obstruct” the reallocation of workers across sectors to ensure skilled labour is used as efficiently as possible. “This will require an agile education and skills policy response to market developments as they occur over the coming decades, with a strong focus on boosting the country’s overall productivity levels,” it says.