Fás has called on the Government to introduce a green card-type system for non-EU workers.
In its annual Labour Market Review, the State employment and training agency says a new strategy on immigration, which recognises the economy's increasing dependence on foreign labour, is needed.
It says the economy has become reliant on immigration, especially since EU enlargement and "it should continue to be a significant factor over the rest of the decade".
Fás predicted the strong economic performance in 2004 would continue next year, forecasting a rise in employment of over 30,000. The majority of jobs, it said, are expected to be in the services sector.
The Review recommends the introduction of a new employment subsidy for the long-term unemployed payable to employers who take on people who have been out of work for more than two years.
It also says the earnings limit for the retention of secondary benefits should be "significantly increased".
One of the Review's authors, Fás economist Mr Brian McCormick says that since the signing up to the euro "the labour market has become Ireland's main economic tool given that we no longer have control over our exchange rate and interest rate."
"Therefore, appropriate labour market policies will be central to increasing economic growth as well as social inclusion," he said.
Director General of Fás, Mr Rody Molloy said: "Ireland's strong employment performance is the envy of Europe. However, we cannot afford to be complacent."
"There are significant competitiveness issues and social inequalities that still need to be addressed," he said.
