Just look at today’s papers. There will be articles about bank bailouts for Spain and perhaps for Ireland, articles on household charges (remember those, they didn’t go away), articles on Ireland’s banks needing more cash pumped into them. Articles on stalled personal insolvency legislation, perhaps articles of the upcoming budget, perhaps an article on some celebrity misdeed, almost surely something about Jedward.
You won’t find unemployment anywhere near the front pages of any major newspaper.
Why is this?
The story is that there is no story. Yet the scale of the unemployment problem is enormous. There are about 4.58 million people in Ireland. There are about 2.2 million people in Ireland between 16 and 64, that’s the labour force. Today we have 14.3% of this labour force trying to get work and not able to find it.
I have two charts to show you. The first one, the big one, shows the annual change in unemployment since 2007. We see a huge jump from 2007 to 2010, and then the level flattens off at around 14% to 2012. The smaller one shows the change in unemployment from 2009 to 2012. Notice how flat the smaller line is. What’s the story here? The story is that unemployment as a percentage of the labour force has barely moved for three years. Despite all the talk by those in authority of 250,000 jobs for this and that, all the announcements and strategies and funds and all the rest of it, this line has not budged. No surer evidence exists that this government is failing a large proportion of its citizens.
This figure is a condemnation of the current and previous government’s approach to the stability of the country and it should be on the lips of every citizen. Yet it isn’t. Why?
Right now the standardized unemployment rate is 14.3%. We measure unemployment using the quarterly national household survey, and in the last quarter of 2011 there were 302,000 people unemployed, enough to fill Croke Park three and a half times.
A side note: the live register of people signing on doesn’t measure unemployment. To be unemployed you have to say you are unemployed, be looking for work, and so forth. The live register doesn’t capture this. People can be employed for a few days a week and still sign on, for example. There is a pretty stable relationship between those on the live register and those unemployed: one is a percentage of the other, and that’s how we get the ‘standardised unemployment rate’ each month. So when you hear politicians talking about ‘over 400,000 unemployed’, they are getting the two things--unemployment rate and live register--confused.
Anyway. One reason the unemployment problem hasn’t been tackled is that there are other problems to solve. Ireland has a banking problem to solve. The balance sheets of Ireland’s major banks are still too damaged to allow them to lend effectively into the real economy. Ireland has a fiscal problem to solve; to make the government’s taxation revenues roughly equal to the government’s spending each year. Ireland has an institutional problem with corruption as Elaine Byrne’s recent book has shown us, and, by the way, it has an unemployment problem.
Another reason is that the Troika, in their memorandum of understanding with the Irish authorities, don’t give much weight to the unemployment problem. Read the 2010, 2011, and 2012 documents on the Department of Finance’s website. The priorities are, in this order: fiscal consolidation, financial sector reforms, and structural reforms, only one of which has anything to do with employment, and that was reducing the minimum wage.
Another reason the unemployment problem hasn’t been given as much consideration is money. We don’t have any, and the bill for social transfers is already huge. The Department of Social Protection already spends almost 22 billion euros protecting the weaker member of Irish society. Expanding its remit or substantially increasing its budget simply isn’t feasible when the government is running such a large general government deficit.
Yet another reason is there really hasn’t been much change since 2009. Who wants to report that “the problem is still there, it hasn’t gotten worse I suppose” on the news? Journalists respond to sharp changes in data series. A sharp tick up, a sharp tick down would get this story on the news. Or a major jobs announcement or the withdrawal of a large number of jobs. But that’s it. The persistence of the problem is what is being lost, I think.
And this is my major point. Unemployment imposes huge costs on the people within our society. Recent research collected for the European Parliam has shown these costs include shame and stigma, increased social isolation, crime, erosion of confidence and of self-esteem, the atrophying of vital work skills and potentially ill-health, financial hardship and poverty, increases in personal debt, homelessness and housing stress, family tensions and marital breakdown, boredom, and alienation, Most of these problems increase markedly with the duration of unemployment, and in Ireland there are an estimated 182,000 people unemployed for more than 12 months. Unemployed people report that being unemployed as one of the worst things that has happened to them in their lives.
And yet this isn’t news.
The reason I gained an interest in the study of economics in the first place was unemployment; not financial markets, not inflation, not banking but unemployment. People far more articulate than I --present company (in particular) included-- have stressed the tragedy of unemployment, particularly in its long term manifestation. It devastates families, communities, and societies yet the orthodoxy approaches it from a facile angle and views the individual as the root cause completely ignoring the political ramifications of how the lives of people are governed by their "betters" in far flung exclusive board rooms where agreements are hammered out without an afterthought to the lives that will be affected. The tragedy in Ireland will be replicated everywhere. We are in the midst of a Depression by stealth: Britons celebrate a "Diamond Jubilee" whilst coachloads of unemployed are brought in to work unpaid on river pageant as part of Cameron's Burkean Big Society "Work Programme". In Canada we are sleepwalking into a property correction that the central bank and Finance Ministry is desperately trying to avoid whilst being focused squarely on the Holy Grail of "price stability". But you have shown in your lectures that a housing cycle is tied to the business cycle albeit in a longer wave; it cannot be avoided. The point is that unemployment has conviniently taken a back seat to other measures. From our experience the goal of price stability was achieved in the early 1990s by a BOC governor hell bent on slowing down the economy: he achieved his mission by orchestrating unemployment that rose from 7.3% to 11.4% over two years. As the orthodoxy stresses the nirvana of price stability and ignores the reality of political economy we have successfully usurped unemployment from its rightful place as the greatest tragedy of the economic crisis.
I would say the real reason there is no "news" on this is that noone has any plausible, concrete suggestions on how to address the problem if we stay within the bailout / Euro. We can't devalue. We can't spend. The option to go more neoliberal in the labour market is open to us, but the whole political system was against the previous-and-soon-reversed cut in the minimum wage. Even the cuts in over-time/Sunday work/ special trades minimum wages were half-hearted. There seems to be little appetite for "active labour market measures" Nordic style, and perhaps some scepticism that Fas (etc) would have the capacity to do it effectively. What do you suggest, beyond waiting for the European economy to come back to life?
@Otto, there's a lot of research to suggest active labour market policies do actually help reduce unemployment, and Ireland's policies are really weak. We could start by spending the billion or so on Fas/Solas/etc. in a more effective way, and then see what types of policies do work. Then we could move towards a different set of payments and incentives within the social welfare system, as well as encouraging aggregate demand-expanding schemes and FDI. No one thing is going to sort it all out, but doing nothing isn't much of an option either.
"We could start by spending the billion or so on Fas/Solas/etc. in a more effective way, and then see what types of policies do work. Then we could move towards a different set of payments and incentives within the social welfare system".
Sounds good to me, and I'm sure if you had proposals to post, or comments on what Burton is up to in terms of reforms at D of Social Welfare, there'd be a lot of interest. I think that ensuring that the "set of payments and incentives within the social welfare system" are employment-promoting is likely crucial.
One way to start a debate on unemployment and welfare incentives might be to post R. Tol's recent paper on "Costs of Working in Ireland" on the Irisheconomy.ie site:
http://www.esri.ie/UserFiles/publications/WP436/WP436.pdf
Otto thanks for this paper, I hadn't seen it. Just from the abstract, the conclusion is intriguing.