Jobless rate fails to give full picture

Fri, Nov 30, 2012, 00:00

Looking at one measure rarely gives a clear idea of how the economy is faring

* The standard jobless rate says nothing about the total number of people of working age who are working and seeking work. The participation rate measures this.

Even in recessionary times, this rate changes little because most of those who lose jobs tend to remain in the labour force (but become unemployed), as even Greece’s experience illustrates.

Ireland has been very unusual in that it has registered the largest decline in participation among the OECD because significant numbers of those who have lost jobs have left the labour force.

Had this not happened, the numbers catagorised as unemployment would be considerably higher.

* The portion of adults in employment is usually – but not always – a good indicator of prosperity levels. Before the recession started, Ireland had one of the highest employment rates in the world. Among the more positive indicators of the Irish labour market is that more than half of adults are still working, a proportion that is still slightly above the euro area average.

* In recent times, there have been frequent headlines about youth unemployment in southern Europe soaring to 50 per cent. While there is a serious problem with job opportunities for young people in that, and other, parts of the world, the jobless rate can give the impression the problem is even worse than it is. In most developed countries, a high proportion of the under 25s are in education. Their employment rate is thus lower than older age groups.

The collapse in Ireland’s youth employment since the onset of the recession has been spectacular. In 2007, one in two under-25s had a job, a rate well above peer country averages. In just four years, the youth employment rate almost halved, the biggest fall in the OECD.

Everywhere, attention focuses on the rate of unemployment. It is an important measure of how an economy is faring in general. It is particularly important in giving a sense of the state of the jobs market. But as with anything as complicated and multi-dimensional as labour markets, looking at one measure rarely gives the full picture.

Ireland’s astonishingly stable unemployment rate illustrates this well. For two years the rate has barely budged, fluctuating in a very narrow range between 14-15 per cent. This gives the falsely reassuring sense that things have stabilised in the jobs market. They have yet to do so, as yesterday’s household survey showed.

Other labour market indicators, which tend to get much less attention than the jobless rate, are equally important. Only when all of these different measures are considered can a rounded picture of the labour market be arrived at.

Case study: Graduating from being stuck in an unemployment rut to full-time work at Ericsson

“You’re record-breakers,” Robert Kavanagh’s civil engineering class was told by the course head at a reception following their graduation at UCD in 2009.

“I know you probably don’t want to hear this – but you have the highest rate of unemployment in the history of the course,” he added. Kavanagh recalls a “muted reaction”.

“People knew,” he said yesterday. “It wasn’t news to us but it’s not exactly what you want to hear. It was a very subdued ceremony – we were graduating but there weren’t any jobs around.”

The 25-year-old from Leopardstown, Co Dublin, said there were “very few” from the course who stayed in Ireland.

“A couple got jobs in the UK and some moved to Australia and Dubai. About half the class has left Ireland.

“Nobody could find work in civil engineering. People were looking for jobs in totally different sectors. I was applying for lots of things but with the construction industry the way it was, there were companies going bust left, right and centre.

“I was very demoralised after leaving UCD. I was stuck in a rut. There were no opportunities in the industry I was in and it was very hard to see where the next step was going to come from. You would hear horror stories of people offering to work for nothing for three months being turned away because there was just no work.”

Kavanagh spent a year working in Easons in Dundrum, and then took an evening course in project management at Dublin Business School.

He then spent another year doing a master’s in management and finance at Heriot-Watt University in Edinburgh, Scotland. He finished top of his class and left with a first-class honours degree under his arm.

“I was trying to switch careers at that stage,” he said. “I had widened my scope in terms of looking for work to basically any English-speaking country. I actually had a fairly decent CV – just no relevant experience – so employers wouldn’t hire me.”

Then, in July 2011, he saw an ad in a newspaper for the master’s in applied software technology, or Mast programme, at Dublin Institute of Technology.

The scheme is funded by LM Ericsson and ICT Ireland Skillnet – and graduates are guaranteed a job with LM Ericsson at the end.

“The last thing I wanted in the world was another year of study, but it was a funded masters and there was a guaranteed permanent job at the end of it. I went through three rounds of interviews and was accepted into the course.”

He achieved a first-class honours in the masters – coming third in a class of 50 – and is now six months into a permanent job with Ericsson.

“ Our learning curve is expected to be a lot sharper than someone coming in without the masters and we have to pick stuff up quicker. I’m very happy here. As long as I’m being challenged and there are opportunities for me to progress here, I am happy to stay into the future.” COLIN GLEESON

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