Are we getting back to work?

Unemployment is at its lowest for three years. Does this signal a resurgence in the job market or is it just that people are emigrating or joining one of the Government’s job schemes?

Sat, Dec 7, 2013, 01:00

“Internships are also contributing, because a lot of young people recognise that they need to be circulating in networks for when jobs do become available,” says Doorley. “There are some inroads being made in the economy, but I think there is still a long way to go in relation to there being sufficient work for a lot of people.”

“I think emigration goes a long way to explaining why we’re seeing stronger job growth for older workers who are more embedded in the Irish labour market and are less mobile,” says John McHale, head of economics at NUI Galway, who sees this pattern as part of a broad improvement. “But I think as time passes, and younger workers see job opportunities improving here at home, the tendency towards emigration will decline.”

Scarring effect
One economist who feels less optimistic about the effect of emigration is Ray Kinsella, a professor at the Michael Smurfit graduate school of business at University College Dublin. In 2011 he cowrote a report entitled The Rise and Rise of Long-term and Youth Unemployment in Ireland: The Scarring of a Generation.

The study analysed people who had been unemployed for more than a year, concluding that they were less likely to re-enter the labour market at anywhere near their previous level or salary.

Kinsella also found that the sociological damage of long-term unemployment and the emaciating effect it has on a skilled labour force are overlooked by Government authorities.

“To move away from the catharsis that’s happened in the labour market will be the work of a generation,” he says. “The idea that different schemes or purely financial metrics is going to get us there is foolish.”

Kinsella believes that third-level education has become prohibitively expensive, that activation programmes such as JobBridge are inadequate and that emigration has become a safety valve to ease the pressure of the labour market. The economic cost of this, he adds, will be with us for some time.

“I think what governments often underestimate – and international literature bears this out – is that when youth emigrate, it’s assumed there’ll be an instant flow back into the system when the economy begins to move. But actually it’s a hugely lagged effect. One of the key advantages in the competitiveness of the Irish economy, in terms of attracting multinationals and holding investment here, is a well-qualified workforce.

“But when you look at the outflow of graduates over the last four years, it’s much higher than the Government estimated, and therefore the damage to the labour market’s competitiveness is proportionally much higher. You don’t roll back to the status quo just because the economy improves. It doesn’t work that way.”

In February the Government published Pathways to Work 2013, a 50-point plan to combat long-term unemployment. Minister for Social Protection Joan Burton has since appointed a Labour Market Council, comprising industry and policy experts, to steer its implementation. A spokeswoman for the department acknowledges that with more than 391,000 people remaining on the Live Register, sustained job creation will be crucial to tackling unemployment, but says that this week’s figures represent further evidence that progress is being made.

Such progress is constrained not just by fiscal austerity but also by having a common currency, says Brendan Walsh, who was professor of national economics at UCD for 25 years. “We are trying to become more competitive without being able to devalue,” he says. “So we have to engineer an ‘internal devaluation’, which really implies wage cuts, et cetera. Given the depressed situation in the main European markets, I think we have done better than expected. If the UK economy gathers momentum, this will be a big help. Of course, I hope unemployment will fall to 10 per cent or below by 2016, but, based on how long it took for unemployment to fall in the 1990s, it could be a long haul.”

Looking up and down: Two jobseekers tell their stories
Dan Silverlock, a 32-year-old web designer from Greystones, Co Wicklow, lost his job a year ago when the agency he worked for could not attract enough business.

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