ESRI claims public job creation schemes not effective

PUBLIC SECTOR employment creation is generally unsuccessful in boosting the job prospects of the unemployed and it is “essential” to measure the costs and benefits of infrastructure projects, a conference on renewing the economy will be told this morning.

The event, organised by the Economic and Social Research Institute in Dublin, is the first of four half-day seminars to take place in the coming months on issues surrounding the revival of the Irish economy.

At today’s event ESRI experts will present three papers on boosting productivity and growth, all with detailed policy prescriptions. Senior officials from relevant Government departments and agencies will give formalised responses to each of the papers. Such public engagement between officialdom and the scholarly community is rare.

In a paper on the international evidence on how public policy can boost jobs growth, three ESRI staff members cite research that suggests active assistance of State agencies in helping the jobless find work is the most effective method of improving employability in the short term. In the medium term, however, training programmes were more effective, the research found.

The paper, by Dr Elish Kelly, Dr Seamus McGuinness and Dr Philip O’Connell, noted that Ireland was one of the few countries in which those who have lost jobs register for unemployment benefits before they register for work placement. They say that the rationale for this is not clear, leading to “an inefficient use of public resources”.

The authors find that there appears to be consensus from the international literature that public job creation schemes are not effective in sustainably reducing joblessness. While acknowledging the changes under way in Government labour market policy, they question the role of Solas, the training agency that will replace Fás. “It is as yet unclear how the provision of training is to be organised between the Department of Social Protection, Solas and the education and training providers,” they write.

In another paper, Boosting Innovation and Productivity in Enterprises: What Works? Dr Frances Ruane and Dr Iulia Siedschlag evaluate evidence from other countries on enterprise policies that can help companies become more innovative, and hence more productive. Irish Government policy needs to enable enterprise growth, strengthen the Irish innovation system and promote links with the international innovation system, they conclude.

In the context of extreme budgetary constraints the authors also stress the importance of evaluating the various supports available to indigenous companies to ensure the best return is obtained from very limited resources.

A third paper by Dr Edgar Morgenroth focuses entirely on the need for better evaluation of infrastructure spending, which at the height of the boom reached €9 billion annually but has since been halved.

Tomorrow the Government will unveil its infrastructure priorities for its term in office in a multi-year capital spending budget.

Dr Morgenroth notes that infrastructure projects internationally often fail to go according to plan and suffer from a systematic “optimism bias”, with benefits overstated in the planning stage.

He argues that it is essential to establish whether similar levels of optimism bias apply to Irish infrastructure development. A study comparing original estimates with final costs for recent projects could establish this.

He notes from the international literature that a large majority of public projects examined in 20 countries suffer substantial cost overruns, typically ranging from 20-45 per cent.