One of the surprises of the recession caused by the pandemic is that, unlike the financial crisis over a decade ago, this time round there has not been significant permanent destruction of jobs nor a semipermanent rise in unemployment.
Quite the contrary: many economies, including Ireland, are experiencing shortages of workers in some sectors, as we surface from almost two years of lockdowns.
The initial assessments were that the lockdowns in the first half of 2020 would leave a long-lasting scar of unemployment, both here and across the EU. Businesses would close permanently and jobs would disappear. However, the very successful action by EU governments has minimised the permanent damage to our labour markets.
In the US, there has been a substantial reduction in labour-force participation over the past two years, as many people have not returned to the workforce in the recovery. It’s not fully understood why so many have left the workplace but the result has led to many complaints in the US of a shortage of workers.
Many businesses in the Republic are also saying they can’t get enough workers but, unlike the US, it’s not about people dropping out of the workforce. In fact, labour force participation here in the last quarter of 2021 was higher than before the crisis. The vigour of our recovery is one of the main reasons why businesses are now finding it hard to get staff.
We don’t yet fully know why workforce participation has risen in Ireland, so we can’t be sure how permanent it will be. But there are a number of distinct groups who have helped drive up overall employment rates.
Traditionally, a lot of Irish students worked part-time to finance their studies or their social life. At the end of 2007, just before the economic crash, over a quarter of men and nearly 40 per cent of women students had a job. There were concerns that this could be interfering with their education, particularly for the postprimary students. However, many of these student jobs disappeared in the recession, and didn’t return on anything like the same scale when the economy picked up. So this looked like it could be a long-term change.
But as the economy here opened up after lockdown last autumn, employment rates of students have risen, almost back to the levels of the mid-2000s, again mainly in part-time jobs. With hospitality particularly hard-hit for staff, students were a ready source of available labour. Maybe virtual classes allowed more leeway to take a job. But as colleges return to normal operations in 2022, with full on-site classes, that could reduce the supply of student workers. Alternatively, wage rates may be raised to try and hold the part-time student employees, given their importance for the hospitality sector in particular.
There has also been a significant increase in the number of women over 50 at work. The health sector workforce expanded to meet the demands of Covid, and to operate testing, tracing and vaccination centres, and the data suggest that older women responded to the challenge by remaining in or returning to work.
The rise in female labour-force participation rates is also observed among younger women, and this may be directly related to the changed working practises that the pandemic has ushered in, which are particularly important for women with continuing care responsibilities, either for their children or for older parents.
By forcing innovation in the workplace, allowing more women to participate in the labour market, the pandemic may bring a long-term economic benefit
Nevertheless, overall female labour force participation rates in the Republic remain well below those elsewhere in northern Europe, including the UK. Over recent decades, female participation rates have also lagged behind those in the North. This has been surprising for two reasons: childcare provision is not noticeably superior in Northern Ireland, and also a much higher proportion of women in the State have third-level education than in the North. This is important because of their higher potential earnings, which, in turn, means that the costs of working loom less prohibitive.
We still have a way to go to tackle barriers to women’s participation at work, particularly availability and affordability of childcare. It remains to be seen whether greater availability of flexible working may facilitate greater participation by parents.
By forcing innovation in the workplace, allowing more women to participate in the labour market, the pandemic may bring a long-term economic benefit. It also shows that, in failing to develop more flexible work practices in the past, employers were missing out on an opportunity to attract additional valuable female employees.