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Northern Ireland economy

Posted on September 11, 2013 by Tom Healy

Tom Healy, Director NERI
Tom Healy, Director NERI

The annual Northern Ireland Economic Conference took place yesterday in Belfast. Typically it is one of the main annual events in Northern Ireland where senior policy makers, academics and business interests gather to debate and consider the major economic issues confronting us. While the balance of speakers and input left much to be desired the Conference provides participants with an opportunity to access information and policy debates.

While not central to the focus of yesterday's conference, trends in wages, productivity and employment did feature. The fall in real wages in the United Kingdom (as in many other European countries as nicely summarised in this infographic from the ETUI) was noted alongside the apparent growth in UK productivity and output per capita compared to many comparator economies. if there is a 'productivity paradox' in the UK and in Northern Ireland (with relatively stagnant or falling output over the period of recession combined with some growth in employment in recent times) then the causes are many and complex. In a recent blog by Michael Burke the role of Government Consumption in boosting GDP in the UK is discussed.

It is not valid to argue that falling real wages explain the relatively 'less worse' outcome in terms of employment compared to output. Stagnant real wages in many sectors in the UK and rising income inequality over a long period coupled with easy credit, lack of regulation and tax-cutting policies (the latter especially true in the Republic of Ireland prior to 2008) during the boom years laid the basis for a perfect storm in the post-2008 period. The problem of declining real wages has exacerbated the decline in real aggregate demand and worsened unemployment.

Falling real wages together with rising wage inequality over the period since 2008 (and since the 1980's in the case of wage inequality) point to a number of factors including technology and changing patterns of demand for labour. However, as pointed out by this participant yesterday, these changes are also connected to changing institutional arrangements that protect the pay of vulnerable workers as well as changing union power over time in many parts of the world.  The declining share of wages in national income is not surprising.

Considering the limited powers of the NI Executive, it is important to link a debate on employment, wages and social security with a UK-wide debate since it is at the UK-level that these are shaped and determined. In a recent paper from the UK thinktank IPPR "A job for everyone: What should full employment mean in 21st century Britain?" the long-term implications of moving towards a high employment rate (possibly 80%) coupled with activation and training measures are considered. At the same time, there are areas of public policy where actions can be taken in Northern Ireland. These have been considered in NERI research over the last year - e.g. the case for investment in key infrastructure and the case for tackling youth unemployment and exclusion

We plan to build on this research.

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