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From correction to prevention

Posted on May 22, 2015 by Tom Healy

Tom Healy, Director NERI
Tom Healy, Director NERI

Employment has increased significantly, in the Republic of Ireland, since 2012. This is very welcome. While the details and scale of the increase has been open to statistical interpretation  it is clear that a recovery in output in most sectors of the economy has spilled over into job creation (See Chart 1 below). Unemployment, as estimated on the basis of the ‘standardised unemployment rate’ is now just under 10% of the workforce – a significant psychological threshold last breached in mid-1997 during the last Irish bust/boom of the 1980’s/early 1990s.

Initially, the increase in employment was heavily concentrated among part-time employees and self-employed. In more recent times the increase is among full-time employees suggesting a more solid jobs recovery. Yet, the extent of unemployment and under-employment remains very high especially among young people. The young or those under the age of 40 have taken the greatest hit since the onset of recession in 2008 with an escalation in precarious employment, inferior pension arrangements (or, more typically, no such arrangements), lower pay scales and in many cases job skill requirements well below their level of educational completion. Add to this the problem of private debt and widespead low pay and we realise that a jobs recovery – while welcome – still leaves huge social problems.

Of particular relevance is the overall ‘employment rate’ – simply the proportion of the relevant working age-group (20-64 year olds) in employment. This shows a steady recovery, in the Republic of Ireland, since the beginning of 2012 with a closing of the gap with the average for EU28 (all 28 member states combined). However, alongside this positive development is the impact of falling population among those aged 20-34 due to emigration which leads to a small overall decrease in employment among this age-cohort.

The labour force participation rate (% of population in work or seeking work) among 20-64 year olds is shown in Chart 3 . This indicates some catching up in Ireland since the beginning of the jobs recovery in 2012. However, a fall in the first quarter of 2015 (which may be more to do with statistical estimation issues than any other factor) is of concern. There is a 2 percentage point gap with the EU28 average. My colleague, Daragh McCarthy in an analysis of last week's Quarterly National Household Survey has pointed significant variation across Irish regions in employment and labour market participation.

The extent of ‘under-employment’ may be gauged by what the CSO refer to as ‘indicator PLS4’ The PLS4 indicator records

  • unemployed persons +
  • ‘potential additional labour Force’ +
  • ‘others who want a job, who are not available and not seeking for reasons other than being in education or training’ +
  • ‘part-time underemployed persons as % of the Labour Force’.

The trend in under-employment is downward.   As measured in this way, the total of ‘under-employment’ is down from a peak of 25.8% in the second quarter of 2012 to 18.7% in the first quarter of 2015. Outward migration has helped but this is not the whole story as employment and participation rates began to recover from 2012 onwards.

The extent of under-employment and associated vulnerability among young people under the age of 25 is illustrated by trends in ‘NEETS’ – those not in employment, education or training. In 2014 (the latest full year for which data are available from Eurostat) nearly one in five of all persons aged between 18 and 24 were not in employment education or training. In other words, they were either out of work and seeking work or not seeking work and were not undertaking any education or training. This is a shocking statistic and one which suggest a high level of alienation, suffering and risk for at least some of those falling into the category of ‘NEETS’ (there may be a range of reasons why some young people fall into NEET for reasons to do with parenthood, etc.).

 Up to now the response of public policy has been ‘corrective’, as distinct from ‘preventive’, to borrow terms from the lexicon of EU fiscal rules. It has involved emergency measures to ‘activate’ unemployed persons by means of training or subsidies to employers (‘carrots’) and penalties for non-compliance with training measures by lack of proof of job search (‘sticks’).

A range of labour market activation programmes are currently in place. These are summarised in Table 1 below (Source: CSO Live Register Report, March 2015 )

Total participation in Active Labour Market Programmes (March 2015)

Back to Work Enterprise allowance scheme

11,373

Short-term Enterprise Allowance

465

DSP Part-time Job Incentive

397

TUS - Community Work Placement Initiative (2011)

7,841

JobBridge (2011)

6,015

Gateway (2013)

1,990

Community Employment Schemes

24,478

FAS Full Time Training for Unemployed People

8,002

Vocational Training Opportunities Scheme (VTOS) - estimated

5,000

Back to Education Allowance (BTEA)

24,143

TOTAL

89,704

The experience in relation to schemes such as JobBridge is mixed to say the least. There is a rising volume of evidence such as indicated in a recent report commissioned by the IMPACT trade union ( JobBridge – Time to start again? ). While the research is not based on a large sample of cases it does provide a strong and convincing indication that all is not well with schemes such as JobBridge.  It may be claimed that unemployed persons ‘are better doing something’ and gaining ‘useful work experience’ while continuing to look for employment  and receiving the dole plus a top-up of €50 per week which might cover the cost of bus fare for anyone lucky enough to live reasonably close to the job experience. The big concern with schemes such as JobBridge is that:

  • Some employers take advantage of the scheme to avail of free labour for the purposes of work that might be undertaken by workers at full pay (how is it possible to strictly prove that such work has not been displaced?);
  • Some trainees derive very limited benefit from the experience in terms of relevant experience, confidence and employability;
  • There is a lack of adequate monitoring in place to ensure that exploitation is not taking place and that the scheme is operating as it is meant to; and
  • There is a lack of accreditation and transition to quality employment upon completion of the training experience.

As the IMPACT commissioned report states:

It is clear that even if JobBridge is closed tomorrow that the use of unpaid internships has replaced traditional entry routes into many sectors and that a culture of unpaid internships is now a cultural norm for many young Irish people.

There is a strong case for reviewing and radically changing interventions such as JobBridge as recommended in the recent IMPACT commissioned report. We need to move beyond short-term ‘emergency’ corrective measures to invest in longer-term ‘preventive’ measures before the next recession arrives. An effective preventive strategy would encapsulate the benefits of a structured, properly accredited and adequately monitored ‘dual training’ approach to education and training. In other words, participants would benefit from a quality training experience encompassing ‘on-the-job’ and ‘off-the-job’ training in an environment that builds on their initial skills and aptitudes. It is no accident that among the European Member States with the lowest level of ‘NEETS’ are those with well developed ‘dual training’ arrangements. Where these are well established and funded there is a significant contribution by employers through taxes and levies sometimes via local chambers of commerce.

Unless we want long-term structural unemployment and under-employment among young people we need to plan and invest in training targeted at young people and linked to newly emerging areas in the economy from hospitality to IT.

Posted in: JobsWages

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