In this blog, NERI Co-director, Paul Mac Flynn looks at his new NERI InBrief which sets out how the Northern Ireland and the Republic of Ireland match up compared to our European peers regarding Unemployment Insurance.
As the last number of years have shown, we live in very disruptive times. Beyond the many crises that we have encountered of late, it seems that not a day goes by without some dire warning of threats in the near future. Whether it is Artificial Intelligence, trade wars or the climate crisis, the future seems almost as terrifying as the past.
What should reassure us is that many of these doom-laden prophecies are nothing new and that many of the bleak futures they paint never come to pass. In the past, globalisation and the internet were seen as the most pressing threats, yet here we are still.
In many cases these prophecies centre around massive job losses as significant changes sweep the economy. However, the experience of the last few decades shows us that while these changes can be quite disruptive, the impact is always subtler than the headlines would suggest.
Globalisation didn’t destroy employment, it destroyed jobs. That is an important distinction and particularly so when you are trying to formulate a policy response. It would be more accurate to say that globalisation changed employment. It moved many western economies away from manufacturing to services. Whether or not this was a wise move is open for debate, but what we should be concerned about is how that change happened.
Since the great shift to services took place there has also been a massive shift in another area, welfare policy. Partly as a response to lingering long term employment that followed the decline of manufacturing, many western governments began to significantly curtail the support made available to people who became unemployed.
Previously, schemes in many western European economies sought to protect people’s incomes by paying them a percentage of their previous earnings. While losing a job was obviously still a major disruption, it wasn’t necessarily ruinous. That has changed.
Many countries have reduced the generosity of schemes significantly and in countries like Ireland and the UK, we never had them to begin with. In both the Republic of Ireland and Northern Ireland, unemployment benefits are paid at a flat rate to everyone. For many people this means that losing their job could dramatically alter their standard of living.
This would be a merely unfortunate event if job losses were not that common an occurrence, but as we have seen that may not be the case. Whether or not the prophecies of AI come to pass, we know that we are definitely facing into significant disruption with climate change, one way or the other.
If we are to meet the ambitious climate goals set out by many western governments, then we will have to confront the reality of what it will mean for jobs across a whole swathe of sectors (for more on this, see there two NERI reports released last week).
If we are going to consciously bring about such an enormous level of disruption to our labour market, then surely, we must build back or create a system of unemployment protection that is suited to the challenge.
This new NERI InBrief sets out how the Northern Ireland and the Republic of Ireland match up compared to our European peers and the reality is that both are at the bottom of the table. We should, at the very least, aim to be in the upper end of the table and moving to an earnings-linked system is the only way to do that. Moreover, we need to stop seeing unemployment insurance as some sort of fiscal burden, and see it as a key pillar of economic security in a very disruptive world.