Saturday, April 11, 2009

Losers from the Recession

As mentioned before on this blog and by Gerard in his talk on Psychology and Recovery, a bulk of the Irish population has yet to be fully affected by this recession, in the sense that their financial position is substantially worse up to the point where they risk not being able to remain solvent. However, there are clearly a number of groups that are particularly feeling this one. Below is intended to be as obvious at it sounds.

- Upcoming graduates: There is currently an embargo on public sector recruitment and very little signs that private sector employers are going to be doing anything other than trying to maintain staff for the next couple of years. Upcoming graduates are losing big time and have not been helped by any recent budgetary measures. As an academic here, I have to admit this has taken up a disproportionate amount of my thinking. We should be propelling graduates into the world with a feeling that they can do anything. At present, we are not doing anything to address this situation. I will post on this in more detail in the coming weeks.

- Those who bought their homes in the last number of years: In particular, people who purchased since 2005, particularly if their job is on the ropes. I do not know how the banks are dealing on an individual basis with households who simply cannot meet repayments due to one or both of the partners losing their jobs. This is clearly much more frequent than the number of repossessions so there must be a lot of deals being made but the sustainability of this type of arrangment is something that is questionable.

- Those who have been made redundant: This is obviously not something that most people would wish for. There is, of course, some differences in how bad this is depending, for example, on redundancy amounts, likelihood of reemployment and so on. The time to reemployment is a key question here as redundancy payments may be able to smooth people through. How people adapt during the period where they are redundant may be key in shaping their outcomes both during and after this recession.

- Those depending on certain front-line services: The recent budget and the tone of the discussion arising from Bord Snip indicates that while pay rises are unlikely, pay cuts are also not on the agenda to a huge degree despite deflation. Thus, moves to reduce public sector expenditure will more likely be achieved by a cut in actual services provided or numbers of people. Depending on how this plays out, this could have strong ramifications for older people dependent (either psychologically or financially) on different types of publicly provided services.

- People running small businesses: Not being able to meet commitments to staff might just be part of the business cycle for a lot of businesspeople but I suspect that particularly for small businesses where developing and trusting one's staff is key, that there is a strong psychological cost involved in not being able to maintain commitments to staff. I dont know whether this extra psychological burden should have any impact on policy but it is something worth discussing as I think we often assume that words like business-owner and entrepreneur are somehow the opposite of emotional whereas in fact many of the best are driven by a desire to develop their teams and be respected by them. The feeling of not being able to continue to be a leader in the eyes of one's employees is disempowering and may be particularly bad for people who have achieved success by sacrificing other aspects of their life.

- People heavily invested in equities: In essence, a wealth wipe-out of the Irish middle-class that Gerard has been speaking about on Turbulence Ahead. Again, the distinction between financial and psychological loss needs to be drawn out. People who have lost from stocks purchased at peak values to finance retirement are clearly in a position that seems to me as psychologically painful as the market can dish out in a developed economy.

- Migrants living in Ireland: As well as the first-order effects on their economic position, there is evidence that scapegoating of migrants is one unforunate consequence of recession. I havent seen recent papers on this for Ireland but I have certainly noticed anecdotally an increase in the number of people using bizarre arguments about the extent to which our migration policies are weakening the economic position. A combination of economic choppy-waters with increasing hostility might be making it tougher for visible migrant groups in Ireland. Though in the abscence of specific evidence for this time period, I wouldnt rule out the view that common-sense is prevailing or that the creation of a larger foe (bankers and politicians) might be distracting people who would usually focus on migrants in times of need to vent anger.

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