Monday, May 04, 2009

Jim O'Leary on Unemployment

Well at least someone's writing about it - some basic points about reducing replacement ratios are not going to cut it though. We are rapidly approaching 13-15 per cent unemployment and associated negative equity among many of the people being laid off. Furthermore, we are seeing mass graduate unemployment unfold before our eyes for the first time in our history.

Immediately taking the bulk of the 80,000 under-25's out of the dole queue should be the first priority. This can be done quickly and reversably if it were properly placed on the agenda. I am stunned at the level of inertia on this issue.


Kevin Denny said...

Ah replacement ratios! This used to get a lot of attention in the UK in the bad old days of the 1980's. My recollection is that people like Patrick Minford thought that reducing them would have a big effect on employment where Steve Nickell & others were more measured. My memory (imperfect with the passing of time..) is that the elasticities were not huge. One finding was that it mattered how rigorously the benefit system was implemented i.e. its not just the replacement rates but whether the unemployed are actually required to demonstrate job search.
I don't know what, if anything, has been done on this here. Tim Callan's work would be the best place to start.

Liam Delaney said...

The public pay premium needs to be thought of just as much as replacement rates. Downward wage adjustment in the private sector is a lot harder than some of these analysts are making out. Even if the new graduates priced themselves to practically zero they would find it hard to get positions in the current environment.