Thursday, April 08, 2010

Let Them Eat Lunch

Whatever the advantage of being over-25 in the labour market is due to (my suggestion is having a steady job before more recent graduates entered the more perturbed market, rather than there being an advantage to more experience), the fact is that the advantage exists. Constantin Gurdgiev has done extensive analysis on the QNHS, and demonstrates clearly that there is also an advantage in being more highly educated. Among plenty of observations, Constantin points out the dramatic decline in the Irish labour force: "Overall, we are now back in Q2 2004 when it comes to employment figures." Constantin also says that "contrary to all the talk about 'bottoming out', the latest fall-off in unemployment recorded in Q4 2009 is seasonally consistent with normal patterns, implying that in all likelihood, unemployment figures will remain on the rise from Q1 2010 on." This is in line with Karl Whelan's comment (previously flagged) that "...overall, the picture has changed somewhat from one in which the unemployment rate appeared to be flattening to one where it still seems to be rising."

Statements like "this is no country for young men" may seem trite, but this is indeed where efforts need to be focused. Overall, the evidence indicates that there is a need to address the lack of opportunities for individuals with lower levels of education, and for those under 25 years of age (in particular, men). Gerard O'Neill is one of the few commentators (that I am aware of) who has put forward a concrete suggestion: national service. The Govt. policies in this arena have been flagged by me before: WPP and Employment Subsidy Scheme, Revised WPP, New Activation Fund and changes to the jobseeker’s allowance and supplementary welfare allowance schemes. The IBEC scheme was also flagged.

There has been a strategy document from IDA Ireland (105,000 new jobs) and an innovation taskforce strategy proposal (115,000 to 200,000 jobs). We also had the Smart Economy document from last year (250,000 jobs) and the green energy strategy document (80,000 jobs). However, these documents may be cold comfort for the 13.4% who are currently unemployed. Many of those unemployed individuals (accounting for almost 1 in 7 of the labour force) may not have the levels of education required for many of the jobs envisioned in those documents. Areas of educational qualification (of the currently unemployed) is another issue.

There is some solace to be taken from seeing Irish economists warn about the dangers of deadweight loss and displacement, that are associated with job creation plans. That is, if money ever became available for a plan, it might be spent well. Of course, the dearth of suggestions (more widely) is likely a function of the fiscal pressures at play in Ireland (rather than concerns about deadweight loss and displacement). If the macroeconomic management of fiscal adjustment is not executed with care, then the unemployment rate (which still seems to be rising, as noted above) would be at greater risk of approaching the peak level last seen in the 1980's (17.1% in 1985). In a note available here, I offer a personal view on why it is necessary to avoid a re-run of the 1980's. Unfortunately, the Tallaght Strategy solution was introduced years after it was needed; and years after the onset of high unemployment and emigration. Philip Lane's paper on fiscal strategy is a must-read for anyone who wants to put forward suggestions in the "national interest".

The obvious question for labour economists is then as follows: given the limits associated with the current fiscal adjustment, what can be done for unemployed individuals with lower levels of education, and those under 25 years of age? Richard Thaler, professor of economics and behavioral science at the University of Chicago, has recently addressed this type of problem: in this NYT Economic View column. The idea that Thaler proposes is described as a paid lunch; "paid lunches are essentially ways to reallocate inefficiently used resources that haven’t been reallocated because of, well, sheer laziness." In the NYT column, Thaler focuses on "reallocating the way we use the radio spectrum now devoted to over-the-air television broadcasting". Thaler is planning to include more paid lunches in his future columns. The question I have is whether there any novel resource reallocations that could have implications for reducing unemployment? To let them eat lunch, so to speak.


Gerard O'Neill said...

Given that the state's share of GDP is back to 1980s levels, most 'under-utilised' resources are essentially state owned. So the 'laziness' to be overcome is that of politicians and civil servants (no mean task: most of them are on holiday as we speak).

A young art student I know has recently proposed taking over half-built offices and apartment blocks and 'decorating' them. Banksy on speed, if you like (though hopefully with a little more use of colour :) It would be an improvement.

After NAMA, most of the half built properties will indeed be owned by the state. Same goes for our schools and colleges - why not use their downtime (up to a third of the year) to provide private education and retraining services? With the facilities thrown in for free to providers?

Similarly with our health services: if the states laboratories are closed every night and every weekend, then why not let private operators use them for a nominal fee to provide the same services to those who want to pay for them? Canada does this for US health service patients.

And then there's the fully built but unoccupied properties. Rather than leave them empty let unemployed young people occupy them - perhaps in return for receiving their unemployment benefit (with the latter subject to their not wrecking the place etc)?

And that's only a start...

Martin Ryan said...


Thanks for your comments. I have also just seen your post "Where Will The Jobs Come From?". Here's the link for others who would like to read it:

I should also mention that I have just read a comment from earlier this year where Stephen Kinsella highlighted the point about the mismatch between the envisaged Smart Economy jobs, and the education levels of those currently unemployed:

"Be smart: Jobs first, smart economy second":

Stephen says:

"The smart economy as a concept takes no notice of the detail: who is looking for what type of job right now, and how long will it take those people to train for new ones? When confronted by the facts, we have to augment our industrial development strategy if we want to protect the real, on-the-ground, economy."

For anyone interested, Gerard also picked up on this:

In the above post Gerard, you mention the issue of minimum wages. Indeed, as Kevin has commented before, it is often the case that multiple issues need to be addressed together, in some kind of joined-up framework. It might be time to have a debate around minimum wages and perceived "welfare traps". Also, for a bout of realism about job projections by Innovation Taskforce, Smart Economy Doc, Green Energy etc.