I have been coming back to this topic more or less since this recession started. There are very few in Ireland who have not now been sizeably affected in terms of economic welfare by the recession.
(i) People between the age of 25 and 40 who purchased at the top of the market and are now struggling to make mortgage repayments. Those outside of the country should realise that Ireland has extremely punitive bankruptcy regulations. "Jingle mail" is rare in Ireland partly for cultural reasons and partly for legal reasons. The upshot is that an increasing number of predominately younger families are living in houses they can no longer afford, with almost 40,000 mortgages now in 90 day plus arrears. Morgan Kelly raised the possibility of a wave of defaults further destabilising the banking system. The basic human cost is also worth considering. A group of Irish economists proposed a debt forgiveness arrangement last week and a government advisory group proposed a part-freezing scheme, whereby mortgage-holders in distress could put up to a third of their mortgage "on ice". I honestly can't see these helping people who were given 100 per cent mortgages on the basis of two-incomes and are now trying to service those mortgages with only one income and the other coming under pressure. While many have pointed out that older people have not borne much cost from this recession, one channel where they might be taking a big hit is through their children with a lot of anecdotal evidence of parental bailouts of children's mortgage payments. The policy needs to be given to someone with a proper mandate to deal with it, including the development of a wide range of policies including some element of freezing, but also more active sale-and-lease-backs and reform of bankruptcy laws. Leaving people in limbo is not a humane strategy and it is getting to the stage where those who can't as opposed to wont pay may simply need, hard as it will be for them, to call the authority's bluff.
(ii) We have blogged continuously on unemployment. It is unfortunate that the ongoing emergency nature of the financial situation is placing this issue on such a back-foot. We are spending a large amount of money on welfare payments and also on the state training agency. As of yet, despite the announcement of a replacement of this agency, there has been no real coordinated effort to utilise the various government agencies to provide a buffer to the problem of unemployment. Our live register figures are nudging 450,000. While ultimately, the best solution to unemployment is a solution to the financial position, there absolutely needs to be urgent focus on the short-term labour market situation in Ireland. In particular, young people are not getting sufficient opportunity to signal their productivity to the wider labour market. The youth labour market problem is both potentially the most costly in the long-run for the country and the most fixable. We are dealing with a cohort of people with very low debt and earnings expectations who, for the most part, will be happy to work for low wages provided they are well-position when the Irish and global economy settles down. For older workers, cheap and cheerful internship-type solutions may be less feasible. There are certainly a cohort of older workers in sectors such as construction for whom it may not be possible to attain long-run employment again. Given that many construction workers begin work far earlier in life, it is worth strongly considering the extent to which it would be possible to allow those who wished to, to simply retire and take the state pension rather than going through a farcical process of retraining reluctant workers who have spent 40 years or more in a given sector into careers they have neither interest nor aptitude in. For workers who are still desperately seeking employment within construction, it is worth strongly considering redeploying capital spending programmes such as Metro North toward labour-intensive repairs and other shovel-ready spending.
(iii) The effect of the growing levels of unemployment on the expectations of children and teenagers coming through is something that is worth considering. Unemployment and economic insolvency are intergenerational phenomena but it would be nice to think that the younger teenagers of today who will likely see better times by the time they reach the labour market do not set their sites too low just because we are going through a period of economic turbulence and likely ensuing stagnation. Current conditions in Ireland have never been a very guide to ensuing conditions and it would be a shame to see people diminish the sense of enthusiasm that is required to get out there.
(iv) Regardless of the severity of the economic conditions, it should be remembered that being lonely or suffering chronic illnesses that involve physical pain are still two of the main negative impacts on well-being along with persistent mental problems. I won't try to put numbers on this during this post but it is worth remembering that countless studies show that the fixed component of well-being and the component related to defined states such as disability and chronic illnesses far outweigh the component explained by fluctuations in economic conditions.
In general, a well-being approach to the recession would focus less on income fluctuations in the middle and top brackets and far more on the components that actually influence well-being, namely ensuring that people are not trapped in an untenable debt position and are not trapped in unemployment. It is unconscionable to leave people in a situation where they simply cannot pay their mortgage yet are receiving letter after letter demanding payment, just as it is completely wrong to make no attempt to mobilise the still vast capabilities of the state to give young people a chance to develop a labour market track. Unfortunately a lot of commentators think of this stuff as fiddling while Rome burns but this is simply a wrong view. A team of people in government will work out a deal with the EU/IMF group and the upshot will be that we will finally have full numbers on the extent to which we have fallen as a country and hopefully things then people will become convinced that we are actually looking at the bottom rather than a fudge. Things will then progress at a much more subdued overall level and trajectory of income than reigned for the Tiger years but we will still be a relatively high-income country by any standards with no excuses for not getting to grips with these issues.