Is Ireland Inc. more than a tax haven?

Nobody will doubt the importance of multi-nationals to this country but the question of corporate taxation shouldn't be so sacred. I think it may well be positive to discuss this and consider our options and their implications.

Ireland's friendly enterprise environment drew massive foreign corporate investment here. Our english-speaking European isle with it's young under-employed workforce was an attractive product, and, in case the raw charm of our officials wasn't enough, the government threw in generous state aid and zero-to-low corporation tax. It worked - they're here and we would like them to stay, and invest more. But do we still need to smear ourselves in honey?

Unfortunately, the government seem to be fumbling this one. Ireland really needs to reassess its position and ask itself a few important questions. We're clearly not the backwater we were in the 70s but right now we seem to be squarely mired. We cannot afford to loose our paddles but we cannot sit still for much longer either.

Here's some questions the government should consider before the forthcoming budget: what is ireland's comparative advantage? how sensitive are MNC in ireland to marginal tax adjustments? what shape is the laffer curve here? how can the "four-year plan" be used to best order and communicate (frame) a possible tax increase to have least impact? how can ireland hold and attract foreign investment in the advent of a (~temporary) tax increase? how can ireland best harness and leverage the current agglomerative advantages it has built-up?

Since tax harmonization is an ultimate part of the European project - Ireland should really stop fooling itself about being able to hold Europe back on this issue. Consider our No votes to treaties in the past, at a time when we were must less obviously dependent on the Union. The country should prepare for the inevitable and start planning to compete on a level international playing field.

Stephen Lea

Professor Stephen Lea, head of the School of Psychology at Exeter, will speak at Geary on April 6th at 1pm. The title of his talk is "Materialism, Money and Myopia: The psychology of recession and recovery". Some details of Professor Lea's work are available here Details of his publications on economics and psychology stretching back to the early 1970s are available here

New Activation Fund

The Enterprise, Trade and Employment section of the Summary of Budget Measures indicates the following:

"Within the overall allocation for Enterprise, Trade & Employment, resources will be directed towards Support Measures for the Food Industry and a range of activation measures including 10/20 week FÁS Training Courses or work placements to provide additional training and upskilling places for the unemployed; and an Activation Fund which will involve an open call for activation proposals targeted at the construction and low skilled sectors."

More details are available from a press release on the website of the Department of Enterprise, Trade and Employment. €1.2 billion will be provided in 2010 to support job retention and tackle unemployment through a range of activation and training measures, employment programmes and the Employment Subsidy Scheme (previously discussed here).

An additional €90 million will be committed in 2010 to increase the number of training and activation places for the unemployed by 16,300 - to a total of 146,300, bringing the number of activation places across Government to over 180,000. A detailed announcement on the nature of places to be made available in 2010 will be made at a later date.

In addition, there will be an additional 500 Community Employment Scheme places in 2010. €20 million of the additional funding will fund the call (mentioned above) for proposals targeting the low skilled and those suffering from unemployment in declining sectors including construction.

Revised Eligibility for the Work Placement Programme

The Work Placement Programme (discussed previously here) has undergone a number of revisions. For unemployed participants the following criteria have been amended:

• Recipients of most social welfare payments, including Job Seekers’ Allowance and Job Seekers’ Benefit, will now be eligible to apply. Unemployed graduates who are not receiving a social welfare payment will also now be eligible to apply.
• 2009 graduates are now also eligible to apply.
• The period, for which participants have to be in receipt of a social welfare payment in order to be eligible, has been reduced from 6 months to 3 months.

The key changes relating to the eligibility criteria of firms providing placements are:

• The Programme will be open to all sectors of the economy including, the private, public, and now the community and voluntary sectors. The Department of Finance will issue a Circular in the coming weeks on the operation of the programme in the public sector.
• The requirement for a firm to have at least 10 employees has been removed.
• Previously firms could only participate if they did not have redundancies in the previous 6 months. This constraint has been reduced to 3 months. However, the level of redundancies in the last three months were less than 5% of the workforce, these firms will be eligible to participate.

The duration of the work placement has been increased to a maximum of 9 months. The revised criteria came into effect from 1st December 2009. For eligibility guidelines and details on how to become a Participant on the Programme, follow this web link: http://www.fas.ie/en/Job+Seeker/WPP/default.htm
For eligibility guidelines and details on how to become a Provider on the Programme, follow this web link: http://www.fas.ie/en/Employer/WPP/default.htm

The Obama Jobs Summit

In yesterday's NY Times it was reported that there are six key areas for discussion at this Thursday's Obama Jobs Summit. These areas are: innovative and green jobs, small business incentives, long-range infrastructure plans, encouraging export-oriented businesses, government and private sector partnerships and training for the jobs of the future. Besides members of the business community, attendees will include several economists, including Nobel laureates Joseph Stiglitz and Paul Krugman, and Jeffrey Sachs of Columbia University.

The Sentiment on the US Economy from Twitter

The Analytic Bridge blog describes an exercise conducted by Life Analytics where 10000 tweets containing the word economy were collected with the purpose of finding out what people think and how they feel about the US Economy and the economic crisis. The exact details of the methodology don't seem to be documented, but the following are some results:

- US President tells that the economy gets better but people don't feel the same.

- Economy cannot be getting better while at the same time there are layoffs.

- People expressing very negative feelings after losing their jobs.

A Healthy Recovery

IT article today indicates that an additional 10,000 full medical (GMS) cards are being issued per month. I would estimate that the number of people with voluntary PHI is currently falling at a third of this rate, i.e., ~ 3,000 per month. It's worth taking stock of these numbers and the effect they will be having on service demand and quality.

All public sectors are facing considerable funding cuts next month but I would urge caution in what is done in the public health sector. It's vital to recognise that this current trend in GMS coverage when budgets and labour remain fixed means a heavier work-load for each individual public health worker. When labour is fixed and funding is falling, as is widely expected in the near future, the situation is exacerbated. We need to think carefully about what broad brush-stokes will really mean. In other public sectors we might expect an increase in demand - more people might choose to finish school, there might be an increase in theft and property crime. But public education and justice are fundamentally different; their services are both less labour-intensive and less sensitive to demand (there aren't an additional 10,000 criminals being reprimanded or school-aged kids showing up each month!). Forthcoming policy needs to consider these facts and design an appropriate response that will ensure quality of service to the patient and fair conditions for staff.

Along with considered measures it now makes increasing sense to seriously revisit the issue of average length of in-patient stay. According to the ESRI's most recent 2007 national report, GMS medical card holders were discharged after an average of 7 days; about 3 days longer than non-GMS discharges. Of course there are a number of reasons why this is the case but to date we have no evidence on the matter.

Growing Up in a Recession: Beliefs and the Macroeconomy

This is the keynote at the 11th IZA/CEPR European Summer Symposium in Labour Economics that starts tomorrow:

Growing Up in a Recession: Beliefs and the Macroeconomy

Do generations growing up during recessions have different socio-economic
beliefs than generations growing up in good times? We study the relationship
between recessions and beliefs by matching macroeconomic shocks during
early adulthood with self-reported answers from the General Social Survey.
Using time and regional variations in macroeconomic conditions to identify the
effect of recessions on beliefs, we show that individuals growing up during
recessions tend to believe that success in life depends more on luck than on
effort, support more government redistribution, but are less confident in public institutions. Moreover, we find that recessions have a long-lasting effect on individuals’ beliefs.

Paola Giuliano (UCLA) & Antonio Spilimbergo (IMF)

Insight on U.S. Unemployment Trends

Tomorrow (or today, Irish time) sees the release of U.S. employment figures, which are expected to show a marginal increase in unemployment. Readers may be interested in visualising U.S. unemploymnent trends (by state, since 1990) using the new offering by "Google Public Data", as shown in the chart above. "Google Public Data" is discussed on the Google Research Blog here. The chart (above) shows Michigan, California, Louisiana, Vermont, and the U.S. average. (Misissippi is not shown though it follows a similar trend to Louisiana).

Of note, both Louisiana and California had above-average unemployment before 2000; but Michigan has fared relatively worse over the last decade. How did it go so wrong for Michigan when Louisiana (and Misissipi) and California previously suffered from the highest unemployment rates? This is a question that may see labour-economists swopping notes with trade-theorits and geographers.

Though Louisiana-State trends closely to Califorinia, Louisiana has a notable unemployment spike in 2005-2006, which corresponds to Hurricane Katrina (see some notes on Louisiana here). Despite an employment boost since Hurricane Katrina, Louisiana trends towards the national unemployment rate since summer 2008 (i.e. financial crisis). (Misissippi was also affected by Katrina but is omitted from the chart for reasons of parsimony).

Michigan's situation over the course of the last year is quite striking; the slope function of the state's unemployment increase is very steep. The outstanding (policy) question is: what is to be done about unemployment in Michigan; right now? From a research perspective, what can we learn from the 2005-06 unemployment shocks in Louisiana and Misissipi?

QNHS Employment Figures for Ireland

Figures released today in the Central Statistics Office's Quarterly National Household Survey show that the unemployment rate increased from 4.9% to 10.2% over the last year.

Nine out of the fourteen NACE sectors showed a decrease in employment over
the year. The largest decline in employment was recorded in the Construction
sector where the numbers employed fell by 72,200 (-28.6%) over the year.

Which NACE sectors had an increase in employment over the year?
(i) Information and Communication: 1,000 more employed
(ii) Financial, Insurance and Real Estate: 200 more employed
(iii) Public administration and defence; compulsory social security: 3,000 more employed
(iv) Education: 10,600 more employed
(v) Human health and social work activities: 2,100 more employed

However, Brendan Walsh has noted that while the QHNS is based on more economically meaningful (ILO) definitions (compared to the Live Register), it too needs to be handled with care. (For example, anyone working for pay or profit for one hour a week or more is classified as employed.)

Jobs That Are Hard to Fill, Right Now

Some jobs are currently hard to fill in the United States, according to the New York Times (earlier this week):

Welder is one, employers report. Critical care nurse is another. Electrical lineman is yet another, particularly those skilled in stringing high-voltage wires across the landscape. Special education teachers are in demand. So are geotechnical engineers, trained in geology as well as engineering, a combination sought for oil field work. Respiratory therapists, who help the ill breathe, are not easily found, at least not by the Permanente Medical Group, which employs more than 30,000 health professionals. And with infrastructure spending now on the rise, civil engineers are in demand to supervise the work.

More on Google Trends: Searching for the Jolly Green Giant?

The Economist Blog reported in April that Google Trends showed a decline in news reference volume for all three of the terms “Great Depression,” “credit crisis,” and “layoffs.” They asked whether this suggests that the worst is behind us, and whether we can expect a pending economic recovery?

Experimenting with these keywords now shows that the decline in news reference (and search) volume has continued. However, it is possible that media operators could provide less coverage of a recession, even though it continues (the question may be: what sells newspapers?). Also, people may not search for information about a recession, even though it is happening around them (sticking one's head in the sand?).

Another approach is to experiment with keywords like "recovery" and "economic recovery". The latter has a spike in search (and news reference) volume on February 10th, when the U.S. Senate passed President Obama's economic recovery plan. The former has been trending upward in news reference volume since the start of the year.

It's difficult to say anything about so-called "green shoots" using this data; at the very least we know that Obama harnessed a lot of attention at the start of February with his plan for economic revival.