Class and Employment Decline

It is worth taking a closer look at the Quarterly National Household Survey results from last week. The difference between the public and private sectors has attracted some comment but there is much more going on here. In particular, the major trend that stands out is the disastrous collapse in working class employment with growing differences between the position of those with third level education and those without. The need for serious commitments in enterprise and employment policy, education and training policy, and housing/ mortgage support is clear.

Table 1 below gives the full results for employment changes by sector, rather than the aggregated version in Colm McCarthy’s post (full details from CSO are in the report and tables.

Table 1: Numbers employed by sector

Last quarter

last year

Start of decline where clear

employment in 000s

percentage change, in numbers employed

employment in 000s

Percentage change, in numbers employed

In labour force

-27.9

-1

-44.6

-2

08Q1

In employment

-72.1

-4

-157.6

-6

08Q1

Agriculture, forestry and fishing

-13.0

-1

-14.2

-11

Industry

-8.7

-3

-19.5

-7

07q1

Construction

-29.8

-4

-72.6

-24

07q2

Wholesale and retail trade; repair of motor vehicles and motorcycles

-6.7

-2

-30.3

-8

08q1

Transportation and storage

2.7

3

-0.8

1

Accommodation and food service activities

-0.2

0

-12.8

-6

07q4

Information and communication

3.4

5

0.9

3

Financial, insurance and real estate activities

-2.3

-2

0.3

0

Professional, scientific and technical activities

-4.0

-4

-6.4

-8

08q2

Administrative and support service activities

-1.9

-3

-15.7

-14

08q1

Public administration and defence; compulsory social security

1.1

1

3.0

4

Education

0.1

0

11.8

5

Human health and social work activities

-4.8

-2

2.2

1

Other NACE activities

-3.2

-3

-3.8

-4

08q3

Unemployed :

42.1

23

113.5

80

What do we see?

First, almost as an aside at this stage, a useful reminder of the progress of the crisis. Long-standing problems in manufacturing, the bubble bursts in construction and then collapsing demand. It is worth remembering that it was lax regulation, financialisation of the economy, a construction bubble and subsequent collapsing demand that generated this crisis.

Second, some interesting findings within the private sector. Information and communication increased over the last quarter and over the past year transportation/logistics, information and communication, and finance etc remained stable. The collapse is first in industry/ construction, then in hotels and retail, and most recently in services to firms (prof/tech and admin/ support services – which includes temporary employment agencies).

While we can expect retail and producer services to recover if and when economic activity is restored, we can’t expect construction and industry to return at the levels they were at previously. Our ‘informational’ sectors show some degree of resilience and will loom larger than ever in any economic recovery.

How does this translate into labour force change? While employment for those with third level education has remained stable over the past year, the collapse for all others has been in the range of 10 to 20%. Unemployment has increased for those with third level education but employment has largely held up.

Table 2: Numbers employed by level of education

q1 08 – q1 09

All persons aged 15 to 64

employment in 000s

percentage change, in numbers employed

Primary or below

-29.3

-18

Lower secondary

-49.2

-16

Higher secondary

-55.0

-9

Post leaving cert

-26.4

-12

Third level non degree

7.7

3

Third level degree or above

7.4

2

Other

-11.4

-15

Total persons aged 15 to 64

-156.4

-8

This is not just a matter of those with higher education competing for jobs they would not have previously been interested in (although there is some of that here). It is also due to the pattern of occupational change (Table 3). Professional employment has begun to drop sharply in the first quarter of this year but the declines are still smaller than in craft, sales, operative and other (generally relatively low-skilled) occupations. The drop in managerial employment is most likely largely due to small businesses going to the wall (these businesses partly accounting for Ireland’s high comparative proportion of such managerial employment), although it may be that larger businesses are laying off large numbers of managers.

Table 3: Employment by Occupation

Quarter

Year

All persons

employment in 000s

percentage change, in numbers employed

employment in 000s

percentage change, in numbers employed

1. Managers and administrators

-11.1

-3

-14.6

-5

2. Professional

-12.5

-5

-4.3

2

3. Associate professional and technical

-5.4

-3

0.9

-1

4. Clerical and secretarial

0.4

0

-8.3

-2

5. Craft and related

-29.2

-11

-49.8

-20

6. Personal and protective service

5.5

2

-1.6

1

7. Sales

-11.2

-6

-13.4

-12

8. Plant and machine operatives

-15.5

-9

-23.4

-15

9. Other

-10.1

-6

-32.8

-18

Total persons

-89.0

-4

-147.2

-7

The class divide in the impact of the recession stands out. While the pain is being felt all around, the sectoral, occupational and educational data points to both the particularly disastrous short-term and long-term effects of the recession on those in manual and service occupations. Given what appear to be high rates of intra-class marriage in Ireland (Brendan Halpin and Tak Wing Chan have an interesting article on this using data from the mid-90s), the worst effects of the recession are likely concentrated in particular classes and households. If we add in the heavy impact of recent unemployment in the 25-34 and 35-44 age group then the implications for housing and household solvency are very serious, as noted on this site previously.

The effects of the recession are tied up with structural changes in the economy. Any recovery is likely to happen in different sectors than in those currently facing the greatest decline – although construction and industry face the greatest decline, it is informational and service sectors that will be the basis of future growth. So we need policies that will tackle both the recession’s impacts and the need for structural change. These will involve at a minimum a serious enterprise and employment policy to promote sectoral recovery and educational and training policy to invest in the skills and knowledge of those worst affected by the recession and put them in a position to benefit from the recovery.

12 thoughts on “Class and Employment Decline”

  1. Interesting points, Sean.

    Breakdown by education is especially striking, not least when taken in conjunction with what is, for me, the most remarkable fact documented in the CSO release, namely the concentration of the fall in employment among younger males. `

    If we compare now with two years ago, the total fall in employment was 123K, of which 63K were males under 25 years. (A further 25K were females under 25 years).

    Indeed, the total number of older workers (over 35 years of age) has actually increased in the past two years.

    Presumably the education x age breakdown pinpoints the concentration of the problem even more.

  2. The main reason why unemployment has been rising faster in Ireland than elsewhere, and why it has been rising faster among the less educated section of the population and among the younger section of the population, lies in the nature of the recession in Ireland as compared with other EU countries. In other countries the recession has been concentrated on manufacturing and services export industries. In Ireland it has been concentrated on consumption and investment industries (pubs, shops, restaurants, building etc). As in all countries, far more people work in the latter than the former, and the less educated and the less skilled work almost entirely in the latter.

    The glaring contrast between the recession in Ireland and that in other EU countries was highlighted in today’s GDP figures which are analysed below. I must say I’m rather surprised that no thread has been opened on the site to discuss today’s GDP figures. The publication of the national accounts is the quarterly highlight in most economists’ lives. So, the absence of any thread to discuss them is a bit like reading the paper the morning after the All-Ireland Final and finding that it isn’t mentioned. I can only conclude that the powers-that-be on the site would rather they were not anlaysed and discussed here because they totally refute the theory, held by most of the leading economists who post regularly here, that the recession in Ireland is primarily caused by a loss of competitiveness, the remedy for which lies in massive wage cuts, social welfare cuts and public expenditure cuts.

    For the past year the false analysis given to us by the Government, the Opposition, the Fitzgerald father and son, Finfacts, IBEC, ISME, IEA, Alan Ahearne, and numerous others, is that Ireland is suffering from a massive loss of competitiveness, that has resulted in a loss of market share and soaring unemployment, and for which the required remedy is the cuts mentioned above. Just how absurd this analysis is can be seen from the export volume figures published by the CSO today. I have collated the corresponding figures for all EU countries that have so far reported GDP figures for 2009 Q1, and these are given in the following table. The figures are for export volumes (not values) and are for total exports (goods + services), so they are the most accurate measure available as to how EU countries were faring on the export front in 2009 Q1. As the figures show, not surprisingly given the global recession, all EU countries recorded a fall in export volume between 2008 Q1 and 2009 Q1. However, the fall in Ireland was by far the smallest.

    y-o-y change in volume of total exports (goods + services) in 2009 Q1:

    IRELAND -3.0% <<<<
    Poland -9.3%
    U. Kingdom -11.0%
    Austria -11.4%
    Netherlands -11.4%
    Cyprus -12.8%
    France -12.9%
    Lithuania -14.5%
    Belgium -14.6%
    EUROZONE -14.6%
    EU17 -14.7%
    Latvia -15.2%
    Estonia -15.4%
    Sweden -16.6%
    Malta -17.4%
    Czech Rep. -17.5%
    Hungary -18.0%
    Spain -19.0%
    Portugal -20.8%
    Greece -20.8%
    Italy -21.7%
    Slovakia -24.7%
    Finland -25.4%

    What is apparent now is just how inaccurate nearly all forecasts of Ireland’s export performance in 2009 are turning out to be. The IMF and the OECD both forecast recently that the volume of total exports (goods + services) from Ireland would fall by 10 per cent in 2009. The Irish Exporters Association (IEA), to much fanfare on this site and sites such as Finfacts, recently forecast that the volume of total exports (goods + services) from Ireland would fall by 13 per cent in 2009. Naturally, the IEA demanded that, in the face of such a collapse in exports (invented though it was), employees in exporting companies agree to massive pay cuts of up to 20 per cent. But, as today’s figures show, the actual fall is turning out to be a fraction of that forecast and the lowest in the EU. One can only assume that the Irish Exporters Association were lying when they published their forecast of a 13% fall. Its also worth noting that the fall in export volumes from Ireland was much less than that from the U. Kingdom, despite the fact that in 2009 Q1 Sterling had been devalued by almost 35 per cent against the Euro (it has since recovered a bit).

    What is more, the full-year outcome for 2009 is likely to be considerably better than even the relatively good export performance Ireland achieved in 2009 Q1. Between 2008 Q1 and 2009 Q1, the actual fall in export volumes was only 3%. But, 2008 Q1 was the peak quarter for global trade in 2008, 2009 Q1 is likely to be trough quarter for global trade in 2009, while the Euro was at its peak rate of 95p Sterling for most of 2009 Q1, but has since fallen to 85p. If the y-o-y fall in Ireland’s export volume was only 3 per cent in 2009 Q1, then there must be an excellent chance that the full-year outcome for 2009 will be a much smaller fall than 3 per cent, and quite possibly an actual rise in export volume. The volume of exports from Ireland in 2009 Q1 was only 2 per cent below its 2008 full-year average. Given the fall in the value of the Euro against Sterling since 2009 Q1, and the forecast upturn in global trade in the second half of 2009, an actual rise in Ireland’s export volume in 2009 is a distinct possibility. So much for the IMF, OECD and IEA forecasts.

    But, if exports are doing much better than anyone (with the possible exception of my humble self) forecast, why is the fall in GDP higher in Ireland than in most EU countries and why is unemployment rising faster in Ireland than in most EU countries?

    The answer lies in the figures given in the following table. This one gives figures for the volume of private household consumption in 2009 Q1. As the figures show, between 2008 Q1 and 2009 Q1, the fall in the volume of private household consumption in Ireland was one of the highest in the EU, the exact opposite of the pattern prevailing for export volumes.

    y-o-y change in volume of private household consumption in 2009 Q1:

    Poland +5.2%
    Czech Rep. +3.0%
    Cyprus +2.7%
    France +0.5%
    Slovakia +0.3%
    Germany -0.1%
    Greece -0.1%
    Austria -0.4%
    Belgium -1.1%
    EUROZONE -1.1%
    Portugal -1.7%
    EU27 -1.7%
    Netherlands -2.3%
    Malta -2.4%
    Italy -2.5%
    Sweden -2.7%
    U. Kingdom -2.7%
    Finland -2.9%
    Spain -4.0%
    Hungary -6.0%
    IRELAND -9.1% <<<<
    Lithuania -14.3%
    Estonia -16.5%
    Latvia -19.1%

    These figures blow the ‘loss of competitiveness and loss of market share’ explanation for the increase in unemployment in Ireland out of the water. Not to put too fine a point on it, it is a FRAUD, a LIE. Those who continue to propound this ‘explanation’ are either right-wing ideologues or on the payroll of vested interests.

    It s clear that the rise in unemployment in Ireland is due to a contraction in private household consumption and not to any fall in exports. This contraction has come about because Ireland, uniquely in the EU, has been subject to massive tax rise and massive wage cuts. In every other EU country, wages are rising. Only in Ireland are they being cut. The reason they are being cut, with disastrous consequences for household spending, is because economists (for example, ESRI, Alan Ahearne, and others) succeeded in convincing the Government and the public that Ireland had a ‘competitiveness’ crisis. Today’s figures show it was a LIE.

  3. Another interesting employment fact from the CSO’s household survey, perhaps already mentioned in media coverage: the number of non-Irish nationals in employment in Ireland has fallen from 16.1 per cent of the total to 14.6 per cent in one year. 103K fewer irish nationals at work; 55K non-Irish nationals.

  4. John – you are understating the role to which most economists commenting on the Irish economy place sharp reversals in the valuation of property from (arguably) unsustainable prices and the consequent effects on banking and household balance sheets as being at the route of the decline in the last year. Im not going to start naming individuals who at any rate are better able to comment for themselves but I can think of a number of academic economists who have been arguing squarely that bad lending practices and poor financial regulation caused a bubble in property, overextended “too-large-to-fail” banks and that the bursting of this bubble then led to a collapse in consumer confidence, strong attempts by consumers to get their own finances under control and so on. It also led to a precarious position where the government (for better or worse) now has a large role in securing banks as well as trying to finance a double-digit deficit just to keep still in the face of declining property-based taxes and substantial declines in other tax receipts resulting from massive falls in confidence. Most economists calling for public sector reductions are doing so to control the deficit rather than from a competitiveness platform.

    I do agree that it cannot make sense that “lack of competitiveness” caused such a dramatic change in such a short space of time and I haven’t heard many advance that position. Though, there are certainly many people arguing that Ireland is uncompetitive and a number of people including yourself have been arguing against this. I think you should focus your argument on that issue though as its not credible to lump all the people you are lumping together into one category of individuals looking to competitiveness as a magic bullet.

    Some of the points you are making are being discussed in the wider literature. For example, Roger Farmer discusses the relative role of fiscal policy in helping to get employment going again compared to a potentially much cheaper option, namely more or less hypnotise people into believing assets are valuable again so that people will start spending and thus their beliefs will become self-fulfilling (a very cursory account of what he actually says but the paper is below). The problem with this view for Ireland is the now almost unanimous belief that there was a bubble in property. There is no way that the public are going to be convinced that this is just a temporary dip and this is leading to further wariness of what is going to happen to taxes, the bank guarantee and so on. Creating some form of self-sustaining higher spending equilibrium is outside most of what I can read in economics under these conditions.

    http://www.nber.org/papers/w15021

  5. @Patrick

    interesting observations – if I remember rightly 1 in 5 male workers were in construction a couple of years ago and that will be very highly concentrated by social class, area etc

    I also notice that whereas unemployment among Irish-born and foreign-born workers was at similar levels last year, it is now much higher among immigrants – despite the reduction in numbers in the labour force

    @ John/Liam

    this is an important area that I don’t think we have got to the bottom of

    we need to think through how to restore demand, how to develop firms and industries (a broader question than just competitiveness – although that will be part of it) and manage the deficit. more on that again

    in the meantime, a question:

    the export growth comes down to five sectors –
    organic chemicals
    pharma
    professional/scientific/technical controlling apparatuses
    other transport (incl aircraft)
    misc

    what is going on in these sectors? it seems like a strange mixture

  6. [commenting politically]

    These figures show the root cause of the defeat of the Lisbon Treaty. As things deteriorate further the risk of losing the Treaty referendum a second time must be considered substantial.

    These figures also show that we are in danger of losing the equality and blurring of socio-economic classes which was achieved over the last number of years.

    Unsustainable employment in construction leading to increased college drop-outs and increased manual labour were clearly a large factor. Many of those people were academically capable of achieving third level qualifications. Those people must be given a way back to achieve third level qualifications or equivalent.

    Where an entire segment of society suffers worse than another segment of society then the risks of social unrest and division are increased. We see this in the election of PBP, SWP and Independent candidates in the local elections. We see this in the defeat of Lisbon. Public sector versus private sector is a laugh compared to the real divide that could infect our society and destroy the national unity that we need to get through this.

  7. One huge issue issue from this excellent and revealing post from Sean I see is the different ways our society treats people from different sectors of the economy.

    Financial insurance and realestate has seen no decrease in numbers emplyed according to table one.
    These are the sectors that are larglely, along with the government, responsible for the current problems.

    No anouncement from anglo re job cuts, no major anouncement from other banks and very little from the insurance and pension industries.

    Compare this with, industries involved in actually creating products which add more real value to an economy.

    The very worrying thing for me is that not only is the state Borrowing billions for the economy. Its that its borrowing billions for a completely unproductive part of the economy.

    The other thing to note is the Fall in GNP V GDP.
    The Fall in GNP is much higher than GDP which just emphasis a point made by Constantine a while back that much of the difference between the two figures is down to Multinational based exports. In other words, our indiginous (some would say more real) economyhad a year on year decline of 12% rather than the 8.5% reported in the media.

    Pen pushers in large companys are being subsidised as small profitable businesses with liquidity issues are going to the wall.

    This just seems mad to me.

  8. Sean – the wider consequences of unemployment among young people is something that merits further research between economics and sociology. We have been talking a lot about the overlap with home equity. The overlap with number and age of children is something that hasnt been mentioned yet. Parents tend to be good at smoothing children’s consumption at least in the literature I read but the more subtle effects on children’s expectations and life adjustment from growing up in neighborhoods where their parents and many of the other people of similar ages are unemployed is a question that is as important to economics as it is to sociology. The peer effects generated by having large cohorts of young people not making transitions to stable employment is something that needs better and less ideological analysis. George Akerlof and Rachel Kranton’s work is some of the best at the interface of economics and sociology. Worth looking at this in terms of conceptualising some of these issues.

    http://ideas.repec.org/e/pak7.html

  9. Liam, you ask a number of interesting questions in your comment above. But I think it should be noted that the literature in sociology on issues like the effects of growing up in neighbourhoods with large rates of unemployment is so vast, it’s hard to know where to start! Not sure what you mean by ‘ideological’ research….

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