Just a short addition to the discussion on job subsidies addressed by Karl Whelan on this blog. Ireland had an extensive program of Employment Schemes during the 1980s. The following schemes accounted for 95 per cent of all participants on these kinds of interventions; Work Experience Programme, Employment Incentive Scheme, Enterprise Allowance Scheme, Teamwork and Social Employment Scheme.
Hartmut Lehmann and I outlined the details of these programmes and evaluated them in terms of their ability to get the unemployed back to work in 1990.
Hartmut Lehmann and Patrick Paul Walsh, CEP and London School of Economics, “Employment Schemes in Ireland: An Evaluation” The Economic and Social Review“, Vol.22, No.1, October 1990, pp43-56
Karl is right to be nervous about their reintroduction. It is hard to prevent unintended displacement and substitution effects in these interventions, employees taking on subsidised workers and letting go unsubsidised workers or taking on subsidised workers instead of intended unsubsidised workers.
We have a history in dealing with mass unemployment and we should not ingore lessons from the research done from that time.
Other notable papers at the time where
Breen, R. (1991), ‘Education, Employment, and Training in the Youth Labour Market’, General Research Series Number 152. Dublin: ESRI.
Breen, R. and B. Halpin (1989), ‘Subsidising Jobs: An Evaluation of the Employment Incentive Scheme’, General Research Series Number 144. Dublin: ESRI.
4 replies on “Employment Schemes in Ireland During the 1980s: An Evaluation”
‘Far from ignoring the actions that have caused our present difficulties, we should take a strict review of them in order to correct our errors if they be corrigible; or at least to avoid a dull uniformity in mischief, and the unpitied calamity of being repeatedly caught in the same snare’.
Edmund Burke (‘On American Taxation’).
It is reasonable to contemplate measures to mitigate the impact of rising unemployment, but surely unconscionable in current circumstances to countenance policy designs found wanting in the 1980s.
Burke’s message (and Paul Walsh’s) is surely to confine attention to policy proposals which either have negligible Exchequer cost or which offer decent bang-for-a-buck. We are borrowing €400 mill per week just now.
Can anyone amongst this blog’s contributors bring forward evidence-based proposals which pass this test?
Im not fully sure what lessons we can draw from the 1980s. Most of the schemes did not have inbuilt designs to test effectiveness. Most of them started at a time when many of the participants were already long-term unemployed, precisely when it is most difficult to intervene. The age-profile of the participants is a lot older than the potential pool for proposed current labour market interventions. Migration was a much more feasible channel for people with marketable skills. In general, the pool of people being subject to these interventions would have had a low chance of being successful in the labour market. The current pool of people who are unemployed are for the most part recent lay-offs, do not have strong migration prospects, are a lot younger and more educated (though I accepted that younger less educated workers are particularly over-represented).
The concept of evidence needed for the current situation is somewhat different to the one you suggest in terms of relying on policy design as well as prior literature. For example, much of the existing budget on employment schemes, business start-up incentives and so on is already spent without real knowledge of potential causal impacts and so we are already repeating the mistakes you talk about before any new measures are proposed. An approach that is evidence based but more active would be to rigorously experiment (including randomised trials) with some of the parameters of existing schemes within existing budgets to actually figure out what works in these schemes and to begin to scrap ones that have no proven effectiveness. In other words, the design of the policies need to draw from prior evidence but they also need to contain self-correcting tendencies whereby features of them that are not adding value can be phased out. This process needs to be public and open to scrutiny and debate.
Also, we need to broaden this out. Particularly for younger workers, the temporary consumption loss from being unemployed may be far less serious than the long-term consequences in terms of lowering expectations, labour market signaling and so on. Low-paid equivalents to unemployment benefit that provide stronger scope for signaling productivity have to be given a better hearing and we need to shift on to these and related training and educational responses as the subsidies debate is only one aspect of intervention.
Similarly, early childhood interventions funded from reallocation if necessary need to be looked at as there is massive evidence on intergenerational transmission of unemployment and related life outcomes. In general, all of these policies focus on training, mentoring and instruction and focus on getting better bang-for-buck from current spending rather than proposing traunches of new expenditure.
Liam, you argue that the recently-disemployed may ‘…not have great migration prospects’, and you may be proved right. But the QNHS gives both an estimate of the labour force and the (15+) participation rate. It is thus possible (using the sa Table 3) to compute the implied quarterly pop aged 15+. The nat increase is recently running about 7 to 8k per quarter in this age group, so we can have a stab at the quarterly rate of net migration in the labour force age group. The figs have developed like this:
(Net Mig in 000) Q1 06 +9; Q2 06 +12; Q3 06 +16; Q4 06 +13; Q1 07 +19; Q2 07 +11; Q3 07 +10; Q4 07 +4; Q1 08 -3; Q2 08 -3; Q3 08 +1; Q4 08 -2; Q1 09 -13.
There was strong inward migration in the 15+ age group until Q3 07, then five quarters at about zero followed by a strong net outflow of 13K in the most recent quarter. This would be a pretty serious outflow if the trend continues – it seems to be lagging the downturn in the economy by a couple of quarters, we shall see.
Thanks for pulling me up on this. There is clearly an extent to which return migration particularly to Eastern Europe is going to partially temper the increases in unemployment and my comments above were clearly focusing on Irish citizens. We dont know for sure how much of this outward migration are Irish citizens but surely our best guess is that this is more likely to be return migration.
More generally, I haven’t thought at all about whether it makes sense to distinguish between Irish citizens and, for example, people from Eastern European countries who are currently unemployed in Ireland when thinking about labour market policies. Again, this was hardly an issue in the 80’s but it brings a lot of complications now in terms of thinking about the rationale and potential return from things like labour market reintegration programmes. In general, ethnic and cultural fractionalisation of populations lowers popular demand for government programmes and also makes them more complex to implement. Compared to the benefits from migration, most economists would argue that these costs are small but they are not trivial.