Employment Schemes in Ireland During the 1980s: An Evaluation

Colm,

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.

Colm

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.

Liam