Irish Times Series on the Jobs Crisis

The Irish Times begins a week-long series today on Ireland’s jobs crisis.   First up is a wide-ranging article by John Martin, Director for Employment, Labour and Social Policies at the OECD.  The other contributors will be Philip O’Connell (ALMPs), Liam Delaney (training polices), Brian Nolan (welfare system-employment interactions), with a concluding article on Friday by Dan O’Brien.   There is also an editorial today that criticises the government’s lack of attention to employment-related policies. 

High unemployment levels are causing growing hardship to families and individuals, requiring extensive State borrowing to fund social welfare payments and causing long-term damage to the very fabric of society. In these circumstances, schemes for retraining and job creation should top the political agenda.

But the Government appears transfixed by the banking crisis and the need to reassure bond markets.

This blog has also come in for (mostly justified) criticism in giving too little attention to the unemployment problem.  A partial defence is that effectively dealing with the banking and fiscal crises is very much part of the policy response to the recession to limit its human cost.  Hopefully, the series will spur debate on more direct policies to limit the rise in unemployment. 

41 thoughts on “Irish Times Series on the Jobs Crisis”

  1. No new credit creation , no new jobs – no capital creation , no credit.

    Its as simple as that – the goverments role in this scenario should solely be to feed and house people to prevent a full breakdown crisis and use the time created to come up with strategies to either create capital or steal it from other regions.
    Talk of holding hands and reskilling is just talk – telling them not to be frightened of the dark when infact there are wolves in the forest waiting watching…… – re skilling for what ?
    I do not see the point in retraining a adult for a job that will soon disappear.
    A dragons den approach is not the role of goverment – individuals may survive and even thrive in a sparse environment but most will be caught in the maws of the credit engine gone into reverse.
    Anyhow the goverment cannot scratch its arse without Brussels displaying market correctness.
    Goverment would be best to nod politely at Brussels advice and do exactly the opposite without any fanfare or overt nationalism.

  2. A partial defence is that effectively dealing with the banking and fiscal crises is very much part of the policy response to the recession to limit its human cost.

    Its only a part of the response. I believe there are alternative solutions to the banking and fiscal crises that wouldn’t have such negative effects on the labour market.

    At the moment the problem with the labour market is relatively simple, the lack of aggregate demand and a sectoral shift away from construction.

    Unfortunately, as long term unemployment is being embedded in the economy the problem is getting more and more difficult to solve.

  3. The Labour Market appears to be an aggregate of ‘marketettes’ – like Heinz 57. Some are functioning. Some are bust. You have to understand why the busted ones are busted! Else you have no way of proposing a fix -and it may be the case that they are, unfixable.

    If your basic economic model is based on annual incremental growth (to parallel pop increases), then any downturn will generate a real, intractable predicament. Maybe its our basic economic model that is busted?

    The series will be interesting – and I hope, useful. My guess is that any long-term solution may have to be in the forestry/agriculture/food areas with less emphasis on industrial econ of scale and more emphasis on the quality. Must be very mindful of future energy problems. All three are a tad overdependent on liquid fuel inputs.

    Brian P

  4. I would also add the implications of debt servicing and unemployment.
    The debt levels also add to the vicious spiral and affect the surrounding economy that is owed the debt…

  5. I read the OECD man’s contribution. Apparently long term unemployment can only be ended through job creation – also noted by a one of the commentators on the IT site. End unemployment by employment. Provocative stuff…

  6. @Brian Woods. I agree with your comment
    “My guess is that any long-term solution may have to be in the forestry/agriculture/food areas with less emphasis on industrial econ of scale and more emphasis on the quality. ”

    However, don’t expect this to come from the government. In fact the opposite.

    One of the cutbacks proposed is to cut the number of hectares planted drastically, pulping the prepared saplings in the process.
    Planting would employ the kind of able bodied young men who have been laid off from the building industry.

    There appears to be no concept of what to do, where to start-nothing. There is not an idea in sight except to bail out the bankers (I say bankers not banking system) regardless of cost.
    What is needed is a Roosevelt type work program funded by a solidarity bond.

  7. Here would be the thing with an employment programme…
    What would be the wage rate?
    Or what would it need to be if the programme needed to be viable in the long term?
    I think the rate would be shocking low in comparison to our recent times…

  8. @Brian Woods & Joseph Ryan.

    Do you really think that Brussels would accept State industrial companies that would compete with the core ?
    I mean get real – A Irish Sugar like company would be impossible as our “goverment” would have to engage in a major confrontation of the European priesthood whose goal is deindustrialization of the periphery to maintain the strength of the euro.
    Besides our “goverment” are subconscious monetarists who really believe that money grows on trees as decades of credit farming have lulled them into a infantilised state of dependencey on foreign credit that will evaporate as the larger nations recapitalise.
    As for fore story it is no longer competitive since the advent of cheap Russian lumber – one of the emergency goals of the state should be the ability of farms to feed our cities as in the event of global monetory collapse the oil will stay in the dessert.
    They should invite over 500 -1000 Dutch market gardeners – and give them free Nama land on condition they develop these as fruit / veg Farms.
    Anyhow the riches lie at sea,not the land and we do not have any control over this wealth anymore.

  9. I’m sure the Irish Times will do a fine job of filling up newspapers columns with articles a) telling us what we already know, b) omitting all important facts, and c) vaguely suggesting that things might get better. I’m also sure that the majority of people who read these dull-witted essays will consider themselves informed about the situation.

    I imagine Dan O’Brien’s concluding article will breathtaking spectacle of orthodoxy, each paragraph more unoriginal than the last, offering nothing much past the current government PR reports. What better way to end Ireland’s foremost introspective on itself than by having our most conventional economist pontificate a full pages worth of the faux-intellectual chaff that will be on display all week.

    I’ll repeat something here that I wrote elsewhere on Dan O’Brien, but I imagine this applies to a large number of economic commentators and indeed to the wider Irish journalism community; the largest single blame for the boom lies at their feet.

    O’Brien is the quintessential mainstream economist who as a matter of principle would never let an original or heterodox idea enter into his head, much less his articles. He functions as a sort of repeater switch for the economic body politic, automatically reverberating the consensus opinion about the echo chamber.

    When the country finally does default, I suspect the event will come as quite a blow to Mr. O’Brien. He will likely stand dumbstruck for six months or so, writing the occasional plaintive autopsy of the event, sans anything resembling an explanation or suggestion(He’s already done this if I recall correctly).

    In the end he will lapse back into quoting strict fiscal dogma in a country which has never heard of such notion and will probably end up with a nice job as a government economic advisor or—with an outside chance—as editor of the Irish Times. Anything to avoid the a disreputable existence of book author/MC circuit host that the likes of McWilliams engage in. The O’Brien’s raised a respectable son.

    This IT series is likely to be a giant waste of newsprint. The acid test of this will be in what to fails to accomplish—bringing down the government—something a competent transition year student with a website and a microphone could accomplish at this point. Hopefully when the country finally defaults, that wretched toothless rag of a publication will be one of the first institutional casualties.

  10. Too late.

    Two years on; Nama in place, banks fed endless money – what did we forget, oh, yeah . . .

  11. OMF

    Dan O’Brien reminds me of Jonathan Freedland in the Guardian writing on Israel. Compare him to the unemployed and incredibly gifted Claire X who brings the mess alive better than anyone else.

  12. Actually I think Dan is beginning to get it – but only subconsciously. He arrived back into Ireland from foreign parts thinking that the policy-making apparatus was based on some kind of rationality where options were weighed and the optimum course chosen. He was rather disdainful with objectors to this panglossian view. This was understandable. He is a glass-half-full man. Nothing wrong with that. He is certainly shocked now about the sudden appearance of the €15bn adjustment and the lack of any rationality in policy. His tone on RTE recently was that of a respectable wife who has arrived home to find her husband wearing her clothes.

  13. Dan O’Brien’s previous suggestions on the labour market indicate that he thinks it is a supply rather than a demand problem (well that is the only thing that makes sense given what he was saying about the timing of tax increases). Given that 10 times more people applied for jobs in tesco than were available, it is clearly a demand issue.

  14. @KC: Note your comments.

    I have formed the opinion that the Permagrowth economic model is losing traction. Transitioning to the new model will be hellish difficult.

    Hence my comments about forestry/ag/food – fishing I forgot (fresh and salt) – thanks. The forestry we will need for fuel (must have well insulated mansions though), but you can get edible food (fruit, nuts and other stuff) from a properly managed forest area (I am assuming predominant broadleaf).

    The EU: Now methinks that that institution might run into some trouble if Ivan turns off them gaz taps! Think he wont? Nasty energy shocks they be coming!

    Re today’s epistle in the paper of record: Penultimate para: “The jobs crisis is a huge challenge for Ireland.” Jeeze! The last para is a real dilly altogether. Not a single mention of our crippled economic model?

    Brian P

  15. @Rory
    “Given that 10 times more people applied for jobs in tesco than were available, it is clearly a demand issue.”
    We should open a Tesco on every corner then. Think of the fillip it would be for the construction industry. Waddaya mean we just tried that?

  16. According to The Economist’s special report on “The Data Deluge” (Feb 27 2010), data analytics is going to be one of the cornerstone of the future economy.

    A quick scan of vacancies mentioning SAS on IrishJobs.ie points strongly to this conclusion.

    What are we doing about making the most out of this opportunity in Ireland? – far too little, and at university and government level almost nothing.

  17. @Brian
    The first thing to be done is to begin to transfer deposits to 100% reserve banks.
    Then the goverment can supply credit into the system which is based on long term investment and energy independence and not housing speculation and mindless consumption.
    Must ask the ECB for their take on this……. I am sure they will be very helpfull.

  18. @Joseph Ryan – “What is needed is a Roosevelt type work program ”

    Is that the same one as featured in “To Have And To Have Not” (E. Hemingway)?

    Grim stuff.

  19. @KC: Good idea about the banks.

    Funny how no one has mentioned it yet – (I forgot!!!) – those millions of workers in east asia who will labour in quite dreadful conditions for low(ish) wages. No western developed economy will be able to compete with them for any sort of industrial production. Whom will they sell to? Themselves? That won’t be much fun.

    So what is nature and type of jobs it is intended to create here in Ireland? They will have to be the sort of job that CANNOT be migrated – and where we have the absolute advantage. That idea of Comparative Advantage has been flushed down the Yangtse.

    Major political reforms are needed here at home. But they will only come when a critical mass of voters plump for honorable independents and the established parties have to re-group or depart.

    Brian P

  20. @Brian
    Check out the history of the Swedish banking crisis – in the 80s and before there was a substantial 100% reserve banking system that was almost completly replaced by fractional reserve banks.
    I am not completly against fractional banks for Industry and technology lending but tying our money supply to the amount of houses produced is insanity.

    As for China they could build their factories because of the Gold suppression scheme – this enabled western banks to export capital on the cheap and develop this crazy unsustainable supply chain.
    I think if the shiny stuff goes to the moon all mercantile states will collapse but America will again begin to industrialise.
    A high gold price will not cause catastrophe for the west except for the western banks as they will need to recapitalise – gold needs to go much higher to reduce the strain on the system.

  21. @Keith Cunneen

    Many countries with fractional reserve banking systems avoided the recent disaster apart from the shock to their export markets. Obviously, more components are involved than this.

    You’ll need to elaborate on your point of view instead of just repeating it if replies of substance are to be possible.

  22. @Rory O’
    “At the moment the problem with the labour market is relatively simple, the lack of aggregate demand and a sectoral shift away from construction.”

    The problem may be relatively simple, but that does not mean that the solution will be equally simple.

    The “shift” away from construction was caused by a vast oversupply of construction becoming finally apparent, and there will be no easy shift back.

    The lack of aggregate demand in construction is a problem for a labour supply that is so heavily focused on construction and construction dependent industries, and which lacks other skills. Architects, brickies, interior decorators, are difficult to redeploy as anything else. Borrowing for construction crowded out other areas of the economy, and crowded out acquisition of other skills. That’s an easy problem to describe, but unless you have a time machine it’s not so easy to fix, particularly if labour costs are going to be maintained at high rates.

    Also, a minimum wage may well be a good idea (a good discussion for another day) but there are a lot of labour intensive industries that might be possible at lower wages that will NOT fly at Ireland’s cost base.

    http://www.google.com/publicdata?ds=z3ennpo156rm1e_&met=minimum_wage&idim=eu_country:IE&dl=en&hl=en&q=ireland+minimum+wage#met=minimum_wage&idim=eu_country:IE:NL:FR:GB:ES:SK:CZ

  23. @Adrian
    This ain’t over by a long shot – this is just beginning if the present monetory system is not changed – to assume that countries and blocs have escaped is just plain wrong or uses a short term horizon.

    As regards Ireland – well a large fraction of bank bonds appear to be oversees so therefore unlike Japan the interest revenue on the debt is not recycled into the domestic economy.

    The crisis in the fractional reserve system is to some extent a product of the monetarist revolution of the 70s and 80s.
    Its mantra was the creation of credit behind banking walls and the replacement of fiscal spending as a agent for growth – although Keynesian fiscal spending was very wasteful it tended to create large applied science payoffs once in a while that increased the capital base of a country.
    But nearly all of commercial bank credit went to the consumption sector – this created the illusion of growth as capital spending was reduced to near zero (My definition of capital spending is really increasing the energy density of a society over and above the current base level – for example wood to coal to oil to nuclear, The final step was broken as the capital costs were immense and a shift to nuclear would have reduced personal consumption for some time).
    The accounting problem was overcome by rejecting and artificially distorting Gold as a unit of capital account – a subsequent consumption boom was fuelled due to a lack of investment in capital.

    So indeed fractional reserve banking may be sustainable using this metal as a core unit of account although Gold has been distorted in value to suit the interests of bankers for centuries.
    So now we come to todays sorry state – where credit is created without any reference to a substance that has obvious value as America would not have defaulted in 1971 if it were not.
    Credit is a unit of extraction – increasing credit increases extraction.
    Capital is wealth – increasing capital extraction via fractional reserve lending decreases wealth unless innovation can beat entropy.
    Clearly for some time commercial bank credit creation has decreased wealth and we are now at a point of static or declining credit extraction rates due to peak oil ,therefore banks cannot be allowed to create credit and should only be allowed to loan out their own money.
    Any credit creation should now come from Goverment entities whose primary goal is to increase the energy density and simultaneously dramatically increase efficiency.
    No inflation or deflation can occur if as Goverment increases its credit via zero interest money banks increase their reserves by the same amount.
    Any external trade defecits or surpluses can be settled by Gold as a unit of account.

  24. Criticizing this blog is great fun!

    But what can this blog do when Ireland is no longer sovereign?

    Governments can create jobs directly but clearly this is unsupportable. The credit bubble caused massive malinvestment and waste. If the blog was to discuss job creation, there are far better economies than that in Ireland at the moment to consider the topic!

    The real economy, sustainable without a credit bubble is unknown to this blog. Addressing the genuine investment needs is complicated by the corruption of the policy process evident in Ireland.

    The land is the under used resource. Crops that do not come within the purview of the CAP offer the most likely source of sustainable careers.

  25. Can’t we tear up all the golf courses and sell them back to all those poor farmers who sold them in the first place? Likewise with many of the ghost thingamyjigs that permeate the country. Sure then we’ll have something to farm.

  26. @ hoganmahew

    Building Tescos is not the solution. I can’t see how you’d think I even suggested it. Tesco’s job applications show that the problem is clearly not supply, but a demand issue.

    @Hugh

    I think everyone agrees that we don’t need another construction boom (well maybe not Tom Parlon), but I do think some construction building schools and so on can help ease the transition to other sectors (that boost net exports).

  27. @Rory
    And I am trying to show, badly, that we may have a problem with the wrong sort of supply. Too many construction workers, too many retail workers (yes, I know anyone and their dog will have applied for those jobs, but look where most of the unemployment rise has come from).

    Unfortunately, it is not enough to say that you have plenty of workers. The type is important.

  28. Soon, China will join India in offering to among others, Irish students, through excellent English, not Angrish, degrees in interesting disciplines like engineering, nursing, teaching etc.

    The jobs will be overseas, not in Ireland.

    They will offer secondary qualifications in IB, A levels, SAT tests etc for home schooling. Because secondary schools will have 50 to a class and bullying will be rampant, Irish scholars will readily take on such courses. They will do well and move abroad to jobs. Any jobs because there will not be any in Ireland. Who is going to provide them? Banks currently have yet to shed the excess jobs that still exist, paid for by borrowing from abroad by the government. Bank strikes have been known to fell governments!

    What exactly is Ireland any more? Corrupt cronyism makes it the Domincan Republic of Europe. Somewhere else is Haiti? Apologies to inhabitants of Hispaniola….

    Until the unemployed take to the streets, no employment will be provided. Their raw power and the inevitable casualties may then balance the political power of the bankers and bondholders and developers?

    This blog can do nothing for them! Some will take to dealing drugs and prostitution. Others will not be so lucky….. Perhaps those with large houses could be required to employ someone on benefit at the rate of one per ten windows in their house? After all, one does hear it is difficult to get good servants these days.One must do one’s part.

    Too many commentators on this blog behave as if unemployment is an issue. In ten years it will be an issue. It will also be a catastrophe. People who vote want this system. They will change their minds slowly. If the msm do not report it then it is not an issue for people who cannot think for themselves. OMF has a good point, well put.

  29. @Pat Donnelly:
    “The land is the under used resource. Crops that do not come within the purview of the CAP offer the most likely source of sustainable careers.”

    You don’t need much land for grow-houses. Some of the redundant houses on ghost estates could be used. The Irish Times itself had an article on this, er, growth industry last Saturday http://www.irishtimes.com/newspaper/weekend/2010/1030/1224282293984.html, but didn’t show its possible role in providing employment, using houses and increasing exports.

    bjg

  30. @ hoganmahew

    OK. My point is that people are willing to work, we don’t need to push the majority of the unemployed to work. But I agree about the need to change skills.

  31. No new credit creation is why property prices still have a long way to drop, but the owners can’t afford the drop! I know of several personal bankruptcies which adds another drop in the ocean towards a sustained recession.

    Shameless plug here, but I’m hoping that this site I’ve just set up, houseflog.ie will speed the trade up as buyers can now advertise their offers online.

    Ireland is never going back to the old days and it’ll take around a decade probably for the excess debt to have bled out the system IMO.

  32. OSM.

    re your comment on Dan O’Brien, your are playing the man, not the ball. He is after all a commentator. He does not make policy, nor does he implement it.

  33. @Keith Cuneen.
    re: “As for fore story it is no longer competitive since the advent of cheap Russian lumber”.

    I would not agree that a huge tree planting program should not be considered because the current price of Russina timber is lower than European timber.
    Given the numbers unemployed in Ireland at present , the planting cost could be close to zero. Trees will take up to 30 years to mature-faster in Ireland than in many parts of the world. I believe that there would be long term economic value in such a project.

  34. @Joseph.
    re: Is that the same one as featured in “To Have And To Have Not” (E. Hemingway)?

    Regretable, I didn’t see the film or read the book. Now that I am underemployed, I will try to brush up on these thinks.
    Nevertheless we need to employ significant numbers of people in some useful long term economic activity. How else can the rot be stopped. There is no point waiting for the mythical growth of government thinking.

  35. @Rory
    Again, the problem is easy to describe. We have a huge number of people unemployed, and lots of them have skills that we can no longer use or which depend on a booming domestic economy.

    The solution may even be easy to describe, whether you want to say train everyone or to say everyone should emigrate, or to say that the minimum wage should be greatly reduced, or whatever.

    It’s just that the solution may be easy to say, but far less easy to implement.

    My fear is that the only solutions which can last will be unpopular, e.g. a combination of emigration, reduced wages (poverty, essentially), and slow retraining until wealth can be created. On the other hand the solutions which won’t work in the long term may be popular, e.g. make-work schemes, high taxes on productive sectors, etc…

  36. @Joseph Ryan
    There is huge input costs for the growth of low quality timber here – sitka spruce especially is of poor quality.
    Travelling in Scotland recently forestry estates were running on a skeleton staff when compared to yesteryear.
    Anyhow I hold no affection for these mono cultures – I am sure that a more productive system of highland and Kerry / Dexter diary farming will provide a more sustainable employment and land management of our highlands as the transhumance system of grazing here has stood the test of time unlike the more recent high intensity sheep farming.

  37. It is possible to set up a parallel currency system usually referred to as Scrip. Only lower levels of gov’t can use this device. Abba Lerner the brilliant Russian-British-American economist is credited with lending credibility with his work on what makes currencies credible. The lower levels of gov’t pay their workers and contractors with Scrip, the lower levels of gov’t then accept the Scrip (which is transferable) as payment for taxes. Lower levels of gov’t usually collect and spend property taxes. In the coming crunch lower levels of gov’t can continue to function with few layoffs or cuts in essential services.
    This system was used around the world in bad times, it is most often associated with Argentina where it was used as recently as 2001-2004. In Canada there was a movement called Social Credit which used these techniques in Alberta (then poverty stricken 1930s) and pockets of rural Quebec. As a political movement it lasted into the 1960s. No need for bankers in London, Frankfurt, Paris, New York. Time for some of you Academic Economists to start casting around for alternatives. One aspect that will appeal to the larceny that resides in most green hearts is that this is completely outside the national tax system. If the national tax authorities do insist on collecting they can be paid in Scrip.

  38. @Pat Donnelly

    I was in India last week. Mumbai is going to run out of drinkable water at some stage unless something is done about corruption in the city. I don’t see India taking many jobs away. Food price inflation is running at 10% and it is crucifying the poor who, after all, are 80% of the population. The state the rich have created will have to feed them. Plus the India story seems to have lost a lot of fans in the West.

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