New research on efficacy of active labour market programmes

The weeks to come will naturally be dominated by the usual leaks on the budget and the Euro crisis. In both cases it seems the public is to be boiled like frogs in bad news turning ever so slowly worse, day by day. Meanwhile, Ireland’s unemployment problems persist. The latest live register, rather than unemployment, figures are here, analysis here, and Constantin also has a decent analysis of recent job destruction here.

Today also sees the publication of some research on active labour market programmes in Ireland by the ESRI. The research looks in particular at job search assistance programmes, training programmes, and employment subsidies like the JobBridge scheme. The study naturally argues for more research and evaluation as well as institutional reform. It is a really useful document for those interested in active labour market initiatives, and, let’s face it, with a 14.4% standardized unemployment rate, that is more or less everyone.

Author: Stephen Kinsella

Senior Lecturer in Economics at the University of Limerick.

16 thoughts on “New research on efficacy of active labour market programmes”

  1. It looks as though the 3.4 per cent growth in GDP since Q4 2009 has stabilised the number on the live register. The October 2011 figure was identical to that of October 2010. Gurgdiev’s analysis is very weak and ignores the most important factor behind the large fall in the live register in September and its partial reversal in October, namely: the CSO figures for 2010 were based on a 5-week September and a 4-week October, while in 2011 it was a 4-week September and a 5-week October. Strip this out and the pattern is one of the live register being basically flat, or falling very slightly, over the course of those two months.

    However, stabilisation is nowhere near good enough. The blunt reality is that, no matter how many academic papers of this type are produced, a significant fall in the unemployment rate will only occur when the construction industry resurges. Most Dublin 4 media/academia economists, commentators and environmental nuts hope that day will never come, as their loathing of builders and developers knows no limit. They cling to the vain hope that full employment can be restored while running down the construction industry to almost nothing.

    The facts are quite clear:

    (1) Construction as a share of GDP averages around 6 per cent in most developed countries. In Ireland, it is currently about 2.5 per cent.

    (2) The census showed that the number of households in Ireland increased by an annual average of 46,000 between 2002 and 2006 and by an annual average of 40,000 between 2006 and 2011. Ireland is forecast to build 7,500 houses in 2011.

    (3) The recent Dept of Environment report showed that the number of empty new-built houses had fallen by 25 per cent between 2010 and 2011.

    So, it is clear that at some point in the next couple of years, there needs to be the beginning of a massive resurgence of the construction industry, with the targets being to see construction output rise by approximately 200 per cent in real terms from its current trough to its next peak in the second half of the decade, and the annual number of new-built houses rise from its current level of 7,500 to around 50,000 by mid decade.

    Unfortunately, the Blueshirt/Stickie government shares Dublin 4’s hatred of the construction industry because of its historic tendency to support Fianna Fail and, notwithstanding the political kudos it could earn from the fall in unemployment that the resurgence of the construction industry would bring, can be relied upon to do nothing to expedite its resurgence, and may well actually seek to delay it.

    Today’s news is an omen. Enda Kenny has added to the long list of falsehoods that he has uttered since becoming Taoiseach and has announced the cancellation of the A5 motorway from Monaghan to Donegal, completely contradicting what he said in May

    Thus, we have:

    27 May 2011: “Kenny commits to motorway to North”

    http://www.independent.ie/national-news/kenny-commits-to-motorway-in-north-2659629.html

    9th November 2011: “Kenny abandons motorway to North”

    This is a purely ideological decision, the product of Fine Gael and Labour’s long-standing hatred for people in the border regions. Naturally, they kept it under wraps until after the Presidential election. It needs to be reversed asap and priority given to revving up the constuction industry all round, rather than increasing social welfare, which seems to what they are intent on at the moment.

  2. “This is a purely ideological decision, the product of Fine Gael and Labour’s long-standing hatred for people in the border regions”

    Now who’s employing weak analysis.

  3. @Mark Dowling

    Now who’s employing weak analysis.

    JTO again:

    The answer to your question is ‘Enda Kenny’.

    Here is the Irish Independent report of Kenny speech in May:

    But Mr Kenny said his Government is committed to co-funding the A5 project with the Northen Assembly because it would “significantly improve” access from the north-west to Dublin. “I’ve travelled that on many occasions and it does need to be developed. The previous government had committed to put money in there and WE WILL HONOUR THAT COMMITMENT,” he said at the annual conference of the Institute for British-Irish studies in UCD.

    Offhand, I can’t think of any infrastructural development a Fine Gael/Labour government has ever built in Donegal, Cavan or Monaghan. Were the roads in Donegal, Cavan and Monaghan painted green if built by Finna Fail and red/white/blue if built by Fine Gael/Labour, they’d all be green.

  4. @Stephen

    14.4% unemplyment is very serious and should not be treated lightly.

    However we also have to keep in mind that Ireland experienced mass immigration between 2004 and 2008 which rapidly expanded the size of the labour force.

    Most EU countries (apart from Sweden, UK and Ireland) imposed restrictions on labour movements from accession states for seven years betwen May 2004 and May 2011..

    Despite media predictions to the contrary we did not witness a “rush to the airports” as soon as the downturn started. So obvioulsy unemployment reamains high despite the fact that numbers in employment are quite high compared to ten years ago.

    Relaxation of labour movements within the EU since May of this year has not resulted in a “mass exodus” of immigrants to countries which are nearer to their own countries of origin or a “mass homecoming” by many immigrants to their countries of origin (which have only recently and casually latched on to the “quaint” concept of democracy) where their states are apparently enjoying “stellar performance” in growth.

    Judging by events of the last week where Democracy has effectively been ignored in two important EU nations and the fact that many East European countries (which have provided the source of many of our immigrants) it is not hard to understand why any recent immigrant to Ireland would take the risk of going elsewhere in Europe ,or returning home, in the present climate.

    Contrast this with the fact that once Ireland started to develop rapidly in the 1990ś many Irish emigrants took the opportunity to return home to Ireland often taking up jobs which (at the time) paid 70-80% of the salaries they had previously been receiving in the countries they had emigrated to in the previous two decades.

    As with our (Irish) “fiscal crisis” IMHO it appears our “unemployment crisis” is a consequence of the the dangerous social malaise which can no longer conceal itself and is spreading into older parts of the European Union like a CONTAGIOUS disease.

    @all

    I rarely agree with either Ambrose Pritchard and Fintan O`Toole but readers of this site might benefit from reading their recent respective articles in the Irish Independent and Irish Times. Fintan is more explicit in defining what is actually happening (divorce between capitalism and democracy) while Ambrose also appears quite “rattled”.

    Both of these writers are clearly concerned about a different kind of social “contagion”.

  5. A number of findings jump out for me. First, job search assistance is cheap, relatively easy to administer, and is probably more relevant than skills training in the current scenario where a good proportion of unemployed people already have some level of skills (especially in the male category).

    Second, whatever about the other benefits of Community Employment, it is not a realistic activation measure.

  6. @Stephen Kinsella

    Regarding private sector incentives, the slides indicate that these incentives worked in Denmark, Germany, Sweden and Switzerland but did not work in Poland and Slovakia.
    I suggest the answer to this is very simple, there were jobs in first four countries and no jobs in Poland and Slovakia.
    There are no jobs (or very few) in Ireland, excluding govt advisors, Nama and its suckling herd etc.

    For once I find myself on the side of the substance (but not the style) of the @JTO argument regarding jobs in construction.
    He is undoubtably correct in his argument that a measured program of investment in the building is needed for several reasons, not least that construction is now down to approx 2.5% of a greatly deflated economy and will come into balance in time.

    In addition there is work ready and waiting to be done. I believe the term is shovel ready, used mainly by people who would not know the handle of a shovel from the handle of a spade.

    I keep repeating it in these columns so I will not bore you with details.
    Get NAMA to finish the unfinished estates and buildings with its funds creating approx 45,000 jobs each year for three years.
    Just get NAMA to do its job.

    PS The government is collecting approx €500 million for a jobs program each year for four years.
    If used for direct jobs that would provide 40,000 job each year for four years at a net cost of €12500 each with €15000 each being saved on welfare payments, giving average wages of €27500.
    The reason we have not had a reduction of 40,000 unemployed is simple. Apart from a few token items, the €500 million was diverted by govt to pay for other items. Not least of which is the extraordinary bonanza payments to retiring PS workers, benefitting not the unemployed by the already well remunerated higher level PS employees.

  7. @Livonian

    Could you post a link on the Fintan O’Toole / Pritchard articles.
    I don’t usually buy newspapers regularly anymore. Can’t afford them!

  8. @JTO
    We will need those houses you speak of for the increase in population however who is going to be willing to build those 40,000 houses when they know that they will sell for about 60-100,000 on the open market. No Fianna Fail builder will touch it. they were only good at making the easy money, not real business men at all.
    So we will then be relying on public housing to do it? with the new lot trying to show how good we at austerity i do not think so!

  9. Fás was a miserable failure, with root and branch corruption to boot (biggest unspoken issue is how unqualified all the instructors/ contractors were)

    Yet the same people who presided over that mess, are just being redistributed to perform the same functions ?

    There’s billions of untapped potential in Ireland’s labour pool, and worse still the long term human capital damage being wreaked by unemployment is of order tens of billions (especially so for young males)

    We need a serious infusion of expertise in this area to Ireland – there’s money on the table – and people’s welfare at stake. Let’s look to Asia, Northern Europe and America for some expertise – the money is there.

  10. @ Joseph Ryan,

    I also find myself in agreement with JTO on this one. Construction may have gotten out of hand in the boom, but this is equally ridiculous. There’s too much stuff that needs to be done. Also, there’s no way they’re going to redeploy 200,000 plus workers into manufacturing jobs that will likely not materialize.

    So besides the unfinished estates I’d prioritize:

    Schools – And save on the prefabs.
    Hospitals – Ditto. Beaumont hospital looks like a prefab with some concrete buildings attached.
    Flood Infrastructure. Could entice insurance companies into setting up a joint fund for this. (One of DmcW’s suggestions)
    Broadband.

    There’s ton’s of other stuff to do also. All that’s lacking is the will.

  11. An interesting document. I agree with the commentors that cutting the knees from the capital budget is a bad decision. We have very few realistic options to boost employment and that was one of them.

    I know a good few people who are on social welfare and they haven’t been asked to show evidence of job-hunting, let alone been offered any Job Search Assistance (JSA) services.

    Saying that, I do wonder if the apparent effectiveness of JSA applies more to older workers. Without effective sanctions, I really don’t know if younger people would benefit as much from JSA – if someone wants to point me to literature that corrects me, please do.

  12. @ Shaun Byrne,

    Normally I’d say fair question, but considering that we paid out €700 million last week for bondholder welfare I’m inclined to let that pass.

    We make our priorities. They’re never about human welfare. Only banks and hedgefunds are systemic. Not people. It sickens me.

  13. Further to my post above about the need to rev up the number of new houses built, the CSO figures for residential rents have just been published (at 11am).

    There are some economists who claim that there are 300,000 empty new-built houses in Ireland. We all know who they are. And, in addition, they claim that Ireland is experiencing massive emigration and depopulation.

    Perhaps they would explain these figures?:

    CSO figures for residential rents (just published at 11am this morning):

    Dec 2010 89.5
    Jan 2011 89.6
    Feb 2011 90.5
    Mar 2011 89.9
    Apr 2011 90.4
    May 2011 90.5
    Jun 2011 90.1
    Jul 2011 90.3
    Aug 2011 90.4
    Sep 2011 90.8
    Oct 2011 91.8

    So, residential rents up 2.6% between Dec 10 and Oct 11, and the rate of increase is clearly accelerating, up 1.7% in the past 3 months alone.

    If there are 300,000 empty new-built houses, and the population falling, surely the laws of supply and demand suggest that rents should be falling. But, they are rising and the rise is getting risier, as Bertie would say.

    An explanation please?

    It is undoubtedly the case that, because of bank problems, many people can not buy houses at present. But, they still have to live somewhere, so they are renting. And, because the surplus of ’empties’ is now falling quite fast, rents are starting to increase quite fast. Do we need to wait until the last ’empty’ is occupied (whether by a buyer or a renter makes no difference), before Ireland sarts building houses again. The ‘300,000 empties’ was always a politically-motivated fraud.

  14. @Kelly, McGuinness & O’Connell

    Useful review – impressive appendix – with dependent variable being ‘Got a Job’ – hence ‘dosh input’ from state deemed to be ‘Effective’. Simply noting the two reductionist simplifications in addressing a highly complex issue:

    “Rigorous Irish research is limited to a small number of studies …. ” Quite amazing really considering employment history …. [I don’t see a single citation to an study from an Irish university in the References!]and I resist the temptation to deconstruct the implied ontology of ‘rigorous’ at the mo … or twin it with ‘relevance’ as this paper is certainly relevant.

    “… … a number of tentative conclusions that can serve to guide policy.” Noting the two simplifications noted above, one can agree – but much that is relevant remains outside these two simplifications and what is outside – remains open at the mo – is highly relevant to other benefits associated with much that is dismissed here as not ‘dosh stat sig’ with the ‘Got Job’ dependent variable – so I humbly suggest the qualifier ‘Highly’ Tentative …

    “Based on the two meta-reviews, “… main policy implication that follows form Kluve (2006) and Card et al (2010) is that programme type is what matters most for ALMP effectiveness. Training generally leads to a modest improvement in employment chances, while JSA and private sector employment incentives tend to show more favourable outcomes. However, public job creation schemes have generally been found to be less effective. Other contextual factors tend to be less important.”

    Strongly Agree on ‘specific training’ to fit ‘local private labour market needs’ wrt Spend Dosh and Get Job.

    Strange phenomenon – those ‘other contextual factors’ are often too damn difficult to quantify or measure – yet are more often than not the key to what the impoverished ontological equations cannot get at – and well beyond the two main variables here. So I would humbly suggest the following qualifier to that last sentence:

    Other contextual factors tend to be less important …” in the admittedly reductionist analysis presented here, and a more substantive discussion on the benefits of other programmes would require the inclusion of insights from both behavioural and institutional economics, psychology, mental health professions, weberian and marxist sociology and so on – but the bleed1n powers that be won’t give us the dosh or resources to conduct such valuable work, and the guardians of the neo-classical paradigm won’t let us ‘do that stuff’ anyway, and we are only economists, not miracle workers.

    And if someone would stop paying off all the vichy_bankers we would’nt have to do it at all at all cos most of the unemployed would go back to work!

    That said, keep up the good work!

Comments are closed.