Richard Tol: The Cost of Working in Ireland

This blog is facing some technical problems today – so Richard could not directly load this post to this site.

You can find it at his on site here.

38 replies on “Richard Tol: The Cost of Working in Ireland”

There seems to be very little for Prof. Tol to explain: he and his team conducted worthwhile early research in a new area, which happens to be quite relevant to contemporary social policy (and therefore more sensitive than other research topics). Fair enough – that’s what academics are for.

The real questions are for ESRI, and I’m not sure that any of the journos have yet thought to ask them:-
– Did someone in govt “get to” the ESRI and demand that this research paper be withdrawn?
– Were any explicit or implicit threats made about State funding?
– Can they point to any specific “methodological flaws”, beyond the type of issues characteristic of any working paper at this stage of development, that would justify treating the reputations of these economists in such a cavalier manner?

I don’t think there’s any conspiracy here, or any question of the ESRI being ‘got to’, pressurised or threatened. The ESRI simply took fright. Richard and his colleagues, inadvertently, broke the first rule when doing research that might impact, however tangentially, on public policy.

The rule is: it is absolutely forbidden to do research, with an open mind, using facts, evidence and analysis, to seek to answer questions to which the Government already has the answers – even if it lacks – or, more usually, when it lacks – supporting evidence. The subsidiary rule is that the only policy research allowed (or which will be taken in to account) is that which seeks to find, assemble or manufacture the evidence the Government requires to justify the policy decisions it has already made.

And if you find you are doing research of this nature, for goodness sake, make sure you don’t present any findings that might call the Government’s previous policy decisions in to question. The intellectual contortions and the verbal gymnastics performed to avoid falling foul of this requirement are a wonder to behold.

I must say that I think Professor Tol is right to make a little fuss about this week’s developments. The mainstream media headlined the fact that the removal of the report was “unprecedented” and the general impression given was that the report was substandard or poor. It has been truly bizarre this week to hear people use the term “peer reviewed” for what was probably the very first time in their lives, and the impression again was that if the report had been “peer reviewed” that imagined or real errors would have been caught.

I think it would behove the ESRI if it issued a statement to clarify its actions and make it clear there is no extraordinary criticism of Professor Tol, whose departure from these shores is still regretted by many of us.

There may be issues in the report about incentivisation or activation measures, but the memorable factoid I drew from the report was that we have the most expensive childcare costs in Europe and that if you are a household with young children these costs could wipe out the financial benefit of work over benefits. I remain amazed that the NCA is not more proactive in driving these costs down, which might help cushion the very nasty budget adjustments in store for us. For this factoid alone, the report was worth reading.

The Crilly, Pentacost and Tol is a valuable contribution to the debate on Irish labour market policy and its availability here is very welcome.

Two points should be borne in mind when reading it.

The first is that, as the authors clearly acknowledge, the data used in the study are some seven years old. There have been some significant changes in the social welfare-tax system since then. The authors did not speculate how these might have affected their conclusions.

The second and more important point is that the unemployment rate was very low when the data used in the study were collected. Highlighting the costs of moving from unemployment to employment in 2005 does not shed light on the reasons why the unemployment rate rose from just over 4% then to almost 15% now.

Well there is a Angela’s Ashes type quality to the material , perhaps there is a Richard Harris type character withen the ESRI who simply does not like the author.

I think you can’t really examine details down at this level as it is almost impossible to quantify externalties to the same level of detail.

Look .. to me I see people going to work who on a holistic level are net extractive as their work adds little or no value – I think much of the private sector is more guilty of this to be honest although the are more likely to be put out to pasture so that they can consume less resourses …….the newly unemployed and pensioners are a vital conduit to the payment of private debt via fiscal funds as their lives are generally less resourse heavy especially in the area of liquid fuel which is the crunch point for western economies now.

Their jobs made a sort of sense when we were part of the eurozone proper and you needed guys to do pointless work that could recycle the surpluses that came from Arabia and North Africa.

Now we are in a kind of national economy again that must produce a current account surplus but without control of our natural resourses or currency which is the worst of all worlds really.
The European periphery has essentially become the Saudi Arabia of the core….. just as in the 19th century when we exported food (energy) to the various coal conurbations.

These are quite inane conversations when looked at in that context – when or if we get back to a national currency we may again engage in rational discussions about the true goal of economics – to create a sustainable wealth base rather then who gets to pay the rent and who gets to keep it this declining income stream.
This is the primary reason both the left and the right is all over the shop at the moment.
Their arguments was always about who gets the pie , capital holders and their dependents or labour and their dependents.
It was never about less pies until now.
There is a reason why we have less pies …… its all about banking credit / leverage and it role in destroying the wealth base over a long enough time period.


“I remain amazed that the NCA is not more proactive in driving these costs down..”

I’m amazed at your amazement. I’m sure there are people in the NCA who’d love to get stuck into excessive costs across the sheltered sectors, but it is neither resourced nor empowered to do this. And this is deliberate government policy. Indeed it will emasculated even more when it is rolled in to this new Consumers and Competition Authority with the Competition Authority.

All the politicians, policy-makers and regulators (and the few economists and academics who make a bit of noise in this area) can mouth is ‘more competition and better regulation’. But they haven’t a bull’s notion of what’s really involved; and it’s in their interests not to know.

A major increase in the reexport of oil products is seen when compared to last years figures

Y2011 Jan – March : 269.537 Million
Y2012 Jan – March : 542.196 Million

Whitegate trade stuff I imagine ?

It puts the oil import figures in some context I suppose – declining / tanking ? domestic consumption
Y2011 Jan – March :1,360.397 Million
Y2012 Jan – March : 1,438.404 Million

The road vehicle imports are slightly higher given the ever increasing diesel preference I guess.
Y2011 Jan – March :590.499 million
Y2012 Jan – march :613.345 million

God be with the days when road vehicle imports was 2/3 times as big as oil imports.
However When food imports is consistently higher then oil imports you are heading towards second world country status me thinks.

Those NAMA fields need to become market farm fields Pronto.

It’s a welcome development that there is a focus on unemployment both by Richard Tol and his co-authors, and Micheál Collins at NERI.

It strikes me that there is more of a focus on the human cost in the media in the United States than in Ireland.

It’s likely that most people would prefer to have a job than be unemployed.

It’s understandable that the longer the person is unemployed the more demotivated that he or she gets. It’s absolutely understandable.

As we all tend to work better with a deadline to meet, it helps people as in Denmark when the state takes an active part in assisting people to get prepared to be available for employment with incentives/disincentives regarding participating in training etc

This is where research is important but of course it’s not easy.

There are additional costs in accepting employment; there are also costs in being unemployed.

The unemployed person who is desperate or depressed is likely to drink more; money shortage leads to family discord and so on. People overeat as an antidote to poverty and unemployment.

How can all that be measured?

It’s unfortunate that the ESRI statement tended to denigrate the professionalism of Richard Tol and his co-authors.

The lives of countless people have been destroyed because of fear during a period of national hysteria, of challenging lines of authority. How can all that be measured? Who would want to measure it?

Last month, The Economist published an article: ‘In praise of misfits’:

We need more iconoclasts in this deeply flawed conservative society.

When I became self-employed, my son who was 11 asked me what job I had as I began working from home. He seemed to think that I had no job even though when he observed me in my previously regular work, he thought all I did was walk around and talk on the phone.

I do know what the fear of unemployment is like among workers, as I experienced it in a company of up to 400 people.

I have never had to apply for unemployment assistance myself but I do know what the fear of running out of money in the modern economy is like.

@Paul Hunt
“But they haven’t a bull’s notion of what’s really involved; and it’s in their interests not to know.”

Okay — do you have a reference to some more concrete proposals in this area? Because concrete proposals are badly needed.

If anyone needs any up to date data on costs associated with working I can assure you that even today a tiny plate of pasta and a thimble-sized glass of house wine somewhere half decent still costs the thick end of €25 for one person in central Dublin. It’s a scandal. My child carer had to make do with bread and water to pay for it.

@otto, Paul H

a) a decade of bickering, or

b) ignore the question, or

c) introduce a domestic currency

@ Peter Stapleton

The first is that, as the authors clearly acknowledge, the data used in the study are some seven years old. There have been some significant changes in the social welfare-tax system since then. The authors did not speculate how these might have affected their conclusions.

It seems to me a feature of RTol’s papers has been what curiously gets left out “for further study” which might upset the whole careful construct.

@michael h

Unemployment cannot be discussed in ireland unless the discussion is filtered politically with lots of what passes for ‘balance’ in the various Official Ireland’s media organs.

Moving five years into the unemployment crisis and still no meaningful workfare program, but lots of opposition to reform. The public service rehires pensioners rather than create room for younger people to come in at the bottom. The HSE has surplus mangers on six figure salaries, while barely above minimum wage home helps are let go in droves. The Minister for Health decides there isn’t enough ‘expertise’ in the 100,000 or so staff at his disposal but needs to hire in extra advisors and specialists at near 200k a throw after PRSI, etc.

My own opinion is that a government composed of cadre who have never encountered unemployment have a gentrified disdain for the those ‘unable to find work’. Old Ireland, old snobberies.

A group in Youghal, as far as I recall, made a powerful documentary on how the town was affected by unemployment and business closures. That was over a year ago. Perhaps it has already appeared on the airwaves. If it has, I missed it.

Enlighten me someone.

Cue Dorkish Train Rant……

If no stimulus is available they need to redirect 85 -90 million of useless road / concrete funds to breath some new life into that town.

If they can spend 60 ~ million on a line with previously 400~ passengers a day then Youghal is a bargain.

From EFF website
“Modernisation of the Bergerac-Sarlat (ERCP)After more than a year of construction, 60 km of line were renovated between Bergerac and Sarlat, and train traffic resumed Friday, March 9, 2012.

Registered in the rail component of the CPER 2007-2013 of the Aquitaine region, the operation was to modernize 60 km of line and remove the slowdown to 50km / h between Siorac and Sarlat. Now, the whole line of traffic to allow a speed of 80/90km/h. This project totaling 44 million euros was financed equally by the State, the Regional Council of Aquitaine and RFF.”

Further work is still planned and two phases:

– In 2013, with the modernization of the track between the Bush and Siorac

– In 2015, with the modernization of the signaling of the star du Buisson (crossing lines Libourne-Bergerac-Sarlat and Périgueux, Agen).

This additional phase is entered in the CPER for $ 26 million.

The entire country both north and south needs one of these thingies working on a constant basis under a 100 man type operation – Ballybrophy and Lisburn – Antrim track renewal comes to mind for starters.

I find it very ironic that it takes a person who has left Ireland to tell the Irish a few facts.

Cost of fuel, with its respective duty and VAT.
Cost of motor taxation, up to 2500 euro for some cars.
Road tolls springing up, with more promised.
Cost of parking, 2.90 euro per hour in inner city.
Child Care costs, A creche is around 200 e/ week, even up to 1000 / month per child.

Of course the reality does not matter, what matters most is the shine on Labours ineptrocracy manifesto.

Well, taxes on income for low and middle income earners are very low in Ireland, so indirect taxes partly make up the difference. And since we need the revenue we aren’t going to be lowering any taxes right now.

On childcare, is there a realistic way forward in terms of lowering the cost with no more public money spent? You would think it would be a competitive market, with few barriers to entry or capital requirements, but perhaps not.

Tax is not calculated withen the raw import figures…… look at the above ratio of car capital imports to oil figures – the ratios have completly reversed.

When we were in the eurozone national planning was no longer fashionable as we were all in the club like – our imports was anothers exports and all that lark…… well they are treating us as a national economy but without any national powers now.
We are a pure colony ….. our only role is to transfer wealth to the cores cold black heart.

@The Alchemist,
How much of this export growth was indigenous versus mnc? And further, how much of this goes to the government in taxes?

I was thinking recently, imagine if we could convert the 100K+ workers in the mncs to Irish smes (assuming linkages, and exports etc stay similar), what would be the increased tax take to the exchequer? Worth considering, in light of possible forced changes to our corporation tax regime in the future!
MNC-based employment can seem a little like most people think of the unemployed – addicted to an easy form of income, which excludes examining other possibilities.
We are not imaginative when it comes to encouraging entrepreneurship. We could for example, do something that some venture capitalists do in Silicon Valley, dump funds into a large number of startups and see what survives and thrives.

Very clear explanation from Richard Tol as regards the methodology and motivation behind the research that ended up as 436.

Inadvertently, if the results are borne out, the research team may have stumbled onto a serious flaw within social welfare policy in this country. A flaw that calls into question many of the so-called job creation initiatives, such as jobsbridge, that are being assiduously pursued. Also the general government resistance regarding any radical reform of a system that might provide genuine incentives to people to get back into the jobs market beyond shibboleths labelling unemployed people as ‘workshy’ as exemplified in placing the onus on such individuals to continue to ‘justify’ their unemployment and produce personal programmes for work-seeking and the like.

The big bugbear in the system for younger couples with children, as identified in both 436 and the NERI study, is the cost of childcare. There are other costs associated with returning to work, which 436 attempts to take account of. The dynamics of individual family circumstances remain difficult, if not well-nigh impossible, to compute.

It seems to me that all such research should be welcomed, however tentative its results. Further, that the quality of data, and ‘received wisdom’. on which the DSP relies, in terms of advice to the resident Minister, is now seriously open to question.

Logically it follows that current policy may be misguided; both in respect of sanctions placed on unemployed persons who refuse placements or job opportunities etc., as well as on the broader labour market initiatives being pursued by government and its agencies to stimulate employment. In the manifest failure of these policies, both the registered unemployed and employed taxpapers stand to be the losers.

As the government-sponsored initiatives fail – as they must do when founded on a false analysis of the problem – the policy response is to intensify the effort. This was the pattern in the 1980s. It failed then. It’s failing now. The difference is that now, though, there is much greater access to a wider range of thinking and ideas and research about these problems. And commentary too. Pity it is that the adminstirative and political elites appear blind to it.

@ Dork,

Not sure when was the last time you filled up a fuel tank of a automobile.

Most cars have a 60 to 65 lt tank. Some have up to 90 or 100 litres.

60 X 1.60 = 96 euro for petrol.

And you know what Dork, that 96 euro F___ing hurts, everytime. Not that those who espouse the ineptrocracy philosophy would understand.

I don’t like cars as I think they are consumption sinks if not used as Taxis etc – but I like to think I’m practical……….

There is nothing wrong with using & depreciating the Highways that were built much like how we used the Edwardian railways post war of Independence.

If you remember my rants from the recent past I recommended anybody with the capital and need to buy a new car should invest in a Skoda Fabia Greenline given its proven real world fuel performance figures / low capital cost /internal space relative to impractical battery powered cars and expensive Hybrids that do not do what they say on the tin.

The older 1.4 model :

Inadvertently, if the results are borne out, the research team may have stumbled onto a serious flaw within social welfare policy in this country. A flaw that calls into question many of the so-called job creation initiatives, such as jobsbridge, that are being assiduously pursued. Also the general government resistance regarding any radical reform of a system that might provide genuine incentives to people to get back into the jobs market

Oh, Veronica, Veronica.

On the other hand, Mr. Tol might just have based this (un-peer-reviewed) effort on data from years ago, which then unemployment rate comprehensively refutes this latest great white hope of those seeking to justify dismantling the social welfare state so that we can move forward into the 19th century.

@ Sporthog

And you know what Dork, that 96 euro F___ing hurts, everytime. Not that those who espouse the ineptrocracy philosophy would understand.

And where, exactly, did you choose to live that you need to use so much petrol?

@ Veronica

You have entirely missed the point of the paper, but that’s your problem

I think the entire point of this paper is abundantly clear.

My niece pays €1600 per month for her two children in a creche in Dublin. Both children are dropped in around 8am so my niece can commute to her job across the city. The creche brings the older child to school and picks him up at 2pm where both children wait for my niece to collect them at approx. 5.30pm. Why does she do this when it cost so much? Both she and her husband work in the private sector so neither know when one may not have a job. Also, while her ideal is to stay at home with the kids it is very difficult for a woman to make the decision to give up her well-paid job with a US multinational which includes such benefits as paid private healthcare premiums for her family. And, as Richard Tol correctly points out, she will spend a lot on upkeep of her car, getting dressed up, and buying lunches and ready meals for when she and her husband eventually get home.

My two older children are both under 10 and for a period of 2 years were in creches while I worked full-time and Mrs B worked on a job-share basis. My experience is that creches are not money-printing machines. Workers are probably on not much more than the minimum wage but buildings were built or purchased at boom-time prices, insurance costs are high, and regulation costs are also very high. Amazingly, you could be preparing and selling food in a commercial premises or caring for children and the State can come in and shut you down immediately if they decree that you are not up to scratch under some or other regulation but, you could be going for open-heart surgery in a filthy operating theatre in a public hospital and there is no similar powerful State agency to immediately shut down the Hospital. I work in the Health Sector and I’m not suggesting that Operating Theatres are dirty – merely that there is no mechanism to immediately shut them down if they were. I once noted at a work meeting that the local McDonald’s kitchen (due to extreme regulation) was probably much cleaner than the Operating Theatre in the nearby Hospital and if I had a choice I would prefer to have open-heart surgery in a McDonald’s kitchen than your average HSE Operating Theatre.

It appears that, as a State, we do extreme regulation of the private sector, but the State sector gets off lightly by comparison. In my opinion what we need is a Common Sense Regulator who might issue such instruction as: “In an ideal world there should be one childcare worker in a creche for every 6 children (or whatever) but, given we are not a wealthy country and no child is likely to suffer unduly, we will allow one childcare worker per 20 children (similar to many primary school classes) given the provision of some basic services such as toilet facilities, snack facilities, play areas, etc”. Now that would greatly decrease the cost of childcare if public liability insurance and other costs such as rent and professional fees were also tackled.

@Seamus McGuiness & Philip O’Connell

Firstly, appreciate the effort, as Irish citizens, in replicating and reestimating the data wrt to the Crilly, Pentecost & Tol paper.

Getting out in the boonie_docks in this timely fashion and into the weak Irish Public Sphere on major policy issues is something we need more of, and much more of …

Just two points to note at this stage from your review:

Summary Table, P. 1.
[no childcare; 1 child under 5 – (15; 44) (27; 41) (9; 19) (1; 3)] …. and the variation here, if presented to a group of junior infants would send them running home to mammy and daddy screaming that their teacher was either useless or mad or more probably both.

Provisional conclusion #1 Crilly, Pentecost, Tol, McGuiness & O’Connell are either useless or mad.
There certainly appears to be some strong support for this assertion; that said, based on age, experience, and ‘form’ I must pragmatically reject this assertion as Nonsense (and place it in the blind_biddy bin with the fiscal-korset)

Provisional conclusion #2 Irish Data is Sh1te
There cetainly appears to be some very stong implicit and explicit support for this assertion in both the original working paper and in the review and alternative statistical analysis provided here. I provisionally accept the assertion that ‘Irish quantitative data is sh1te’.

This brief begs two suggestions:

Q1. What is needed to improve quality of Irish quantitative data? DO IT.

Q2. Do more interviews with real people on the complexities of the ‘dole’ to ‘work’ transition that are quite simply unavailable to the limited ontology demanded by neo-positivisist research. (yes, it is expensive, but so is paying out 90 odious billions in welfare to dodgy financial system)


If only life could be so simple. There were many people who due to cost of housing moved out to the commuter belt, in addition some people where within walking distance of their job but when the company folded the next employment was many miles away.

It may come as a surprise to you but uprooting a family home (so that one commutes less) is a huge undertaking and costs a lot of money, it can also be unsettling for children and school etc

In addition why would one undertake this task when there is no guarantee that the new employment will last more than a few months?

I popped this in the later thread – relevant here as well (the holodeck on the blog appears to be becoming a little unstable on this serious labor market issue!)

IMF Press – The Conference Call


Transcript of a Conference Call on Ireland

MR. BEAUMONT: On the first point, it’s certainly the case that Ireland’s ability to regain market access depends very much on broader financial conditions in the Euro Area, especially in 2013, and so that remains a risk.

In terms of the point about political support and the promissory notes, in fact, everything we write is directed to our Board, so we’re helping our Executive Board understand the domestic situation in Ireland.

These promissory notes used to recapitalize failed banks entail repayments of 3.1 billion euros annually, which is quite similar to the amount of fiscal consolidation that is done annually. These notes are very difficult politically to keep servicing in the current manner, and that’s what we saw at the end of March where instead of making the repayment in cash, the repayment was made in the form of a long-term government security.

MR. BEAUMONT: Yes, this is specifically in relation to a potential shortfall in growth in 2012. Currently we have no signs that, but if it were to happen, we would support accommodating a revenue shortfall rather than trying to offset it within the current year.

Just tried to phone IMF – on hold – they have switched from Fields of Athenty in Gdansk to There Is An Isle in Christchurch ….. fairly tuned in alroight these days!

Strengthening growth and job creation is critical to the success of the program. Stronger support for job seekers in obtaining jobs is needed, where private providers of case management and employment services may have a useful role to play. It is also important to make sure that the structure of social payments does not contribute to long-term unemployment, and this is the topic of a cross-departmental review.


Pretty relevant ….

@ Bunbury

Interesting points. The private sector is being killed off with rents and rates that are absurd. Just today, I was getting an ink cartridge filled ( not in SF) and the owner and I were talking about the Wallace affair. The guy said he was not even making enough money to cover his business rates and commercial charges. He was using very little water but there was no meter so he was flat charged. The man was going to another job that night (saturday) and he said the money from that job would go towards keeping his business open. This is crazy but is going on all over the private sector. Cannot last . BTW 20 to 1 ratio is way to much, there would be absolute chaos. These children are too young to say. “sit in your place”.

The creche business was doing fine until the government tax incentivised it. When they did that, they needed to drive all the original creche owners out of business and they did that with a raft of rules, tests, regulations which made sure that only the cronies who were using creches as tax shelters and sticking them here there and everywhere would come out on top. If the others were lucky they became employed at minimum wage levels. It was pure Machiavellian. Decent people with a genuine interest in children could not compete with tax incentivised FF developers.

If only life could be so simple. There were many people who due to cost of housing moved out to the commuter belt, in addition some people where within walking distance of their job but when the company folded the next employment was many miles away.

“Cost of housing”. The overriding of professional planners by elected politicians – themselves of course getting the backhanders from the developers suddenly finding their ways cleared to massive profit – is what has caused this situation.

The Dork is entirely correct – a vast amount of money has been sunk into tarmacadam, which has formed a vicious circle with the rise of the commuter towns. This is neither economic sense nor sustainable, based as it is on a finite resource (that is also a serious contributor to pollution and climate change) and the presumption that people will always be able to own and run motor cars and be competent to drive them (neat trick in your seventies).

But sure, lash another couple of bypasses on, and make IE’s own “Motorway” McCarthy very happy.

@david o’donnell

Minister Burton on RTE’s one o’clock news programme. Interesting insight into just how much money is being spent on welfare. The Minister said something to the effect that if one person in a married couple took up a job leading to the loss of a rent allowance of 1000 euros monthly, the other person would need to find a job paying around 30k to compensate, including childcare. However, the government is looking into this anomaly and a solution will involve rent allowance being paid through local authorites. Didn’t follow it myself. No hurry though. One thousand per month in rent allowance? At a time of property price meltdown and thousands of vacant units?

Ireland can’t recover as long as no one in the Establishment sees the need for something radical to be done opin social welfare expenditure.

It’s not a bug, it’s a feature. Remember the take home is that a considerable number of people would be better off monetarily not working. That means essentially long term unemployment, not a rapid finding of a new job at the same or better salary as was typical of the boom year. Yet, yet, somehow, among the costs associated with long term unemployment (which is what the paper is claiming to look at, although if you dig in, you find that it is much more focused on short term) is that of losing your house or apartment and moving under the bridge, or out in the field.

There is much about this paper that does not make sense.

Well, back for a second small bite, after reading the paper, these and other posts and comments, it is clear that the issue of the high cost of child care is a red herring. Child care of costs exceeding $1000/month is a luxury that only the top 10 or 20% can afford, and that should be reflected in the calculation of differentials. It is not, the lower costs association with unemployment are a uniform $200 across the board. Prof. Tol thinks this is a feature, not a bug.

Even with the paper being withdrawn, a number of people are going to follow the bread crumbs and quit working. They will be quite surprised when after a few months they find their standard of living falling, and when they can’t pay the mortgage/rent, that they get evicted.

This is a tragedy waiting to happen to the foolish, and Tol owes it to everyone to make clear the problems with the study.

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