The Costs of Working in Ireland Again

(This is a joint post with Donal O’Neill (NUIM) and Frank Walsh (UCD))

Because of the media storm last week about the Tol et al. paper on working costs, myself and a few colleagues (separately) decided to read the paper to see what all the fuss was about. We are all labour economists, used to using data on individuals, households and firms to address questions relevant to public policy issues. Our assessment of the paper is below.

The basic approach of the paper is as follows: it uses Household Budget Survey (HBS) data to examine the consumption patterns of different types of households. HBS data is collected at the household, rather than the individual level so the analysis distinguishes between households whose chief earner is employed and those whose chief earner is not employed. In particular, it examines the consumption patterns of these two household types under four headings: transport, childcare, heat & light, and takeaway food. To the extent that the amount spent by these households differ, the difference is designated a cost of working.

Without going any further, the problems with this approach are clear. Households headed by earners would have higher expenditure than households headed by unemployed people even if the earners incurred zero costs of working, simply because they have higher incomes. If you have a higher income, you are more likely to go for a spin in the car at the weekend, to buy a takeaway on Friday night, to employ a nanny rather than use the local childminder, and to leave the heating on if it’s chilly. It is therefore very important to take this income effect – which is going to be substantial – into account before labelling the difference in expenditures as working costs.

This is actually very tricky to do at all, and even trickier to do well. However the approach adopted by Tol et al. paper is not statistically valid – instead of modelling selection into employment and taking that into account in predicting expenditure for the two groups, they model positive expenditures; the econometric analysis in the first half of the paper is therefore flawed in that it fails to address the non-random selection of individuals into unemployment.

The use of these estimates in the second part of the paper is even more confusing: having obtained predicted probabilities of having positive expenditures (for each of the four categories) separately for households headed by workers and those headed by unemployed people, they multiply the conditional mean expenditures by these probabilities. For example, they multiply the mean transport expenditure for worker households (which as far as we can see includes those with zero expenditure, since the minimum value is reported as zero) by the probability of observing positive transport expenditure in worker households; then they multiply the mean transport expenditure for non-worker households by the probability of observing positive transport expenditure in non-worker households. The difference is then called costs of transport to work. This makes no sense to us; the measure of cost obtained in this way does not correspond to any meaningful summary statistic that we are aware of and should not be used as the costs of transport to work.

Furthermore, it does not appear to be possible to distinguish between one- and two-earner households in the data. This means that where costs of working do arise (assuming they were properly estimated in the first place), it is not possible to tell whether they should be spread over one or two individuals. In the case of childcare (and to a lesser extent, heat & light), this is crucial: if the chief earner is employed but his wife is not, he will not incur work-related childcare costs, whereas if his wife is working, he will. The Tol et al. paper does not address this problem because it seems that the data don’t allow it. If this is true then the HBS is just not appropriate for addressing this question.

In addition, we have several, more detailed, technical criticisms of the econometric methodologies employed at various points in the paper, including concerns about the estimation of incomes using a Tobit model when the zeroes appear to be due to missing data rather than any labour market behaviour. The inappropriate use of the Tobit model in this context will introduce biases in the estimates of incomes in addition to the biases in the costs data outlined earlier.

We have sent these comments to Richard, and he has not rebutted them. We agree with him that this is an important topic: costs of working do arise, and they may indeed be substantial, thereby creating a disincentive to work. But while Richard thinks that his estimates, though not perfect, are 90% there, we disagree; in our view, the problems with the data and methodology are so severe that these estimates are not informative about the disincentives associated with the cost of working.

91 thoughts on “The Costs of Working in Ireland Again”

  1. minor point:

    It is ‘not’ the Tol et al. paper: it is the Crilly, Pentecost & Tol Working Paper.

  2. It looks like the ranks are closing even tighter.

    A few questions:
    1. You agree with Richard Tol that this is an important topic. Would you have read the paper and critiqued it in this manner if there hadn’t been this ‘media fuss’? Has you critique been solicited by other parties?
    2. Do you have any comment on Richard’s assertion that he sought and was refused access to better data within the ESRI whose inclusion might have strengthened the quality of the analysis? If true, is this not something academics should be very concerned about – and seek actively to remedy it?
    3. Is your and your colleagues’ critique and the views expressed in it entirely your responsibility or does it enjoy some authorisation from the institutions which employ you? Do you accept that research which has gone through the appropriate peer-review procedures and which is approved for publication by the ESRI should receive the backing of the ESRI and not be made the sole responsibility of the researchers?
    4. Do you accept that both in this instance and more generally the ESRI has exhibited profound institutional and functional failures? Do you accept that these failures limit the scope and quality of public policy research in Ireland? And do you not see this as something all policy reserachers in Ireland should be actively addressing?

  3. @Aedin Doris, Donal O’Neill, Frank Walsh

    Your efforts are much appreciated. You might drop in to the blog more often as there appears to be a ‘scarcity’ of labour economists around and the interpretations and (spin)projections of capital-labour relation appear to decidedly one-sided towards the former in the weak Irish Public Sphere.

    FYI
    Midweek on TV3 – 10.00 tonite address this issue (no details)

  4. As a lay person who only understands about 60% of the above post (I do not understand the Tobit model but do understand the selection error and the lack of clarity about one or two incomes) it seems pretty straightforward the data is not appropriate and the study is therefore severely flawed.

    It is further apparent that this should have been apparent to the people who carried out the study in the first place.

    Insofar as the study was only a working paper and it was subject to the caveat that the data used was not wholly appropriate, this may be excusable insofar as the particular deficiencies in the data were highlighted. It may also provide a good reason why the harsh public criticism of the research should have been tempered pending the author’s having the chance to address the issues.

    However, it is clear that the ESRI was justified in taking the paper of the website insofar as the ESRI felt that the basis for the report was so flawed as not to be probative (not to be confused with any question of the authors’ probity).

  5. @Paul Hunt

    “2. Do you have any comment on Richard’s assertion that he sought and was refused access to better data within the ESRI whose inclusion might have strengthened the quality of the analysis? If true, is this not something academics should be very concerned about – and seek actively to remedy it?”

    +1

  6. I think we can learn all we need to know from this episode when we get (I think I’ve counted) five people with a legitimate claim to having knowledge and competence in this area putting in considerable effort to show that Richard Tol and his colleagues got their numbers wrong. But there seems to be little interest in estimating what the correct percentage might be (or any apparent previous interest in estimating this percentage) – even though it is recognised as an ‘important topic’.

    The moral of the story is “don’t do policy research whose results might upset the powers-that-be”.

    This is one of the principal reasons Ireland is in the mess it’s in – and is finding it damnably difficult to get out of it. But, hey ho, everyone involved is still getting paid – and that mightn’t be the case if they started researching some hard policy questions. Though the reality is that it is probably impossible to secure funding or approval for such research.

  7. @Aedin
    “Without going any further, the problems with this approach are clear. Households headed by earners would have higher expenditure than households headed by unemployed people even if the earners incurred zero costs of working, simply because they have higher incomes. If you have a higher income, you are more likely to go for a spin in the car at the weekend, to buy a takeaway on Friday night, to employ a nanny rather than use the local childminder, and to leave the heating on if it’s chilly. ”

    I take serious issue with your assumptions in this statement.

    1. Zero % of workers in this marginal bracket would “employ” a nanny (if you mean pay their PRSI, holidays etc.). Did you not get the memo regarding employment costs?
    2. Buying a takeaway in the evening as a worker is more likely because you are wrecked from work and travel.
    3. If you are unemployed you do not need a car with its car tax, fuel taxes hitting you. Telling us that a spin on the weekend is a big expense is facile. 4. If I am out working, and my kids are in childcare, should I not be using less fuel? Perhaps unemployed I could qualify for fuel allowance

    Perhaps these are top of the head examples, but they do lead me to worry at your real-life experience of the situations.

    Perhaps also, you are right regarding the data and methods used by Tol et al, but my own personal experience with a family member, she tells me she is better off staying at home with benefits than taking on the expense of the available job roles out there. Yes, she must be the exception.

    Move on, nothing to see here.

  8. I appreciate the scrutiny.

    The expenditure equations of course control for income. Re-reading the paper, I realize that we were not particularly explicit about his.

    The HBS data are not perfect. We all wish we had better data.

    The selection equations are crucial, but I am not convinced that it is feasible to estimate a selection-into-work equation (to the excruciating standards in labour economics) with the data available, and less convinced that a different selection model would have led to radically different results.

    After all, the selection here is selection of expenditure. Employment is an explanatory variable, not the dependent variable.

  9. As another lay person, I find a lot of common sense in the rebuttal.

    It seems on the face of it that the discretionary non-work related travel expenditure of a working household has in fact been equalized with the non-work related travel expenditure of a non-working household for the purpose of arriving at the cost of traveling to work. The same false logic was applied to other household expenditures.

    This rebuttal is a welcome contribution to what were very suspect findings in the original paper.

  10. Is there any data more recent than 2005 on the spend on takeaways ?
    Maybe we need a few pizza restaurateurs on the blog. I doubt there are many punters splashing out EUR 30 a week or whatever it was now that money is too tight to mention for so many people in employment.

  11. JR,
    were the findings in the original paper suspect because i) they conflicted with the results of your own empirical research or ii) because they did not suit your partiuclar world view. Can you publish your own paper?

  12. @all

    Humbly suggest that this brief, if welcome, ‘review’ by Doris, O’Neill & Walsh specifically on the Crilly, Pentecost & Tol Working Paper be addressed in parallel with the earlier ‘review and alternative analyis’ (note the variations) on other data (not made available to Crillly et el.) by McGuinnes & O’Connell:

    http://www.irisheconomy.ie/index.php/2012/06/16/seamus-mcguinness-and-philip-oconnell-the-costs-of-working-in-ireland/#comment-297867

  13. So the big question that still has not been answered (and economists who are paid by the state directly or indirectly seem reluctant to answer)

    What % of working people would be better of not waking up in the morning and going to work.

    If this number is greater than 1% (~18,000 people) then there are serious policy issues that the government needs to address, more than 10%? more than 20??

    Who knows, but it seems none of the economists have the balls to touch this interesting question which could get them fired or put under a spotlight.

    Do remember that we are where we are because majority of the economists decided to put a blind eye on the bubble and not rock the boat (some even jumped into the boat and helped row faster)

    If you are an economist and you can address these questions, but are afraid to, then shame on you.

  14. At the rate we’re going, we’ll soon have the equivalent of the 1931 German “100 authors against Einstein”. The question here is very simple. The best estimate is a number between 0 and 100%. All the focus should be on estimating this percentage. The Government reluctantly accepts that it is probably more than 0%, but should be a very low, probably single digit, percentage. Richard and his colleagues estimated 44% – after which the fuss started.

    Their critics are seeking to answer a binary question in the negative – are Richard and his colleagues right or wrong? This is the question – and the answer – the Government, the ESRI and other interested parties want.

    It is totally and utter disgraceful that academics with knowledge and competence in this area are asking this question and seeking to produce this answer. Their focus should be on providing the best estimate of the percentage. That is the only proper scientific way they can refute the estimate produced by Richard and his colleagues.

    Their failure to do this tells us all we need to know about policy research in Ireland.

  15. @Richard Tol

    Beyond the inclusion of a ln(income) variable, how is income controlled for?

    I would strongly argued that a ln(income) variable is not nearly sufficient to control for the endogeneity between income and employment.

    I can only think of non-parametric methods to control deal with this.

  16. @Rory
    You are free to get the data from the archive and try for yourself.

    @All
    Stop going after Aedin and co.

    We should always try to pick apart an argument. That makes it stronger. This is normal academic practice. It is usually done within the ivory tower rather than in the public eye, but Aedin is doing us a service.

  17. @Tull McAdoo

    re: “Can you publish your own paper?”

    I live in the real world where people get paid close to minimum wage and are willing to work for that level of wages. Nobody is saying that they are happy to do so, but in the real world they have to.

    The only people I am aware of that refuse to work are those at the upper echelons where ~€97,000 is not enough for a government adviser or ~€500,000 is not enough for a banker to trouble himself to sit on his brains.
    [That is ~500,000 before pension contributions, you understand]

    And now that you have ask.
    The figure that 40% of people with families were better off not working, which was widely used by the media, was utter rubbish.
    For anybody with either a world or indeed Irish view.

  18. I dont know about all that evidence based stuff, I come here to be lectured and ignored by bloggers and academics. Lets face it is an inverted complement to irrelevant to those that didn’t see the bust and now that there are in the dark cant find the way out. if I was you Richard I would be thinking similarly about the ESRI, £60 a week unemployment assistance up North €188 a week down south and remind me who has the oil again?

  19. JR,
    You find the original paper to be wrong because you don’t like the number 0.44. You think it is close to 0?

  20. @Paul Hunt

    “I think we can learn all we need to know from this episode when we get (I think I’ve counted) five people with a legitimate claim to having knowledge and competence in this area putting in considerable effort to show that Richard Tol and his colleagues got their numbers wrong. But there seems to be little interest in estimating what the correct percentage might be (or any apparent previous interest in estimating this percentage) – even though it is recognised as an ‘important topic’.

    The moral of the story is “don’t do policy research whose results might upset the powers-that-be”.

    +1

    IMHO it is also disgraceful that none of the four questions posed in your first post (12.55pm) were answered/addressed. 🙂

  21. @Richard,

    “It is usually done within the ivory tower rather than in the public eye..”

    Totally agree. So let some or all of those with knowledge and competence lining up here to declare you and your colleagues got it wrong go back to their ivory towers, do some analysis, generate their best estimate using relevant data and methods, get it peer-reviewed and publish it.

    I doubt you would claim you have a comparative advantage in this area. You have already explained that you did this research because you needed the analysis for another purpose. So let those with knowledge and competence in this area do the work and you can use it for your purposes.

    The problem, as, I suspect, you well know, is that it would be very difficult, if not impossible, for these researchers to secure funding and approval to do this work as it would, most likely, generate a result with which the Government would not be best pleased.

    This, rather than whether the percentage is 44, 20 or 10, is the fundamental issue here. Addressing it requires a comprehensive investigation of the role, functions and funding of the ESRI – as well as the scoping, funding and approval of all other policy research paid for from the public purse.

    You might prefer to treat this as discussion about methods and data in a very specific policy area, and you are perfectly entitled to do so. But for those of us who hold fast to the principle that public policy research that is funded from the public purse should be conducted without fear, restraint or favour there is a requirement to expose and remove this rottenness.

  22. @Paul
    It’s progress that the question is even asked. If asked often and loudly enough, there may even be some government funding to try and answer it.

    I am not worried about academic freedom in the universities of Ireland. The problem is that this question straddles three fields (labour, fiscal, consumption) and that data are imperfect. It’s a hard sell to a learned journal.

  23. @Richard,

    Time and distance seem to be rendering you exceedingly magnanimous. That is to your credit. I’d better stop now as you are feeding my gripes about the narrowness of much economic analysis, the excessive specialisation – plus the apparent under-resourcing of certain areas in Ireland – and the resulting failure to address many key policy and regulatory issues that arise in the current crisis.

  24. Re access to the data. The EU SILC data is collected by the CSO. While a basic version of the data with a limited set of variables is readily available from the Irish Social Science data archive the full data is available from the CSO but it entails a lot of extra effort. You have to apply to the CSO and say what you are going to do with the data and make a set of promises on where the data will be kept etc to guarantee the confidentiality of the data. Once you get the data it is very rich but there is a lot of work in cleaning it up etc.

    I applied for the data about a year and a half ago, met the various conditions and was granted access with no problem. marion McCann is the contact person in the CSO and I have always found gher to be very helpful if anyone out there wants to get access to this data

  25. @ Richard Tol

    I downloaded the paper and read it. However, the equations you estimate are not clearly laid out in the paper, so it is not possible to replicate your results.

    I don’t think it an unreasonable question to ask how you control for income, given that this is crucial to the results.

  26. @Tullmcadoo:

    re: You find the original paper to be wrong because you don’t like the number 0.44. You think it is close to 0?”

    I simply do not agree with the conclusion of the original document as sated below:

    “This is important for policy as it substantially affects the incentives to work. A comparison of take home pay shows that it does not pay to work for 1% of the population. However, a comparison of take home pay plus extra expenditures shows that 15% of the people without children, and 44% of people with children, are better off not working.”

    That is not a statement that stands scrutiny for a number of reasons:

    1. The extra expenditures as calculated are not to use a revenue phrase expenditures ‘wholly, exclusively and necessarily’ incurred in the transition from unemployment to work. The expenditures for people in work include discretionary expenditures that are obviously higher for a person at work than they would be for an unemployed person.

    2. ‘People with children’ is not a unique subset in terms of household expenditures. The number and the ages of children are clearly a determining factors in expenditures but ‘people with children’ is not a satisfactory grouping for the purposes stated.

    3. I do not know what the true figure but I am crystal clear in my own mind that the statement “44% of “people with children”, are better of not working.”

    I do not know what the figure is but it is not 44% for this undefined group.
    Further I am not paid to come with data such as the above, but I may have have to live with and abide by policies derived from such data.
    Therefore I do feel free to give an opinion for better or worse.

    One final point:

    How come we do not have close to full employment for young people without children, instead of soaring unemployment, if the numbers indicate that such people are indeed incentivised to go to work.
    The reality is that there is little or no work, whether for single people with or without children, couples without children, couples with one child, couples with two children etc.

    If the unemployment problem was solved for all groups without children, then perhaps we could begin to address the ‘incentive’ for ‘people with children’ to go to work.

    PS. There is probably one exception where the report is accurate. Bank executives and government advisers with children seem to have to be uniquely ‘incentivised’ to go to work. Perhaps we should take the model that works for those people and apply it to the general public.
    Could we be any worse off that we are as a result.

  27. A gentle aside:

    Nietzsche wrote: “The question ‘What would happen if this and not that occurred’ is almost unanimously rejected, and yet it is precisely the cardinal question.”

  28. Thank you for bringing your professionalism and expertise to this Aedin. The fact that you have received such a response says more about the low signal, pseudo antiestablishmentarianism of many on this site than it does your objections. (Which, of course, are being completely ignored)

    It’s worth noting Rory O Farrell was the only one to raise any objections to Richard Tols paper on this site.

    Brad De Long’s opinion of Tol is also worth noting

    http://crookedtimber.org/2011/11/26/stupid-revealed-preference-arguments/#comment-389441

    We shall now return to irrelevant ESRI bashing

  29. @rf

    Do you have anything of substance (re the content; as distinct for playing the authors and not the ball which is the accepted norm in this game) to say on the Crilly, Pentecost & Tol Working Paper or on the three peer-reviews received to date?

  30. @ Joseph Ryan, Tull, etc

    Hi all, just looking in – Keep an eye out for Fishamble’s production of the Great Goat Bubble by Julian Gough as part of the Galway Arts Festival.

    On subject: My mother worked as a teacher when we were infants and said later that nearly all her wages had gone on care/commuting, etc and she was exhausted. I asked her why she did it, and she said so that she could move up the career ladder. In other words, by the time we went to school, she was earning more and had been promoted than if she had been out of work for that period.

    So maybe a reason why in 2005 people took work – which they clearly did – when if (big if), it would have been as financially viable to be on welfare is partly because they expected a superior chance of earning more later than if their employment record had a big fat hole in it.

    And of course, people don’t merely choose to work for bread alone.

  31. Quite apart from the debate over the exact percentage of the LF who would be better off on SW than working at current levels of transfers there is one overarching point which renders this analysis redunadant. We cannot afford to pay the current levels of SW. We are broke!!!! So it follows they have to be reduced.

  32. @Tullmacadoo

    I accept fully that the country is broke and also that for a broken country there are many people in work doing very well and some out of work who have no dependants doing relatively well.
    Indeed some that were doing very well in work have been given a bonanza incentive so that they can do very well out of work, even to the point of bringing them back in so that they could do even better.

    In my view, one of the few I share with the Troika, the ‘pain’ has not been distributed in anything remotely approaching an equitable distribution.

  33. A tangent topic , but can someone explain the dramatic increase in the reexport of oil products from this state ?

    April Y2011 : 104 M
    April Y2012 : 252 M

    Jan – April : 373 M
    Jan – April : 794 M

    Is Whitegate covering some of the recent reported shutdowns of UK refineries or what ?

  34. @ Tull

    “We cannot afford to pay the current levels of SW. We are broke!!!! So it follows they have to be reduced”

    I would just add

    We cannot afford to service the current levels of personal debt. We are broke!!!! So it follows they have to be reduced

    We cannot afford to guarantee the current levels of bank balance sheet. We are broke!!!! So it follows they have to be reduced

    I think this debt golgotha is going to run and run. It is very hard to see much growth over the next 10 years given the way things are going. What would be the advice to someone heading into year 3 on the dole ?

  35. Total Seasonally adjusted imports fell by 23% !!! according to the CSO

    This is the lowest sesonally adjusted figure since Nov 2010 ~

    In prefer the plain figures

    Y2010 April Imports : 4,132 M
    Y2011 April Imports : 4,669 M
    Y2012 April Imports : 3,717 M

    Oil consumption is probally diving given the import export figures.
    The rump domestic economy is tanking folks as its not all GPA like stuff.

  36. @Seafoid
    Debt is a metaphysical concept – we are broke because our elite choose to be payed in a foregin currency so that they could travel to the South of France for their holidays.

    Real countries don’t go broke – they can get poorer but they don’t go broke , unfortunetly we live withen a strange juristiction called Ireland Inc. (we always have to a greater or lesser extent)

    Noticed the Dole thingy debate on TV3 tv3 tv…3 land.
    Some “independent” economist wants to cut the dole – he does not realise that withen the euro that and the pension is the only thing keeping domestic demand together.
    He may wish to ask himself what is the purpose of a economy without demand ?… (ohh yes transfer our surplus to the chronically in trade defecit financial capitals. because they do such vital work)

    If somebody can think of a better Euro way to keep domestic demand together without sucking in massive imports he better tell us poor Dorks.

    However I like the rest of us cannot understand how people on the dole can drive to the post office – but that can be easily solved……you tax cars and fuel and subsidise public transport to French levels at the very least – but our euro masters don’t like us subsidising the commons either so we are heading for civilizational collapse me thinks.

    What a bloody Juristiction.

  37. Zee Germans are F$3Ked also.
    They have become infected with the now virulent switch disease.

    http://www.railwaygazette.com/news/urban-rail.html

    “19 June 2012
    Berlin S-Bahn split to go ahead
    GERMANY: Meeting on June 19, the Berlin Senate voted to push ahead with controversial proposals to split the city’s S-Bahn network into three separate.”..more

    MANY millions of German commuters will now be badgered on a daily basis by thousands of spotty people who want people to switch transport companies half way between work and home.

    It is confidently predicted this will lead to a Industrial revolution although many scientists outside of the corporate sector remain sceptical.
    Indeed the 2 scientists who remain outside of the corporate sector claim this will be a misallocation of resourses as capital has been more powerful then Labour since the obsolescence of the Galley many 100s of years ago.

    Still its worth another try is it not ?……… I mean those new BTUs must come from somewhere………..maybe its inside the Pus of adolescent acne – its worth a few million to find out anyhow.

  38. Standing back from the methodological detail, while Tol at al’s methodology is certainly far from perfect, its emphasis on the incremental costs associated with working is something important that has been largely missing from the Irish policy discourse on the economics of choosing whether or not to work. The costs of commuting and childcare are clearly important for a significant subset of the labour force, and the incremental costs of attire and grooming for business will be significant for some. While Tol et al’s conclusions appear to overestimate the incremental costs of working, many of the analyses favoured by the labour force economics establishment neglect these important costs, undermining the thrust of their policy conclusions despite the soundness of their methodology. To my mind, that puts both sides on more or less equal ground.

  39. From my perspective as self-employed with my home office as my DPOW and entitled to treat travel and subsistence costs as expenses, Tol’s rough estimates for incremental travellling cost related to work feel about right. In my particular case I frequently travel 35 miles from Wicklow to central Dublin and spend much of the day there. MY run rate for travel and subsistence costs alone, exceeds Tol’s estimate by a small factor and has done so fairly consistently over a number of years.

    As for what to do to help alleviate the rising burden of work-related expenses. Recognising they exist would be a start. Perhaps Ireland should look to bring its tax law into line with Germany for example, where the employed as well as the self-employed can have their employment-related travel and subsistence expenses treated as what they in fact are – wholly, exclusively and necessarily related to working in a non-industrial society, where ‘defined place of work’ is less clear with each passing year.

    Irish economists in my observation rarely seem to consider ethical principle to be relevant to the design of studies such as these, where the definition of cost and expense categories is fundamental. In this case a mythology has been promulgated over a number of years that various categories of work-related costs are not ‘expenses’ for the employed and do not exist, but for people like me they do exist. Preserving mythology and ignoring evolving work patterns simply exacerbates the many conflicts baked into Ireland’s over-complex, often principle-free and out of date tax and social transfer system. This in turn encourages political tinkering which consumes bandwidth better devoted to a broader transformation.

  40. I think this is the first time I have seen comments on a working paper posted on an economic blog?

    Should they be posted at all?

  41. @JMK,

    Good question. One has to ask: Cui bono?

    I think most of us know the answer to that – even those who would be loth to admit it.

    However, as seems to be the rule here (with a few notable exceptions), the original posters have deigned not to engage in the subsequent discussion. Is it safe to assume that have retreated to their ivory tower now and are furiously seeking to secure the funding, approval and the most relevant set of data to generate the best possible estimate of this percentage?

    Hmmm. I somehow doubt it. It is very difficult to avoid coming to the conclusion that most of the policy research that secures funding and approval is scoped and conducted to generate the results the government (and its expansive apparatus which is probably even a greater source of policy research funding) wants to see.

    It’s a sophisticated version of the ‘three monkeys’ act’ with self-determined partial impairment of the relevant faculties.

    It will prove impossible to sustain this act indefinitely. This is just one ‘event’ that has created a media fuss, but it has demonstrated quite clearly how threadbare and disingenuous the ESRI’s assertions are about its independence, its relationship with its staff and its relationship with those providing funding.

    Would it not be better to come clean about these failures and deficiencies and seek to remedy them? This attempt to maintain an optical illusion is identical to the huge efforts made to maintain the bubble era optical illusions. It should be clear to all that these were a total labour in vain.

    Why, when their illusory nature becomes clear, is the knee-jerk reaction to re-double efforts to protect and maintain these optical illusions – in the full knowledge that it will not be possible to maintain them indefinitely?

  42. @Paul Hunt

    You’re losing the plot Paul! You’r no John TheOptimist!

    Have you considered going back to school? Try an ol MA in Economics from UCD (check out if Kevin Denny is still swimming anti-clockwise in the middle of the pond or beavering away on his Commodore_64 in preparing his review of Crilly et al.). Or are you competing with your bosum pal DOCM for June’s top financial spinner of the month award for the mathematically challenged? Following Jedward, a joint award is possible – but it is a dynamic month.

    BTW – this is ‘public policy research’ in action and in real-time. This is progress.

    p.s. Has DOCM prepared his ‘epistle’ on the capital-labour relation yet?

  43. @JMK
    I prefer to have the first round of review behind closed doors, as genuine errors should be quietly corrected. Doing this in public would just make people defensive and unwilling to take risks.

    That said, this paper was inadvertently and prematurely put into the public domain, so it is no more than fair that the review will be public too.

  44. As John Kenneth Galbraith put it once – that impression of clarity, precision and simplicitiy that people claim to admire in my written research work usually only emerges in the 29th draft! (more or less)

    Do continue …

  45. @D O’D,

    You might view it as losing the plot, but I’m posing a very simple question. I know it goes on everywhere to some extent or other, but why in Ireland (and this has relevance across the piste) is so much time and effort expended attempting to suspend disbelief indefinitely and to maintain recognisably unsustainable optical illusions for as long as possible – and traducing the professional integrity of anyone with the temerity to hint at the existence of these illusions?

    It is particularly galling when the illusions, inevitably, will be shattered and then everyone goes in to damage-limitation and crisis mode and when expending a tiny fraction of the effort expended in sustaining these optical illusions would be sufficient to remedy the obvious deficiencies and detriments.

    Has anything being learned from the run-up to the blow-out in 2008 and its implications?

  46. @PH

    Do you have anything SPECIFIC to comment on any of the SPECIFICS in the working paper or reviews or to those who have bothered to read them? Have you read them? I can perceive no empirical evidence in your comments that you have done so. The soap box has its limits.

  47. I came across this and it’s an issue any country with a housing bust has

    http://www.zerohedge.com/news/imfs-rajan-undresses-keynesian-emperor

    “Consider how hard it is to improve the match between skills and jobs. Since the housing and financial sectors will not employ the numbers they did during the pre-crisis credit boom anytime soon, people who worked in, or depended on, those sectors will have to change careers. That takes time and is not always possible; the housing industry, in particular, employed many low-skilled workers, who are hard to place. Government programs aimed at skill building have a checkered history. ”

    Given the incapacity of the government to keep 196 troubled children alive how likely is it that the 400k unemployed are going to get the support they need to rejoin the productive workforce? Can the private sector help ?

    In her book Understanding Limerick Niamh Hourigan divides the disadvantaged population of Moyross /Southill into “the Advantaged of the Disadvantaged” and “the Disadvantaged of the Disadvantaged”. Can Ireland work towards helping the former back to work and mitigate the worst effects of unemployment for the latter ?

  48. @seafóid

    ‘In her book Understanding Limerick Niamh Hourigan divides the disadvantaged population of Moyross /Southill into “the Advantaged of the Disadvantaged” and “the Disadvantaged of the Disadvantaged”. Can Ireland work towards helping the former back to work and mitigate the worst effects of unemployment for the latter ?

    The up-ended pyramid of upper_echelon insider in_bred governance that has proven to be resilient over the past five years and empirical (scanty and all as it is) evidened from political economy over the past fifty years strongly supports the argument for NO.

    As for the €1.7 billion promised by FF/gp/PD for the Regeneratin Project in Limerick – this was pulled to pay off the Zombie Bank Bondholders – but 100 houses have been demolished in Limerick. Explanatics does not come near the levels of hermenuetic hopelessness that such policy decisions impose on the decent people of Moyross, Southhill, and Ballinacurra Weston.

  49. @D O’D,

    This ‘event’ raises two sets of questions. The first set relates to the data and methods used in this working paper. Richard may think it fair that the review be conducted in public, but, in my view, this serves little purpose. It is for those with knowledge and competence – and access to appropriate data – to get to work on remedying these deficiencies, generate their best estimates, subject the effort to the usual peer-review process and publish the results for use in the public policy debate. I have nothing to contribute to this process beyond the anecdotal, but I might have something to contribute once results were produced in this manner and policy implications were being considered.

    The second set of questions should be of great interest to those concerned with the Irish Economy because they relate to how public policy research is scoped, approved, funded, conducted, reviewed and applied in the formulation of policy. This ‘event’ has lifted the curtain a little and, for those not suffering from selective blindness, has demonstrated how farcical the entire process is.

  50. @PH

    ‘I have nothing to contribute to this process beyond the anecdotal ..

    Quite!

    Have a kitkat – take a break. Read a little Wittgenstein (who got p1ssed out in the Aisling Hotel – go and raise a glass to his ghost ..

    “Whereof one cannot speak – thereof one must keep silent.”

  51. @D O’D,

    Hmm..you have been betraying signs recently of selective blindness. Hopefully it’ll pass. But if it doesn’t, you’ll have the consolation that you share the affliction with the vast majority of your compatriots.

  52. Graunaid

    http://www.guardian.co.uk/society/2012/jun/20/life-on-the-economic-precipice

    Poverty is all too often wrongly portrayed as a problem created by workshy people, scroungers happy to live off benefits. You rarely hear about the parents struggling to keep their heads above water in low-paid and insecure jobs, or parents desperate but unable to find work (Breadline Britain: 7m adults just one bill away from disaster, 19 June).

    The real challenge in driving down child poverty is a labour market that isn’t delivering anywhere near enough decent, well-paid and secure jobs to parents in deprived communities. At present, 58% of children living in poverty are in households where at least one adult works, and the number is rising. Record numbers of parents have to work part-time because there aren’t enough full-time jobs. Tax-credit cuts and lack of support for childcare costs barely make financial sense for families bringing home a low income.

    New analysis released by the TUC on Tuesday shows that long-term youth unemployment has risen by a mammoth 874% since 2000. For the rest of the population the increase was 50%.

    This highlights the urgency needed to tackle the tragedy of millions of young lives wasted on the dole. Your articles on Breadline Britain reveal the millions more trapped in low-wage, insecure employment. The crisis across Europe threatens to swell the unemployment numbers even further and push those holding on by their fingernails over the cliff. The government’s workfare policies and tweaking of Osborne’s failed Plan A offer no hope. What we need is investment in real jobs before it is too late.

  53. @jmk

    “I think this is the first time I have seen comments on a working paper posted on an economic blog?

    Should they be posted at all?”

    You might be overestimating the reverence that should be afforded to the academic ‘process’.

    This blog can be viewed as one big working paper.

  54. I don’t know why I am referred to here. I haven’t read the paper and so am not qualified to comment. Would that other people showed such restraint.

  55. @DoD

    The thing about Limerick and ignoring the descendants of the neighbours of Mrs Angela McCourt for the last 3 generations is that the poison has now infected the “respectable” economy. Limerick is a polarised city and polarisation is bad for everyone. Limerick is way behind Galway and Cork in attracting FDI. The city centre is full of empty shops because it can’t draw enough people in. And attempts to jazz up the area around the castle with public money have flopped.

  56. @seafóid

    Limerick needs a revolution; The Claw at the head of an Emergency Maul and the place could be sorted in five years. There is previous ‘form’ from the early 20th century to draw on when the chaws got roightly p1ssed off with the governance and simply took over the place themselves. Took an empire to shift em .. and naatthin like an empire around at the mo! Twould certainly liven up the city centre …

  57. Here’s a “cost of not working” for employers:

    BBC “Workers who fall sick during their annual leave are entitled to take corresponding paid leave at a later date, the EU’s top court says.”

    I hate being self-employed. I miss out on all these perks.

  58. There is a very cryptic message at the top of the post

    Normal 0 false false false EN-IE X-NONE X-NONE

    The first “false” presumably refers to Kevin Denny but the rest has me stumped.

  59. @David od

    It would appear that a quick site search for ” the fuckwit trolls that dominate this blog” no longer brings up that comment.

  60. @PR Guy
    re:
    BBC “Workers who fall sick during their annual leave are entitled to take corresponding paid leave at a later date, the EU’s top court says.”

    Not unique to the BBC!.
    It’s a ruling that will be welcomed by many closer to home.
    In fact I believe it is written into law for all employees. Those that is who get ‘sick pay’ from their employers.

  61. @ David O Donnell

    “Do you have anything of substance …. to say”

    I don’t. And you’re right to imply I should keep my trap shut if there’s nothing constructive coming out.
    However I thought the point of the threads on this blog were to ‘play the man not the ball’ – and I’m glad you noticed that 95% of the posts before mine were irrelevant attacks on the professionalism of Aedin Doris et al.

    Some slight ‘pushback’ though. Maybe 20% of the posts on here are from yourself, and I’m not so sure you’re living up to your standard of “Whereof one cannot speak – thereof one must keep silent.” ! -(Apart from clearing up that the authors of the paper extend beyond Richard Tol)

    Anyway, I shouldnt have insinuated such things about Dr Tol. I guess I just miss Karl Whelan, and find it very difficult not to become an outrageous troll on this site! I will aim to be a better class of poster

  62. Prospect Theory anyone?

    The simplistic idea that someone may be ‘better off’ or whatever way you may wish to frame it, is not the way to go. Rational Choice is NOT the way to analyse the issue. Its a behavioural matter.

    Kahneman , D & Tversky, A. 1979. ‘Prospect Theory: An analysis of decision under risk’, Econometrica, 47; 263-291.

    – for a political science slant on the same; –

    Levy, J. 1992. ‘An Introduction to Prospect Theory’, Political Psychology, 13, (2):171-186.

  63. There is great joy in heaven over even one that repenteth. And I suppose one person’s ‘f**k-wit troll’ is another person’s ‘informed and enlightening commenter’ – and vice versa.

    But this blog is heading down a blind and rapidly narrowing alley.

    Ireland is in the grip of a ‘democratic centralism’ more forceful and effective than was ever applied in the former Soviet Union – and puts the Politburo Standing Cttee of the Communist Party of China in the shade. At the apex is the Economic Management Cttee comprised of the Taoiseach, the Tanaiste, Ministers Noonan and Howlin, their special economic advisers and a handful of senior civil servants. (It is interesting, but not, perhaps, surprising that the Taoiseach has taken like a fish to water to this form of governance. There isn’t a politcian anywhere who wouldn’t relish it. How Chancellor Merkel (insofar as she might be aware of it) would love to exercise such authority. It is more understandable in the case of the Tanaiste as, during his formative political years, he probably imbibed the essence of ‘democratic centralism’ when Brezhnev elbowed Podgorny and Kosygin aside.)

    The lower tiers of government and the rest of the expansive government apparatus take their cues, with varying degrees of enthusiasm and compliance, from this central ‘clearing-house of power’. Public policy is formulated and promulgated by this very tight circle. And detailed policy formulation is kept well away from any public scrutiny – and the impact of the influential sectional interests is kept well hidden. (An excellent example is this NewEra beast, handling state asset, semi-state and privatisation matters, hidden behind the walls of the NTMA as a non-statutory body.)

    Almost all public policy research that is conducted by bodies with a nominal independence from government is funded by government or some part of its expansive apparatus. Not surprisingly, as this ‘Cost of Working’ working paper episode has revealed, how any research is scoped or conducted or the results that are presented must not cause upset to or prove difficult for the funding bodies.

    This doesn’t mean that dissent doesn’t surface but it tends to be muted and murmered privately – and even if it is publicly presented it is easily brushed aside.

    So, while a blog on Irish economic policy issues with contributions from leading practitioners seemed like a good idea – and has certainly contributed to the policy debate, the excessive democratic centralism governing policy formulation, the nature of the process of scoping, approving and funding public policy research, the ‘siloisation’ of economic and political science and the apparent lack of expertise in some key policy areas have all contributed to an inexorable reduction in the number of active contributors and contributions, in the number of policy areas covered and in the depth and breadth of coverage.

    For various reasons the leading practitioners have no incentive to rock such a comfortably provisioned and well-appointed boat. But outside the discontent and disaffection grows. It would be better of this were channelled and addressed in a civilised and rational manner, but the occupants of the boat seem to have no interest in this.

  64. @Richard Tol

    You did not yourself invite any publicity for your working paper, rather it was unfairly thrust upon you.

    so I do not see why Aedin Doris et als’ comments, that would be best communicated privately, should be posted here. What exactly are these comments intended to achieve?

    The presence of mistakes or otherwise in the working paper is not the key issue in this whole unseemly episode, rather the motivation for doing so. Today’s comments seem to have the same counter-productive spirit of the ESRI’s initial withdrawal of the paper

    Anyway following Aedins post today she can have few complaints if anyone chooses to post any critisicism / errors of her own on this website

  65. @ PH

    It is nice to see you back.

    What has become clear to me after 2 years of reading content on this site is that the Irish state is in many key areas dysfunctional, sclerotic and not fit for purpose. You can take a pick from a wide range of failures that go far beyond the weekend of 29 September 2008 – Moyross, the explosion in the health budget under the PDs, 196 children dead in state care over the last 10 years, the state of protection the legal system provides to ordinary citizens, the negotiations with the religious orders over child abuse reparations,the NCC on Ireland’s competitiveness challenge, pyrite or whatever else you fancy .

    Everywhere you want to look you can see failings in accountability, competence and project management capacity.

    TSHTF may arrive with the banks when they run out of phone credit on the EUR 64 bn.

    The last 4 years have been an exercise in hoping that time would sort out the banking crisis. it didn’t. Time to get real.
    Or else shortly after.

    But the country can’t afford another generation of this. There is just no point in educating kids to a decent standard when the country in which they will mature is run the way Ireland is.

  66. @Seafoid,

    I have been primarily, and temporarily, lured back by the ‘event’ which the apparent inadvertent publication of this working paper provoked. It provides pretty solid evidence for the case I have being making for some time.

    It is inevitable there will be more ‘events’ of all sorts and types, but the ability of Official Ireland to brush off the implications and to sail on sedately is quite remarkable. The people will have an opportunity to pass an interim judgement in the local and Euro elections in two years time, but it will probably generate only some trimming and tacking by the Government. I think it was Morgan Kelly who remarked that, while the last general election had some significance, it is the next general election that will have real significance.

    I expect we will just have to wait for that. I had hoped that, at least, some of our ‘public intellectuals’ might have had the guts and gumption to confront this policy thrust that is driving the domestic economy in to the mire, but it was really silly of me. I should have known better, but I figured that the severity of this crisis might have focused, at least, some minds on the need for some restoration of an effective parliamentary democracy and of effective and resourced local governance and a reassessment of the requirement for some genuine political economy.

    But I was wrong, wrong, wrong…

  67. @JMK
    There was a very public claim that our methodology was “flawed”. This claim was backed up (with a delay) by a note that primarily argues that we should have used data that we do not have access to.

    Aedin and co do argue that our methods are flawed (albeit without demonstrating that it matters) and reckon that the ESRI’s claim, although not substantiated by the ESRI, can and should be substantiated.

    As I wrote before, I don’t feel unfairly treated by Aedin. I publicly stood over what I did, so she should publicly scold me.

    Aedin’s expertise is relevant. We should be glad that she has taken an interest in this thorny problem.

  68. @Paul Hunt

    The ship of state is sailing on sedately down the river
    And look at what awaits it

  69. @Joseph Ryan

    Sorry, that was a hat tip to the BBC as it was a quote from their website, not a story about BBC employees. I didn’t make that very clear.

  70. @Richard Tol

    1. Re Frank Walsh’s helpful comments [June 20th at 4:32pm], why did you not contact the CSO to get access to the appropriate data if it is so straightforward?

    2. I, for one, think it’s a pity that you could not persuade the Sunday Times journalist, who contacted you, to hold back the “results” from your “proof of concept paper” until they had been subject to some quality control.
    Do you agree?

  71. @ DO’D: Thanks for that. There have always been evidence that the ‘received wisdom’ about folks’ behaviours was faulty. But the Status Quo is in control so the evidence is ‘suppressed’ in favour of the legend.

    Neo-classical economics is somewhat similar to medieval medical practices – lots of purgatives, leeches and incantations. The latter are written in math notations rather than Latin. This allows the practitioners to perfom catastrophic social experiments and blame failures on ‘evil spirits’ and illiterate peasants who fail to follow the instructions on the label.

    @ PH: No matter you may have been mistaken. At least you recognize the situation. Lots of so-called intellectual folk are also wrong but their reference frames are set in military-grade concrete. It will take a very nasty political shock to shake their belief systems. Unfortunately they will reprise their old behaviours as they attempt solutions. Its both maddening and sobering.

    I’d guess we may have to wait until the back-end of 2015.

  72. @QC
    1. We could have. The paper aimed at an international, academic audience, so access to data was more important accuracy.

    2. I see you have never met Eithne.

  73. Breaking Newz

    The Irish Federation of Toddlers’ Groups (IFTG), an emerging activist childer group in the Irish public sphere (run for and by toddlers only) put out a tender to garner a few her_an_him_eneutics on the state of childer_care in Ireland. The Blind Biddy Hedge School won the tender over an outrageous bid from Inde_kon (which the IFTG Board chuckled out of the playground to immense glee). Following extensive co-creation research, in which toddlers were directly involved, numerous focus groups (N=30) and a reasonably representative sample of interviews across the hidden Irish class divisions (N=44) [n.b. the toddlers love the perfect corrleation between the Inde_kon 44-economists and the 44% supposedly at home with the toddlers on the dole]. Based on the preliminary findings, Aoife and Anto (spokeschilder for the group; age 2yrs11mnths & 3yrs 10mnths) would like to announce the following awards from the IFTG: (the working report, which will remain open to comment and consultation for one month only will be placed online on WikkiLeaks, Facebook, and all over the Internet with full functionality):

    [1] Childer Champion of the Month

    Dickie Tol ….

    … for recognising childcare in Ireland and putting it on agenda – we luv ya Dickie -don’t kut da hair

    [2] Bold Mistress of the Month

    Frances Ruane … because we’re worth it

    [3] Hard readin award of the month

    IrishEconomy.ie more cartoons and funny pictures please.

    The IFTG want to tank The Blind Biddy Hedge Fund for financial assistance in buggy hirin, nappy dryin, taxidrivin, digital recordin trains_scription, snacks, and all dat other stuff. Responsibility for the content of the IFTG report remains solely with the authors and the IFTG. The usual disclaimers (wat are de?) apply.

  74. Off-topic a bit, but not too much. This is Irish Economy, right? Is it me, or has anyone else found it odd that there has been no post on the ESRI’s QEC?

  75. @The Alchemist,

    The Eurostat data underlying this report is here:
    http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Comparative_price_levels_of_consumer_goods_and_services

    Ireland is the fifth most expensive in the EU and third, behind Finland and Luxembourg, in the EA. There has been an improvement since 2008 when Ireland was in the stratosphere, but the improvement has been mostly in the more exposed sectors. Still major room for improvement in the sheltered sectors, as evidenced by the CSO CPI sub-indices, but we wouldn’t want to inquire too deeply in to that, now would we? In any event, we don’t have enough appropriately qualified microeconomists to do it.

  76. @ Richard Tol

    1. If you could have then it’s pretty clear that you *should* have.
    Also, why would the international academic audience listen to self-confessed inaccurate work? Unless you weren’t going to tell them…

    2. I have not met Eithne, though I am sure that she is great. You clearly agree with this since on your blog you make the obviously flattering (though barely intelligible) statement that, “She faithfully represents both the research and its early stage”. Are you now claiming that in this case she did not?

    You also say that the “ESRI should have explained that the paper was a working paper…”. But that wouldn’t have been necessary if you had done it in the first place. Isn’t that right?

    Quality Control over and out

  77. TxtMsgs for Dickie Tol

    [1] Anto wants you to wear the Irish Rugby jersey for the award ceremony

    [2] Aoife wants to meet your own childer

  78. What have we learned from all of this?

    We now have three non peer reviewed papers in the public domain on the subject of welfare vs. work. Apparently, if Frances Ruane is to be believed, these aren’t worth the paper they’re written on. Who was it said: “If the fact that 1+1=2 were to have a political dimension there would be a faction formed to deny it”?

    I love this bit from Doris et al above:

    “If you have a higher income, you are more likely to go for a spin in the car at the weekend, to buy a takeaway on Friday night, to employ a nanny rather than use the local childminder, and to leave the heating on if it’s chilly. It is therefore very important to take this income effect – which is going to be substantial – into account before labelling the difference in expenditures as working costs.”

    What data set were they working off to form these conclusions? I love it when middle class people start pontificating on life for those on welfare. Mrs B works with disadvantaged children and, by extension, their parents. Doris et al really need to talk to some Community Welfare Officers, Social Workers, and others to see how unemployed people (both short-term and long-term) actually live their lives.

  79. Anto, in fairly sombre mood for a toodler who is nearly four, has just brought this to my attention: and I agree with his suggestion that it be added as a case to the draft ‘working’ report from the IFTG

    Daniel couldn’t read or write. He desperately wanted to learn, but it would have taken a major input from the State to teach him the basics. There was nothing forthcoming.

    … without the political will, particularly now with resources stretched, children like Daniel McAnaspie will continue to be thrust out beyond the bounds of basic nurturing that all children require.

    http://www.irishexaminer.com/opinion/columnists/michael-clifford/nurture-little-children-who-come-to-thee-198399.html

  80. More than a bit late, but perhaps relevant in this age of search engines. To figure out what it cost to work, Tol and friends looked at childcare, transport, take away food and clothing costs (dress for success). For example, in Table 15 they set the average expense for transportation if someone is working as €106.30 and €23.93 if not working. Now some, not Eli to be sure, are on the floor laughing their butts off. If a bunny is well off, has a car and commutes from the suburbs well, that €106.30 is reasonable. If not, if your weekly income is €106.30 you are not spending it all on a car (well maybe if you are a 20 year old, that fags and Guiness). It’s Bill Gates walking in to the room and turning everyone into millionaires on average.

    The survey upon which this working paper was based puts the AVERAGE cost of transport at €106.30 ranging from €274 in the top decile to €19 in the lowest.

Comments are closed.