Inflation and Unemployment in Ireland

Two links for the policy wonks!

http://www.voxeu.org/article/how-germany-can-avoid-wealth-losses-if-eurozone-breaks-limit-conversion-german-residents

http://www.bloomberg.com/news/2012-09-18/deposit-flight-from-europe-banks-eroding-common-currency.html

Is the De Grauwe article an invitation to the “make my day” moment so ardently sought by some? Or a warning to those demonstrating their patriotism by shifting their assets from the periphery to the core?

HT Eurointelligence!

@ JF: “The policy of bringing our ‘young people up for export’ is back in full swing. One government policy that’s working well.”

Except that it is not John. Our ‘human export’ markets (in Anglophone destinations) is weak. Too many bums, too few seats. That’s Globalization for you!

What we actually have is a Non-policy. Non this, non that and non-‘tother. Its much safer that a Yes policy. Except to dole out some social soporophics to keep the un-jobbed quiescent while the jobbed are mugged.

Where are our econs to express rage at this. “Gone to ground everyone!”

Employment, male 1000s

15-19. 20-24. 25-34. 35-44. 45-54. 55-59 60-64. 65+

July- Sep 07. 44.2. 133.3. 329.8. 285.1. 227. 85.2. 53.3. 30.7
April-Jun 12. 11.9. 49.2. 250.6. 257.7. 217. 77.8. 53.3. 33.9

Female

July- Sep 07. 33.9. 120.0. 287. 210.7. 173.8. 52.4. 30.1. 10.2
April – Jun 12 12.6. 57.1. 256.4. 216.4. 179. 65.9. 36. 13.1

@ BW. The non policy is forcing a lot of young people out of employment, either back to college, eastern Europe, the local dole office or perhaps Australian mining towns.

Maybe CSO should call it ‘chances of someone buying your house from you the next time you want to sell it’, that way it might become a national issue, cos the chances of the next generation affording 600,000 (in todays money) for a 3bed semi are slim.

Aside from the human cost of long term unemployment, another concern is that the long term unemployed are probably “less effective” in a Phillips Curve i.e. they have a smaller deflationary effect on wages. I guess some people might think that’s a good thing.

@ JF and Seafóid: I think both of you are skating very close to the thin ice on the housing affordability issue.

If this turns out to be correct, then its v-bad news indeed. And our wonderful leaders in Leinster House are placing all their stake-money on getting loads of ‘free-dosh’ from the property sector. Jesus wept! What class of political cretin is in charge of this unfortunate state. Again I ask, where is the rage being expressed by our econs? Why are they so silent? We have a serious, and deteriorating economic situation and they appear to be like a bunch of shitless rabbits in the glare of headlights.

Would any knowledgable person on this blog be able to provide a plausible explanation of the different outcomes between an immediate soverign default followed by a general Jubilee or a 4-decade long slow strangulation of our society. Apart from the fact that it will be someone else’s problem by 2052. We really do need a new economic paradigm.

@Brian Woods Snr

‘Where have all the econs gone? Just need the lyrics ….

The only alternative within Irish political economy at the mo is Sinn Féin.

So, Constantin focuses on inflation. Are there not a few more important things that an economist should be more worried about, such as – I don’t know, maybe the unemployment rate?

A description I came across in another context fits this government’s modus operandi rather well I think : in the face of overwhelming adversity, they’ve circled the wagons and turned all their guns inwards, ready to fire. A recent clear example is the sorry saga that has unfolded regarding cuts in public service allowances – one cut agreed from over 1,000 possibilities, providing 3.5m euro of the 75m euro savings sought this year.

Second, responsibility for employment/unemployment has been diffused across a range of Departments. I couldn’t tell you who the ‘Minister for Labour’ is. I’ve no idea and neither, I think, has anyone else.

There is no focal point of overall responsibility for employment/labour market policy. Just various Ministers each holding a slice of the pie and fashioning separate programmes that are periodically announced with great fanfare by the Taoiseach and the Tanaiste with extravagant ‘job creation’ targets attached, rather than any coherent strategy. So the Tourism Minister can say that x policy has realised y jobs in that sector; the Social Protection Minister can crow about the success of Pathways to Work or Jobsbridge in terms of throughput, the Minister for Enterprise can wax lyrical about the ongoing strength of FDI and our exports sector and so on and on. Nobody is measuring the potential displacement effect of these schemes, or how the separate policies co-ordinate with one another. Individual Ministers may be very well meaning in their efforts, but it’s hard to gain a sense of the overall picture until the CSO provides one, which signals continued deterioration in employment.

That the government’s employment promotion policies don’t work has become self-evident , possibly because they were ill conceived in the first place. But the system lacks any flexibility to change course even in the event of manifest failure.

Further, the government sets the agenda for public discourse on the economy, of which the unemployment crisis should be a part. Cliches about ‘employment being our greatest priority’ easily slip off the tongue but are pretty meaningless. In reality, they don’t want to talk about unemployment; the unemployed are best depicted as a’ casualty’ of the economic morass, not an issue in their own right and testament to an even broader economic policy failure. For their own reasons, the vested interest groups of unions and employers don’t want to address the crisis either. A commitment to a policy of ‘full employment’ would require drastic alterations to the present course, a reordering of priorities and some fairly brutal changes to the system as a whole. Best not to raise the hare.

@Joseph

I should have added above that there are no votes for the government parties in acknowledging that current labour market policies are failing. Or in embracing a whole new strategy which would inevitably also carry the risk of failure and would also implicitly require afflicting comfortable vested interests in ways they would not like at all.

There needs to be a sustained critique of government policy on employment, political as well as economic.

Brian Woods Snr asks: “Where are our econs to express rage at this?” (at least we know where the neocons are – – with the president-reject).

Unemployment is not the priority it should be; those who should have some answers have none and those who do, find that they do not fit the cosy status quo. So why upset well-arranged applecarts?

So 50,000 direct workers are responsible for 69% of total exports.

Venture capital supports 9,000 jobs; the taxpayer directly supports over 8,000 full-time equivalent researchers and their supports’ jobs in the public sector.

Veronica wonders who is the ‘Minister of Labour’?

Bruton is the Minister of Job Annoucements and there have been a few projects held over since July that have been hitting the headlines.

The jobs of course are welcome. However, the announcement yesterday that Northern Trust will create 400 jobs by 2017, is revealing as in the real world no company would have firm hiring plans 4 or 5 years forward.

Process is boring for many besides politicians but we are good with the announcement side.

In Nov 2006, five ministers were on hand to reveal plans for a new Dublin Metro line. On the same day, commuters witnessed the biggest traffic jam in Irish history.

Thanks to a spot of bother with a pipe on the M50, motorists were stuck in a snarl-up for up to seven hours.

Until the spin is junked, data is stripped of the pollution of massive tax evasion strategies and there is an honest evaluation of the challenges and remedies, then it will take more of the waiting for Godot.

Eventually the dyke will crash; even in the rehiring of cronies for public sector jobs, it’s clear that the unemployed can paddle their own canoe.

The bitter truth is that too many are still living on the froth of the bubble years and it’s both a public and private sector issue.

The taxpayer underpins the lifestyles of most professional groups.

A half-century after Whitaker, ministers are doubling up to claim credit for jobs provided by Americans while they can give no hope that they themselves and the policy apparatus have a clue other than quarterly ticking off of check lists.

About 20% of US startups are created by 55-64 year olds. The 20–34 age bracket has the lowest.

There is much more that could be done for the unemployed including engaging the voluntary support of retired people with a range of skills.

@ Michael Hennigan,

You’ve nailed it.

Jun-Aug 2006 Full-time: 1,724.7k
Jan-Mar 2011 Full-time: 1,377.5k
Apr-Jun 2012 Full-time: 1,364.2k

I keep a gawk at these as a sign of health – a rough proxy for consumption and personal tax potential (there is a bit of a deficit to close). Although the rate of decline has slowed, they’re far off the highs. Hard to think there are enough worker bees to support the gov. spending.

@seafoid

I think a discussion on Ireland’s ongoing internal devaluation within the EZ would be good addition to this site.

Of course it would, it’s an obvious forum for such a discussion / debate.

So we will leave it to the politicians, and then complai
About what they do or don’t do afterwards.

Anyway, there are shortable risk assets levitating precariously near record highs as reality catches up with the global economy.

What should we do, continue to fail to properly and openly discuss economic policy options or…?

@Brian Wood Snr

Look at the Dáil! The only opposition stems from Sinn Féin – unless you wish to see Fianna Fail back. These are the facts of the moment. I’m not as harsh on SF as you are – Peadar Toibin, McLaughlinn, Mary Lou McDonald, O’Caolain are consistently on top of their briefs and in terms of smarts are superior to most in the present Gov. They are doing a decent job in the 6 counties as well.

The Gov we should have at the mo is a FG/FF admin to be followed next time by a Lab/SF gov. The next Gov will now be a FG/FF admin.

I agree that we have never had a serious Social Democratic alternative of the Europan Variety, and in European terms this is where I find my main interest, hence I’m hoping for an SPD.GP Gov in Germany in Sept 2013.

I only know two things.

1. I don’t see any real evidence of action and policies to address unemployment in Ireland.

2. The daughter of a friend (24) returned from a year away in Australia three weeks ago. Having looked around her back home she says she is in despair and is now heading to Canada – telling me it’s even worse than before she went to Oz and all her mates are either abroad themselves or have gone back to full time education because they can’t find a job.

Is it any wonder why Mr George Lee packed his bags and cleared off!!!

I am disappointed to know that the money taken from my pension last year has not improved the employment rate.

I would imagine that my pension will be raided again by Mr Noonan for 2013, and again for 2014 and onwards forever.

Of course I will be told that I have “historically” done very well by the tax breaks given to pension contributions and that I should pay more in a solidarity tax.

The reality of course is very different, my pension fund has not grown in the last 10 years, and due to stock markets taking big hits my pension is 55% of what I have contributed.

Unfortunately I am not the only one.

@ Brian,

I think you are being a tad unfair to our political class, at least historically. Policy is important both to those seeking office and to the Irish electorate. There’s ample evidence to support this. But the office seeker won’t get to implement his/her party policy unless the party can maximise its vote and seat gains, which is where ‘auction politics’ and local promises, and what Colm McCarthy described as the 2011 TUPs, come in. GE 2011 was unusual for a host of reasons, not least of which was the vast swathe of previously unavailable FF votes up for grabs to the two remaining mainstream parties, as well as the uncertainty of the eventual outcome between them. For example, Labour moved from a position at the start of the formal campaign where it appeared possible they might equal or exceed FG in seat numbers, to a realisation in the final week that FG might win an overall majority. In such circumstances queer things happen in people’s heads.

Irrespective of any rhetorical flourishes to the contrary, the leadership of these parties also knew that, as constitutional politicians, they would not revoke the Troika Agreement, so their policy options were limited from the outset.

Eighteen months on though, it’s hard to decide whether we’re at the mercy of an oligarchic ‘politburo’ style administration or the unwitting victims of a bunch of poltroons.

Veronica, thanks for that reply.

I have recently completed an analysis of our 10 coalition govs (1948 -2007) using party number and vote size as operational measurement variables. The result (with cautions due to the small sample size) indicates that 8 of these coalitions were formed due to an ‘office-seeking’ preference behaviour. There are other important factors which make Irish gov coalition formation significantly different from the west European norm (whatever that might be!).

The idea of vote maximization is interesting, but the evidence supports a vote ‘optimizing’ behaviour (apart from the greedy and selfish behaviour of some individual TDs) on the part of the parties. Given our multi-seat electoral districts there is intense inter-personal candidate rivalry so essentially each voter votes ‘locally’ for the candidate of choice – their party is secondary. Policy is used for electoral purposes only, then quitely side-lined once office has been achieved. It cannot be otherwise. This is not to say that no policies will be implemented. Just those which minimize electoral disadvantage.

Our Dáil is meant to be soverign and the government accountable to the Dáil, but its not. Our oppositions are merely Niet-sayers, not policy supporters. We are not a real democracy in that sense. As I remarked, we know exactly what we are voting for and we have got what we deserve – ” a bunch of poltroons.”

Thanks again.

@Brian,

Our system bears a huge imprint of the ‘Westminster model’ as well as containing elements of the Western European ‘consensus model’. At electoral level the multi-seat constituency system allows voters to choose between candidates of the same party, so that their party allegiance, or ideological preference between parties, if you like, is maintained. In Ireland, localism is a major factor in national electoral contests, but I think it is overly maligned especially by political factions and some analysts who focus on it exclusively as the cause of defects in governance.

In line with the Westminster model of represetnative democracy, our system is ‘winner takes all’ which, in theory, might be described as an effective government dictatorship from one election to the next. In practice of course it’s not, as governments are subject to a range of checks and balances within their own parties, from the judiciary if they overstep a constitutional line and from the media and society generally. Also from the fact that sooner or later they must face the electorate again and be judged on the failure or success of their policies. Representations that some have made of our political system on this blog have been overly simplistic.

Ireland is generally described as having a weak parliamentary system because of executive dominance. Much of the pressure for political reform should be concentrated on improving the procedures and processes of parliament. The trouble for most parties though, once they achieve office, is that the incentive to democratise the workings of parliament disappears. Up to very recent years, for instance, there was no Committee System worthy of the name. And even after it was introduced, it quickly degenerated into a mechanism whereby potentially unruly backbenechers, ‘disappointed’ at being excluded from executive office but other wise deserving of ‘reward’ of some kind, were appointed as Committee Chairs and so on.

The role of the opposition is to hold the government to account. But given the executive dominance of parliament there is little incentive for them to do otherwise than play the populist card. However, it is also evident from electoral history that policy development is important if those parties in opposition are to stand any chance of dislodging the incumbent government at the polls.

I don’t disagree with the fundamental point of your analysis that parties invariably seek to maximise votes and seats for office-seeking purposes, but would suggest that’s the case in all democratic contests and is not incompatible with having strong policy platforms. It is very difficult , though, for any new party to establish itself in the Irish political system. Also, people can only elect from among the choice of candidates that are made available to them by the parties. As voters, we elect representatives to do a job that most of us wouldn’t want to do ourselves. But the system only permits a very narrow choice among both parties and candidates. Thus the failures of our political class are their failures, not those of the people who elect them. I think it’s way too simplistic to say we get the government we deserve – very far from it, most of the time we don’t.

@ Brian,

Just been listening to an interview with the Minister for Health on RTE radio. He sounds like he’s reached a tipping point and has come to see himself as a character in some grand old Greek tragedy. OK. I give in. Poltroons, the lot of them!

@ DOCM,

I’m up for Donegal I’m afraid – sheer ‘localism’ of course.

Thanks for the link. I’m well-versed in the works of Gallagher and Mitchell and Mair and Hardiman etc. as I have no choice but to be.

Perhaps I was dreaming this but has the ESRI, echoing the opinions of the IFAC a week ago, advised the govt. to abandon its proposed ‘jobs stimulus’ programme unless individual projects are subjected to a rigorous cost-benefit analysis? No doubt such advice will be blithely ignored for ‘good’ political reasons.

I really wish there was some labour economist out there subjecting the plethora of employment schemes/initiatives to a rigorous analysis as well. Maybe there is. (?)