Author: Stephen Kinsella

Senior Lecturer in Economics at the University of Limerick.

New research on efficacy of active labour market programmes

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

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

Fiscal plan published, difference split?

Ireland’s rail gauge, the distance between two load bearing rails that make up a single railway line, has a strange history. The standard gauge is 4ft 8inches. Ireland’s is 5ft 3inches. During the 1800s, each new railway line chose its own gauge, and in 1845/6, a commission was set up to essentially split the difference, meaning that Ireland has one of the most unique (and uniquely expensive) rail gauge systems in the world.

Splitting the difference might work to get an issue through a committee, but it does not often help in solving practical problems.

In a similar vein, Ireland’s medium term fiscal plan has been published. The document is here. Looks like the government has not taken the ‘front loading of pain’ approach advocated by some commentators, nor the avoidance of austerity championed by others, and gone for a 3.8 billion euro, ahem, adjustment, this year.

I leave it up to commenters to judge the merits to this approach. The document makes for interesting reading. Chapter 4 in particular is an analysis of the debt position (and sustainability, obviously) of the State.

Wonktastic Statistical Yearbook Released

Better than a John Grisham novel for policy wonks, the statistical yearbook of Ireland 2011 has been released from the CSO. Lots to dig into here, but I guess readers of the blog will dig into chapters 8, 9, and 16 on the economy, public finances, and prices first (links are to the chapter pdfs).

More on Savings Rates in Ireland.

Seamus’ excellent post today reminded me to post something I looked at some weeks ago. The September Budgetary and Economic Statistics from the Department of Finance carried some really useful information in Table 25 on investment, Gross National income, and gross and net savings. The figure below shows the evolution of gross and net national saving and the gross total available for investment from 1995 to 2010.

We can see clearly from the figure that the spike in net national savings in 2007 is rapidly diminished, with only 21 million euros put aside, so to speak, in 2009, and 1951 million euros in 2010. Occasionally the notion gets floated that there is a load of money somewhere in a bank account to be taxed. This should be dispelled rather quickly, as households don’t seem to be saving their way through the crisis much at all. In addition, the total available for investment seems to have dropped off, with no rebound in sight, which is a worry.

O’Leary and Walshe on Debt, Deleveraging and the Irish Economy

More Kenmare-related fare (sorry I couldn’t resist). This time it’s from Don Walshe and Dermot O’Leary of UCC and Goodbody Stockbrokers, respectively. I attended this talk and the paper they produced is just now online at Finfacts as a Goodbody note. The pdf is here. The data they provide is really useful to guide our discussions on debt and deleveraging in the Irish banks, especially (for me anyway) sections 3 and 4 on balance sheet dynamics. O’Leary and Walshe argue for a slower deleveraging process to help aid growth in the economy. From the piece:

The goal of an export-led growth strategy is the correct one, and appears to be yielding some benefits already, but the external strategies of fiscal consolidation in developed economies puts this under threat. Indeed, the external trilemma of policy autonomy, fixed exchange rates and capital mobility, close off some of the traditional routes to achieving an acceleration of export growth and/or real debt reduction.

Ireland wants to reach a destination whereby it will have a smaller private debt level, a smaller banking system and stable public finances. That is the story of stocks. How it gets there, outside of default, is determined by flows. This paper shows that the current policy course is inconsistent with the achievement of all three goals in a reasonable timeframe and sustainable way. With private sector deleveraging largely outside of domestic policy control and political imperatives pushing for fiscal consolidation, we view the slowing of banking sector deleveraging as a way to ease the damaging circular dynamic that is currently taking place in the Irish economy. Further European assistance will be needed to achieve this, but the policy recommendations laid out here are unlikely to be exclusively beneficial to Ireland if they were implemented.

A quick note on comments. I’ve gotten a few complaints discussions aren’t being kept (roughly) on topic, so I’ll be a bit more aggressive in deleting comments that don’t add to a discussion on debt and deleveraging in the Irish economy.