Rachel Dardis, Professor Emerita at the University of Maryland died February 23, 2021. An obituary is here. Prof. Dardis was a prolific author and mentored more than 60 PhD students during her career. She spent her academic career in the USA, starting in the 1960s with her University of Minnesota PhD. She retired in 1996 and is survived by her nephew and his two children.
The Leaving Certificate Exams have three main roles: sorting, incentivizing, and signalling. The exams serve to sort students into third-level courses where the students will perform well and contribute to the performance of their peers; they incentivize secondary school students to study hard and learn, and the examination process allows students to signal their academic abilities and their work discipline by doing well on them.
pandemic shutdown has created learning and emotional challenges for sixth-year
students, and also worsened the “digital divide” between students with
supportive home environments and expensive computer technology and those
without. An accommodation needs to be made for students who have not coped well
in this very challenging environment. It is also sensible, where possible, to
reduce the size of examination hall numbers. At the same time, cancelling the
examinations entirely and replacing them with very noisy and low-information estimated
grades seems an inferior plan.
The government, teacher’s unions, and Department of Education officials need to quickly step up and show courage and wisdom in implementing a solution that is not a muddle-through compromise designed only to appease political pressures. The cabinet including its senior members need to oversee and back whatever solution is quickly chosen and implemented. One obvious possibility would be a rigidly-capped estimated grades option (perhaps capped at H5-O1), together with an exam option for those students who feel that they can exceed the H5-O1 level, or exceed the estimated grade (below H5-O1) that they expect to receive.
A guest post by Kenneth Devine (Central Bank of Ireland) on new occupational pension fund data highlighting household exposure, concentrated asset holdings and the impact of COVID-19. [Disclaimer: This blog represents the author’s views and not those of the Central Bank of Ireland]
Pensions are the primary source of income to households in retirement. The volatility and economic shock associated with COVID-19 have compounded pre-existing issues for pension systems. These include aging populations, the low interest rate environment and the prevailing low yields on safe assets (OECD, 2020).
In a recent Behind the Data publication, Ciarán Nevin, David Mulleady and I ask the question – What do we know about occupational pension funds in Ireland? Our note highlights the role of occupational pension funds as a household asset, outlines the breakdown of financial assets, and examines the impact of the pandemic on these holdings. An overview of the key findings can be seen in Figure 1 below.
work by the OECD
(2014) provided a comprehensive review of the Irish pension system, its analysis
of occupational pension funds was constrained by a lack of data. New
Central Bank of Ireland statistics covering occupational pension funds help
to fill this gap by providing a better understanding of the structure and asset
holdings of the sector.
We show that, in
June 2020, Irish occupational pension funds had assets of €118 billion,
accounting for 30 per cent of household financial assets. This is the second
largest household financial asset behind currency and deposits. Household
sector housing assets accounted for €542
billion in the same period.
According to the Pensions
Authority’s 2019 annual report, the Irish sector consists of over 75,000
active occupational pension funds, representing almost half a million active members.
This represents over 90 per cent of total euro area pension funds by number. The
size, and role, of occupational pensions varies across euro area countries (Curos
et al., 2020), with total assets of the pension fund sector amounting to €3
trillion at September 2020.
We have seen a transition away from Defined Benefit (DB) funds in recent years (fall of 50 per cent in number of active schemes since end-2009). For Defined Contribution (DC) pension funds, the member’s income in retirement is dependent on asset performance. Therefore, the switch from DB to DC pension funds has shifted investment risk from the corporate sector to households (Brown, 2016). Households, and their retirement income, are now increasingly exposed to financial market shocks.
The Behind the Data piece outlines that Irish pension funds primarily invest in investment funds shares and unit-linked insurance products. Combined, these two instruments account for three quarters of the sector’s balance sheet. However, structural differences in asset holdings exist across DB/DC pension funds. While the larger DB pension funds are seen to directly invest in hundreds of diverse assets, smaller DC pension funds tend to predominantly hold a limited number of investments.
As can be seen in Figure 2, at the onset of the COVID-19 pandemic the total value of pension fund assets fell by 6.5 percent (€7.9 billion). These asset values largely recovered across Q2 and Q3 2020 to sit at €118 billion. The movements were predominantly caused by financial market price gains and losses as the pandemic, and global policy responses, evolved. At Q3 2020, asset values were 1.8 per cent below pre-pandemic levels.
Going forward, the Central
Bank will publish Pension Fund Statistics information releases on a quarterly
basis. The next steps in developing this dataset will include an investigation
into asset breakdowns by their sector and geography, to further explore
Researchers interested in hearing
more about the data can contact Kenneth Devine.
Disclaimer: this post represents my own views and not those of the Central Bank of Ireland
Two recent CSO releases shed light on the evolution of earnings in the first three quarters of 2020. Alongside employment and hours, understanding the impact of COVID-19 on earnings tells us how household incomes are affected by the shock.
In previous work, using data from the Financial Crisis, we found that earnings in Ireland were sensitive to economic conditions, notably changes in the unemployment rate. The workers most exposed to lower pay when labour demand falls are those with weaker bargaining power. For example, in our paper we focused on the lower wages of new hires during the last crisis.
When looking at changes in average earnings, such as from the CSO’s Earnings and Labour Costs release, it is important to take account of changes in the composition of employment. For example, if changes in employment are concentrated amongst lower paid workers, average earnings could rise when there is a negative aggregate demand shock. In a SSISI paper in 2012, Kieran Walsh showed that these compositional effects can be large. The CSO also noted the potential for compositional effects in the context of COVID-19 average earnings changes.
Tracking the earnings of the same workers in the same jobs can remove some of these composition effects, giving a clearer picture of underlying wage developments. The CSO does something close to this in its Labour Market Insight Bulletin 4/2020, showing changes in average gross weekly earnings conditional on workers being in employment in Q1 and Q3 2020. Earnings includes wage subsidies, where applicable, but exclude PUP payments.
The chart below, from the data in the CSO Bulletin, shows that for all sectors earnings fell by almost 4 per cent for workers in employment in Q1 and Q3. In some sectors, like Administrative & Support Services and Financial, insurance & real estate the changes are double-digit. In others, like Construction and Accommodation & food, earnings are up.
For comparison, during the financial crisis, and controlling for composition effects, average weekly nominal pay also fell by around 4 per cent, most of it between 2008 and 2009 (Lydon & Lozej, Table 2). At that time, the declines were largest in sectors connected to property market, like construction and real estate. The emphasis on nominal pay is important. Between 2008 and 2010, prices (CPI) also fell sharply, by over 5 per cent. This helped offset the fall in nominal earnings, cushioning the impact on households’ purchasing power. Price levels have fallen in 2020, by around 1.5 per cent, which suggests a fall in real earnings in the first three quarters of the year of around 2.5 per cent.
… changes in earnings positively correlated with labour demand, but important to control for hours
The changes in earnings between Q1 and Q3 are generally positively correlated with changes in labour demand, such as changes in employment or job postings. There are some notable exceptions like Accommodation & food – where employment fell by over a fifth, but average earnings rose marginally, by 0.4 percent; or Industry, where employment grew by 2.4 per cent, but average earnings fell by 6.4%.
Despite conditioning on workers in employment in Q1 and Q3, there are likely still many factors affecting earnings dynamics that are not picked up in the conditional averages. One example is hours-worked. As weekly earnings are the product of hours worked and hourly pay, higher or lower earnings could be due to higher or lower hours. This could matter in sectors with seasonal hours, like Accommodation & Food services.
To get at the the change in hours worked, and for a sample broadly aligned to the administrative earnings data, the CSO provided me with average actual hours worked by sector for employed persons interviewed in Q1 and Q3, from the LFS. I use this data to back out change in average hourly pay as the change in weekly earnings minus change in weekly hours worked. Readers should note that earnings data is from administrative sources (including wage subsidies), whereas the hours data is from a survey. Furthermore, the two matched LFS samples are six months apart and may not be exactly representative.
The chart below shows the data. The line in the chart is the change in average gross weekly earnings, corresponding to the bars in Chart 1. Whilst there are offsetting increases in hours in several cases, they are usually small. Furthermore, the direction of the change in hourly pay and earnings is roughly the same for most sectors, with the notable exception of Accommodation and food services. In fact, the increase in hours worked (10.5%, an increase from 32.1 to 35.5 hours per week) offsets a large fall in hourly pay (minus 10.1%). This fall in hourly pay is more closely alinged with the fall in demand (employment and job postings) that we have seen during COVID-19. Looking at the historic LFS data, it is clear that this hours increase in Q3 is not unusual. In fact, it is entirely predictable: the historic Q1 to Q3 change in hours is almost exactly the same as the 2020 figure, at 10.3 per cent.
The third chart below shows the correlation between the estimated change in hourly pay (conditional on working in Q1 and Q3) and the change in job postings by sector from Indeed. Job postings are generally a good indicator of labour demand, and, whilst postings are down across the board, we find that sectors where postings have declined the most have generally see larger falls in hourly pay.
It should be said that three quarters of data is a relatively short time period. Added to this is the fact that the COVID-19 shock has generated a very high degree of uncertainty. For firms in some sectors – such as exporters, industry or multinationals – the demand shock may may turn out to be less bad than initially feared. This might help explain negative earnings growth for workers in Industry, but positive employment growth. It is quite possible that in Q4 or Q1 2021 we may see a strong earnings growth for some sectors as employers unwind pay freezes that were put in place early-on the crisis.
… looking ahead
By combining administrative and survey data in novel ways, the CSO provides timely and granular insights on the COVID-19 labour market. This is crucial information for understanding the impact of the shock, and how policy might help mitigate it.
The decline in earnings in 2020 for employees working in both Q1 and Q3 is similar to falls seen during the last recession, albeit with a different sectoral pattern. There are other differences this time around. The most significant difference is the large and decisive policy response to COVID-19 – both fiscal and monetary. In November, over a quarter of workers were supported by Pandemic Unemployment Payments or Wage Subsidies. Furthermore, the government has committed to these supports remaining in place while restrictions remain in in place. Another important difference is healthier state of household balance sheets going into 2020, a factor which dragged on domestic demand during the last recession.
If the spread of the virus can be brought under control in 2021, this points to a potentially shorter duration shock than before. However, the longer restrictions continue, the greater the potential for behaviour to change – like less business travel or less bricks-and-mortar retail, for example – and the harder it becomes for some businesses to reopen. This would lead to permanent job losses, even after restrictions are lifted. Furthermore, if employment and (real) earnings shocks persist, there is greater potential for precautionary savings, with negative feedback loops for domestic demand. The fact most people who have experienced reduced employment or been laid off due to COVID-19 said they expected to return to the same job suggests a widespread perception of this as a short-term or temporary shock – albeit this was in Q3, before the most recent Level 5 restrictions.
Related to this, in services – the sector most affected by the shock – turnover picked up sharply during the summer easing of restrictions. Although some sub-sectors, like travel and accommodation remained far below pre-COVID levels. Job postings in services track tend to track turnover very closely, rising in the summer, before declining again in the move to Level 5. This suggests that permanent relaxation of restrictions, leading to increased demand, could undo some, but not all, of the labour market damage we have seen in 2020.
The Statistical & Social Inquiry Society of Ireland invites you to attend the second Ordinary Meeting of its 174th session, where a symposium with the title “Jurisprudence and its impact upon Public Policy” will take place. The Society’s original object was to be the promotion of the study of statistics, jurisprudence, and social and economic science. The symposium highlights the jurisprudence aspect with a discussion of how modern laws impact upon the public policy realm, with contributions from three distinguished speakers: Paul Gallagher SC is the Attorney General. Margaret Gray SC QC is a specialist in European and Competition law. Michael McDowell SC is a former Attorney General and Minister for Justice, Equality and Law Reform. Given the public health guidelines, this meeting will take place online, using the Zoom platform, at 4.30pm this Thursday November 26th. To register for this webinar, please click here or copy and paste the link at the bottom of this email into your browser. After registering, you will receive a confirmation email containing information about joining the webinar.
As ever, attendance is open to all and, given the format, feel free to circulate to others who may be interested so that they may also register their interest and attend on the day.