Central Bank event: Labour Markets over the Business Cycle

The Central Bank is hosting a one-day conference on “Labour Markets over the Business Cycle” on 11 December in Dame Street (programme below). There is a limited number of places still available. If you wish to attend, please email ieaadmin@centralbank.ie by 9 December. Please note that places will be allocated strictly on a first-come-first-served basis.

Labour Market Adjustment over the Business Cycle

A one-day conference at the Central Bank of Ireland

11 December 2014
Liffey room, Dame Street, Dublin 2

email ieaadmin@centralbank.ie to confirm attendance by 9 December



11 December  
08:45 Registration and coffee
09:00 Opening remarks – “Prospects and Challenges for the Irish Labour Market 2015 – 2020”. John Flynn (Head of Irish Economic Analysis Division, Central Bank of Ireland).
Session 1 


Cycles in employment, unemployment and wages
  Labour market transitions in Ireland – Thomas Conefrey (Irish Fiscal Advisory Council)
  Wage Cyclicality – Mario Izquierdo (Banco de Espana)


11:00 Coffee & tea break
Session 2
Labour market attachment
  Are the marginally attached unemployed or inactive? – Martina Lawless (CBI/ESRI)
  Sources of wage losses of displaced workers – Pedro Portugal (Banco de Portugal)
13:00 – 14:00 Lunch
Session 3
14:00 – 15:45
Wage flexibility
  Wage flexibility in Ireland – Olive Sweetman (Maynooth University)
  Wage Setting – Flexibility and Rigidity in the UK since 1975 – Jennifer Smith (University of Warwick)


Session 4


Labour market adjustment during and after the crisis: the role of policies and institutions
  Pedro Martins (Queen Mary University of London)
  Questions & discussion


  Closing remarks

Conference Ends

QNHS for 2010:Q4

Results from the Quarterly National Household Survey for 2010:Q4 are now available (press release here, full release here.)  The seasonally-adjusted unemployment rate for the quarter rose by one percentage point to 14.7%. This is a percentage point higher than the previously available proxy for the seasonally adjusted rate based on Live Register figures.

I’m not sure what the explanation is for such a large divergence between the QNHS and Live Register series for this quarter. One possible factor is that some people are now reaching the expiry of their benefit eligibility and thus falling off the Live Register while still being unemployed. The different behaviour for 2010:Q4 doesn’t seem to reflect a big drop in the labour force, due to emigration for example, because the decline in the labour force was of a similar magnitude to previous quarters.

Labour Party Pre-Budget Presentations

Before the snow hit, I gave a pre-budget presentation (pretty similar to my UCD presentation from today, though with some additional material on the banks) at a Labour Party pre-budget event. That presentation and three others are available here. Marie Sherlock from SIPTU and John Martin from OECD gave interesting presentations on labour market and training issues and Michael Collins from TCD gave a presentation on tax breaks.

Responding to the Jobs Crisis: Brian Nolan on Social Welfare, Employment and Unemployment

Brian Nolan addresses interactions between the benefits system and unemployment in the fourth part of the Irish Times Jobs Crisis series (article here).   Among the topics: unemployment traps due to high overall replacement rates; the relative importance of labour demand and supply factors in the rise in unemployment; the (limited) need to adjust social welfare benefits in line with changes in other incomes; and the importance of providing meaningful work opportunties as part of soical employment/benefit conditionality schemes.

October Unemployment and Exchequer Returns

Two pieces of moderately good economic news. The Live Register declined by 6,600 on a seasonally adjusted basis in October and the standardised unemployment rate fell by a tenth of a percent to 13.6%.  Also the October exchequer returns show that tax receipts, which had been falling behind target for a while earlier this year, are now slightly above target. Overall, the non-banking component of the deficit for 2010 appears set to not be too far off the target set last December.

Responding to the Jobs Crisis: Liam Delaney on Training

Liam Delaney draws on the policy evalutation literature to offer an agenda for the reform of training and education policies (article here).  Among the topics: the nature of required traning; the graduate unemployment problem; the importance of early childhood and lifelong learning; and the scarring effects of unemployment.

Irish Times Series on the Jobs Crisis

The Irish Times begins a week-long series today on Ireland’s jobs crisis.   First up is a wide-ranging article by John Martin, Director for Employment, Labour and Social Policies at the OECD.  The other contributors will be Philip O’Connell (ALMPs), Liam Delaney (training polices), Brian Nolan (welfare system-employment interactions), with a concluding article on Friday by Dan O’Brien.   There is also an editorial today that criticises the government’s lack of attention to employment-related policies. 

High unemployment levels are causing growing hardship to families and individuals, requiring extensive State borrowing to fund social welfare payments and causing long-term damage to the very fabric of society. In these circumstances, schemes for retraining and job creation should top the political agenda.

But the Government appears transfixed by the banking crisis and the need to reassure bond markets.

This blog has also come in for (mostly justified) criticism in giving too little attention to the unemployment problem.  A partial defence is that effectively dealing with the banking and fiscal crises is very much part of the policy response to the recession to limit its human cost.  Hopefully, the series will spur debate on more direct policies to limit the rise in unemployment. 

QNHS for 2010:Q2

Results from the Quarterly National Household Survey for 2010:Q2 are now available (press release here, full release here.)

Employment is still falling, though at a slower pace than previously. The seasonally adjusted unemployment rate for the second quarter is 13.2 percent, which is the same as the average for these months that has been estimated by the Live Register figures over those months, so there will be no great revision to those figures (which last showed a standardised unemployment rate of 13.8% in August.) The decline in the participation rate seems to be easing, with the seasonally adjusted rate falling from 61.2 percent in 2010:Q1 to 61.1 percent in 2010:Q2.

July Unemployment and Exchequer Returns

For an economy that’s supposedly in recovery, the unemployment figures seem to be puzzlingly weak. The July Live Register figures show an increase in the standardised unemployment rate from 13.4% in June to 13.7% in July. Slightly less negative were the July exchequer figures: Tax revenues had fallen from being on target in April to 1.6% behind target in June. The July figures reversed that trend to be only 1.4% behind target.

Still, both sets of figures raise a question. We keep hearing about how GDP figures are supposed to be coming in better than the assumptions penciled into the last budget: How is that to be reconciled with tax revenues being behind budget target and the unemployment rate coming in higher?  (The budget assumed a year average unemployment rate of 13.2%, which is the average for the year so far with the figure now moving in the wrong direction.)

Update: I was interested to hear Minister Eamon O’Cuiv explain the increase in the seasonally adjusted unemployment rate on seasonal factors. Sure unemployment always goes up in July, I heard him say on the radio. You’d think the CSO boffins would have factored that in to their calculations …

Quarterly National Household Survey for 2010:Q1

The latest QNHS figures have been released. They show the unemployment rate in the first quarter declining from 13.3% in 2009:Q4 to 12.9% in 2010:Q1. This will lead to a downward revision to the monthly Live Register based standardised unemployment rates, which had previously averaged 13.4%.

When the previous QNHS was released, I had expressed concern that the monthly Live Register figures may have started to underestimate true unemployment as expiry of eligibility for benefits saw people still seeking work falling off the Live Register. These figures show that this doesn’t seem to be a set pattern. The Live Register figures would have implied a small increase in the unemployment rate rather than a decrease.

A factor that is perhaps going in the other direction from the issue of benefit eligibility is that the QNHS measure of labour force participation continues to decline. It fell another three tenths in 2010:Q1 to stand at 61.2 percent, down from a peak of 64.6 percent in 2007:Q3. Over that period, male participation has fallen from 74.3 percent to 69.4 percent, while female participation has fallen from 55 percent to 53.2 percent. These declines in participation have been largely concentrated among the under 25s and the over 60s.

If some of these people deemed to be out of the labour force by the QNHS questions are still collecting unemployment benefits, then the Live Register measure will overstate unemployment as measured on the ILO basis.

The composition of unemployment is starting to become more skewed towards the long-term unemployed. In 2010:Q1, there were 112,600 long-term unemployed out of 275,000 unemployed in total. This compares with 49,100 long-term unemployed during the same quarter a year earlier when the total was 222,800.

May Unemployment up to 13.7%

This is disappointing news. The latest Live Register-based measure of the standardised unemployment rate is up to 13.7% having stayed flat at 13.4% over the previous few months. What worries me about these figures is that the Live Register may be underestimating the true trend. The last QNHS figures, for the fourth quarter of last year, showed a jump in unemployment even though the Live Register figures for that period had been flat.

April Live Register, March Retail Sales

Amid all the bond (and now equity) market excitement, it’s worth noting some economic news from home that’s not so bad and some news from abroad that’s positively good. Not so bad is today’s Live Register release which shows the standardised unemployment rate steady at 13.4% (though this is subject to all the usual caveats about whether this claims based measure is accurately capturing the underlying trends in joblessness) while the retail sales figures show some sign of stabilisation.

From abroad, the non-farm payrolls figures in the US showed 290,000 jobs added in April. While the unemployment rate from the household survey increased to 9.9%, this is partly due to a reversal of the decline in labour force participation. Payroll growth at this pace, if sustained, would start to reduce the unemployment rate.

March Unemployment Figures

The standardised unemployment rate for March was 13.4 percent (release here) having been revised up in previous month’s due to last week’s QNHS release. The Live Register based unemployment rate was flat over the first quarter but there are questions now about whether this reflects tightening of benefit coverage rather than underlying labour market conditions.

Bad News from the QNHS

Yesterday’s QNHS report paints a picture of a very depressed labour market. The seasonally adjusted unemployment rate for the fourth quarter of 2009 was 13.1%.

It is perhaps worth reminding readers of how the unemployment rate is measured in Ireland. The QNHS, a large nationally representative survey, provides the official measure of the unemployment rate. The survey asks questions to assess whether the person is really participating in the labour force and then, if this is the case, whether they are in employment. So the survey provides measures of both the labour force participation rate and the unemployment rate. 

The QNHS takes some time to process, so it’s release is not very timely. For this reason, the CSO also publishes a “seasonally adjusted standardised unemployment rate” which extrapolates from the most recent QNHS data using Live Register figures on the number of people claiming benefits. Sometime this extrapolation is accurate, sometimes it’s not.

In the case of 2009:Q4, the extrapolation was not accurate. The most recent Live Register release, reported standardised unemployment rates of 12.4 in October, 12.4 in November and 12.5 in December. These data had suggested that the unemployment rate was flattening out. However, the QNHS now reports that the seasonally adjusted unemployment rate rose from 12.5% in 2009:Q3 to 13.1% in 2009:Q4.  

The most recent Live Register release reported an unemployment rate of 12.6% in February. A simple extrapolation from the QNHS release would suggest that this would be revised up to 13.3%.  Overall, the picture has changed somewhat from one in which the unemployment rate appeared to be flattening to one where it still seems to be rising.

A noteworthy feature of the QNHS data is that the increase in the unemployment rate is occurring despite a significant decline in the participation rate. This rate has dropped from 64.1% in 2007:Q4 to 61.5%. For comparison the decline in participation in the UK and US over roughly the same periods has been about one percentage point. So this is an extra 2.5% of the labour force that is no longer counted as unemployed because they are not looking for work.

Perhaps surprisingly, the decline in participation has been most concentrated amongst men. The male participation rate has declined from 73.5% in 2007:Q4 to 69.7% in 2009:Q4 while the comparable decline for females has been from 54.7% to 53.5%. One possible explanation has been the concentration of job losses in the construction sector. Very few women worked in the construction sector, while male construction employment has declined from a peak of 263,000 in 2007:Q2 to 122,000 in 2009:Q4. The decline in male participation may reflect discouraged former construction workers leaving the labour force.

The male unemployment rate, which prior to the recession was similar to the female rate, has risen from 4.8% in 2007:Q3 to 16.6% in 2009:Q4. The comparable rise in the female unemployment rate has been from 4.0% to 9.0%.

Finally, the data show that long-term unemployment is becoming a more important factor. The QNHS shows that by 2009:Q4, one third of the unemployed had been out of work for more than a year; this share was up from one-fifth at the start of the year.

Fine Gael PRSI Reduction Proposal

Fine Gael’s PRSI reduction proposal is linked here

As part of their ongoing commitment to focus on job protection and creation Fine Gael have announced plans to reduce the upper rate of employer’s PRSI by 20% and the lower rate of employer’s PRSI by 50% as part of a €900m pro jobs tax cut for December’s budget. The proposal, which will benefit 175,000 employers and their 1.7m employees, was announced in the Dáil today by the Fine Gael Deputy Leader and Spokesman on Finance Richard Bruton T.D. The €900m tax cut for jobs plan will be financed by the broadening of the tax base to include a carbon tax (480m), a windfall levy on power generators (200m) and the abolition of the PRSI allowance and the ceiling on employees PRSI (470m) while contributing €250m to deficit reduction.

Also, a simplified explanation of the job sharing incentive scheme referenced by Krugman is available from the author Dean Baker of CEPR in Washington here

Work Experience Programme Being Reviewed

David Blanchflower’s ideas on stimulus have received a lot of attention but the core of his paper, namely the imperative to act on the youth labour market side did not receive much debate. It is good though to see that the most downloaded article for the last day on the Irish Times website deals with this part of his talk and hopefully he has succeeded in pressing home the urgency of this problem.

However, those who argue that active intervention in the Irish labour market is counter-productive will be given further credence by the reports on the FAS Work Experience Programme. If the Times is correct, it is very likely that this has flopped and is currently under review.

However, if something is designed in such a way that it has no chance of success then its unclear how much we have learned from its failure. In terms of graduates, FAS simply does not have a recognition among graduates as a place to go to look for work (though even with this caveat it seems to have attracted greater interest from graduates than nongraduates). The process required companies to actively apply to FAS and also made the stipulation that the applicants themselves be unemployed for six months or more before applying. Even with this, it still got nearly 2,000 applicants.

It is important that they get this right, and start by taking it out of FAS and placing it between departments packaged in a way that will attract both the companies and the graduates. The 6 month proviso is also pointless in the current market and this should be relaxed. We cannot say that active interventions do not work until we actually begin to experiment properly with their design and approach them with more vigour than these efforts.

Unemployment Taskforce

It is worth discussing whether the report that the unemployment taskforce does not seem to have gotten off the ground is worrying. On the one hand, it potentially points to a failure to take seriously an issue that may have enormous consequences for the future economic and social well-being of everyone living in the country, particularly younger people. On the other hand, it may be saving the waste of another talking shop that will have no teeth and ultimately will not be able to achieve anything. Can a committee meeting on a regular basis to draft recommendations to government bodies on unemployment achieve something? If so, what should this committee be doing and what should it be empowered to do? If not, then should it simply be wound down now rather than cluttering the policy environment?

Bell and Blanchflower – Unemployment in the OECD

New IZA Discussion Paper.

What Should Be Done About Rising Unemployment in the OECD?
by David N.F. Bell, David G. Blanchflower
(September 2009)

There is a growing belief that the recession has run its course and that the goods market has started a period of slow, but sustainable, recovery. Improvement in the labor market may take some time, but many believe that unemployment will return to its 2007 level in the medium term. In this paper, we argue that recovery is by no means guaranteed and that the consequences for unemployment may be worse than anticipated.

September Live Register

I don’t have time to report any detailed analysis of today’s Live Register figures but it is worth noting that September was the first month since December 2007 in which the unemployment rate did not rise. The standardised unemployment rate remained at 12.6%. As an aside, I’d note that this is still two tenths higher than the rate previously reported for August because higher second quarter unemployment in the QNHS, upon which this measure is based, saw the previous figures revised upwards.

Combined with last week’s GDP release, which showed flat seasonally adjusted GDP in the second quarter—consistent with a 6.7 percent year over year decline if GDP stayed flat for the second half of the year—there are now good reasons to believe that the economy is bottoming out. Of course, there must be concerns that further fiscal contraction could undo this stabilisation but hopefully by the time this kicks in there will be a decent world recovery to help out.

Dell Workers and the European Globalisation Adjustment Fund

RTE reports today that 14 million euro will be provided from the European Globalisation Adjustment Fund to people who have been made redundant at DELL to assist them in the process of retraining and finding a new job. The website of this fund is available below and the basic idea is that the fund will support people who have been displaced by trade-related developments. It is intended only to fund active programmes rather than social protection measures. It is worth some discussion of this in light of the long running debate here about active labour market intervention.

link here

Cowen Announces Job Subsidy Scheme

An Taoiseach appeared today before the biennial conference of the Irish Congress of Trade Unions (incidentally, the highlight of their last conference was Mr. Cowen’s predecessor wondering aloud why those who criticised his economic policies didn’t go off and commit suicide.)  The Taoiseach’s remarks suggest that, despite David Begg’s disavowal of it, the €250 million job subsidy proposal is going ahead:

Drawing on detailed discussions with Congress, we are introducing a new initiative to safeguard vulnerable jobs through a Temporary Employment Subsidy Scheme. This will provide a subsidy to support jobs in exporting companies in the manufacturing or internationally-traded services sector.

Perhaps these detailed discussions with ICTU have changed the proposed scheme from the one criticised by me, Sarah Carey, and of course, David Begg.  However, there is no information in the official announcement to suggest so as of yet.  Indeed, it directs us to the document containing the original announcement of the scheme for “more information.”

As an aside, I’d note that the name of the scheme is a bit confusing.  I thought when I read it first that it was a scheme to promote temporary employment via a subsidy.  However, it appears instead to be a scheme that temporarily promotes employment via a subsidy.

Begg Critical of Job Subsidies

David Begg of ICTU has responded to Sarah Carey’s article on job subsidies.  The essence of his reply is twofold.  First, he also thinks it’s a bad plan. He writes that

Carey is correct to point out that a “jobs subsidy scheme” of the nature she outlined would be disastrous. It would be a waste of vital taxpayers’ funds, it would do nothing to ease the jobs crisis and, of course, it would be wide open to corruption and abuse.

Second, the plan wasn’t his idea:

Unfortunately, where she went wrong was in attributing such an initiative to congress. The truth is that precisely this approach has been repeatedly proposed by employer and business groups. We have opposed such feckless initiatives from the outset.

Continue reading “Begg Critical of Job Subsidies”

Job Subsidies and Stimulus

One point I had meant to make in yesterday’s post about job subsidies but forgot to was the following.  Beyond the fact that these programs are expensive and known to be ineffective at reducing unemployment, it remains the case that, whatever agreement the government comes to with the unions, the fiscal situation remains the same (I am discounting arguments here that these schemes pay for themselves because we know they don’t.) I doubt if the government will change its plans for the budget deficit by one cent if it adopts this plan.

So if we spend €250 million (or a €1 billion) on these schemes we will undoubtedly have to find a corresponding €250 million in tax increases or, more likely, spending cuts to offset them.  These measures will themselves have a negative effect on aggregate demand and thus unemployment.

This comes back to the point I made in my post on stimulus. In the current environment, spending measures like this need to be evaluated according to balanced-budget multipliers (i.e. factoring in the negative effects of the taxes that need to be raised or other spending that needs to be cut to pay for them.)  With so many difficult cuts in public spending ahead of us, why put ourselves deeper in the hole by adding an extra €250 million (€60 for every man, woman and child in the country) just to pay for a program that doesn’t help much.

Job Subsidy Plan “Announced”

The long-mooted job subsidy plan appears to be about to happen, though as is often the case in Ireland, the public can only learn about this through leaked details from social partnership talks, rather than through the publication for discussion of detailed government proposals.

Continue reading “Job Subsidy Plan “Announced””

Perspective on the Labour Market

As readers will be well aware, the Irish unemployment has soared since the end of 2007. Most of the short-run commentary focuses on the monthly Live Register (LR) figures, which we know contain many landmines of interpretation.  The Quarterly National Household Survey (QNHS) data are based on more economically meaningful (ILO) definitions, but these too need to be handled with care. (For example, anyone working for pay or profit for one hour a week or more is classified as employed.)

The survey data allow us to look at the employment rate  – that is, the proportion of the adult population in employment – and this is probably more meaningful as a current economic indicator than the unemployment rate.  (The employment rate is the product of the labour force participation rate and (one minus) the unemployment rate.)

A look back at the employment rate over the past twelve years is interesting.  The male employment rate has fallen by five percentage points – from 70.5% to 65.5% – since the third quarter of 2007.   (N.B. These figures are not seasonally adjusted, but I do show the four-quarter moving average.

This brings it back to where it was in the late 1990s.  The female employment rate dropped by only two percentage points – from 52.7% to 50.7% – over the same period.  This leaves it where it was in 2006. The overall rate fell by three and a half percentage points, from 61.5% to 58.0%, so it is back to here it was in 2004. Female participation held up well in 2008, but male unemployment has risen, and participation fallen, faster. 

The continuing relatively high participation rates is one hopeful sign in an otherwise gloomy landscape. The forthcoming QNHS for the first quarter of 2009 will probably show further rises in unemployment and falls in participation, but perhaps later this year there will be signs of stabilisation.

Unemployment Rate up to 11.8% in May

Today’s release shows that the standardised unemployment rate, which is based on the Live Register, rose to 11.8% in May from 11.4% in April and 11.0% in March.

As I wrote last month, it’s tempting to be relieved at seeing increases that are less than the huge jumps recorded at the start of the year.  But a four-tenths increase in the unemployment rate implies an annual rate of increase of almost five percentage points and this is huge. Certainly, the economy appears to be still contracting, if not at quite the shocking pace of late last year and early this year. In the seventeen months since December 2007, the unemployment rate has increased by 7.2 percentage points or four-tenths per month.  Today’s release is exactly in line with that pace of increase.

On a more mundane note, expect to hear plenty over the next few days about how we have “400,000 unemployed” (the total listed on the Live Register).  This is despite page one of the release stating:

The Live Register is not designed to measure unemployment. It includes part-time workers (those who work up to three days a week), seasonal and casual workers entitled to Jobseekers Benefit or Allowance.