Tag: Unemployment

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)

Abstract:
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.