Wednesday, 16 December 2009

"It's positive from a fiscal perspective"

Slí Eile: Haven’t heard much from Bank of Ireland Chief Economist, Dan McLaughlin, of late but this statement must qualify as Quote of the Day: 'It's positive from a fiscal perspective…The government was anticipating a much higher unemployment figure and therefore the benefit payments they'll have to pay out is coming in lower than projected'
The latest unemployment figures by the Central Statistics Office today make for grim reading. They are based on the results for the Third Quarter of 2009.
The headlines indicate a ‘monthly standardised unemployment rate’ of 12.4% (or 12.0% in April-June 2009). The other story underneath the headlines is the fall of about 7% (35,000) in the population of non-Irish nationals between Q2 of 2008 and Q2 of 2009. The bulk of this fall is in the EU new accession countries. It seems that lots of single Poles in their 20s and 30s, many of them working in construction, are heading home (or elsewhere) – at least those who have lost their jobs (see Table A1 for overall summary of changes in non-Irish population).
The latest (pre-budget) forecast from the Department of Finance is for the rate of unemployment to climb from a projected average rate of 11.8% to 13.2% in 2010. This, already, looks like an under-estimate. Moreover, researchers at the Economic and Social Research Institute have stated in the latest Quarterly Economic Commentary: ‘We now expect the rate of unemployment to peak at close to 15 per cent.’ (or 14.8% in 2010 per Summary Table)

A further increase in unemployment in 2010 will, according to ESRI figures, represent an additional 55,000 unemployed persons (322,000 over 267,000 on the ILO definition of labour market status). At a conservative estimate, that level of increase would add about €1billion Euro to the Social Welfare bill. Other costs would arise, in addition, by way of lost tax revenues and negative impact on consumer spending. Still other impacts include mental health and the social costs of forced unemployment especially when these are associated with a whole cohort of people permanently scarred by the experience of long-term unemployment at an early stage in adult life.

So, when you hear some commentators and economists talking about ‘recovery’ some time next year they are referring to growth in measurable GDP or GNP – not a decrease in human misery as indicated through unemployment. Neither does a recovery in share prices constitute an adequate social and economic recovery. Only a decisive cut in unemployment and restoration of ‘full employment’ would signal recovery

[It should be pointed out that the true extent of unemployment is under-stated in all of the above figures since the CSO point out that if unemployment were reported to included ‘unemployed plus marginally attached plus others not in education who want work plus underemployed part-time workers as a percentage of the Labour Force plus marginally attached plus others not in education who want work.’ you would arrive at a figure of 15.8% in the second Quarter of 2009 (Table 20).]
Behind every statistic of averages are other statistics of particular groups. So, in this case, we are looking at a disproportionately higher unemployment rate among young people. Behind an average rate of 12% unemployment rate (ILO measure) in the second quarter of 2009 we find a figure of 36% and 23%, respectively, for 15-19 and 20-24 year olds). Moreover, the rate of unemployment among young early school leavers (aged 15-24) is higher still (although the data are not shown separately in the CSO figures for the second quarter of 2009). Some notion of the extent to which unemployment is highest among the young who leave school early is presented by the latest information available March-May 2008 (Table 9C in QNHS)when the unemployment rate among early school leavers aged 18-24 was 29% or 21% of all persons in this age group. This contrasts with an unemployment rate of 7.5% for all persons aged 18-24 in early 2008. So, before the onset of the Great Recession, unemployment among young early school leavers was running at three times the level for all young people in this age group. Since then, unemployment has soared and the relative position of those who have left school has surely worsened over the last two years. With an unemployment rate of close to 30% for 18-24 year olds in the second quarter of 2009 it is likely that the rate has increased further since the earlier part of this year (lets assume up to 35% at least by now). Where does that leave early leavers in the 18-24 age group where the rate is higher still? No wonder there is huge excess demand for further and higher education courses among those who have completed second level schooling. But what about those who left with a Junior Cert or, perhaps, no qualification? And how they are faring in 2010 when various allowances, maintenance grants and welfare payments are either withdrawn or reduced significantly? What hope is there for those people any time soon? Surely, they deserve better.
Sometimes I wonder if – unconsciously perhaps – some in authority and in the commentariat just wished that these potentially troublesome persons literally went away – through emigration – when labour market conditions pick up abroad.

Then it will be said that: Very unfortunate but we could help deflating the economy to appease the markets and ‘restore confidence’
Its all the fault of those greedy insiders who hog jobs and high salaries and don’t make room for the young (at much lower pay rates of course)

- a type of Wage Fund doctrine that sees the world in very static terms.

Will we witness a surge in political awareness among the young and their families? Where is the spirit of grey army venting their anger in the Temple in October 2008?

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