Thursday, 11 August 2011

NESC Report on Responses to Unemployment Crisis

Sinéad Pentony: Earlier this week NESC published its latest Report on Supports and Services for Unemployed Jobseekers: Challenges and Opportunities in a Time of Recession. The report states that the labour market will take years to recover and it rightly points out that “the exporting sectors play an indispensible but limited role in attaining high employment rates...until there is a revival of domestic demand, a large proportion of those now unemployed face bleak employment prospects.” Solving the jobs crisis requires interventions that address issues relating to the demand and supply of labour.

On the demand side, the jobs crisis cannot be solved in the absence of maintaining and increasing demand in the domestic economy. The current programme of austerity continues to ravage the domestic economy, which will lead to further job losses, ever-growing queues and accelerated emigration. Efforts to achieve short-term financial gain will have long-term social and economic costs.

In the context of the current phase of the global financial and economic crisis there are renewed calls for measures to stimulate economic activity. Demand can be maintained and increased by protecting incomes, especially those at the lowest level because they have the highest propensity to spend everything they earn in order to meet their basic needs; maintaining and increasing the rates of social spending e.g. Iceland. There are also the old reliables of increasing investment in human and physical capital.

On the supply-side, the NESC report highlights the need for improved activation strategies and acknowledges that changes are underway with the reconfiguration of delivering employment services. However, the report states that further reforms should be guided by a long-term vision of what constitutes an effective unemployment regime in a knowledge-based economy, and be imbued “with greater empathy and less suspicion towards those who have lost their jobs or the misfortune to be seeking a first one” at this time.

A long-term vision of an effective unemployment regime should be informed by a wider goals of achieving strong economic performance and combining it with a welfare state that offers comprehensive protection against social risks and investment in lifelong learning. There is a large body of literature in this area, and a recent paper on Scandinavian Labour and Social Policy provides a useful overview of how it is possible to integrate employment policy with active labour market measures and social services that support families and healthcare policy. Of course all of this comes at a price “...Nordic tax and finance policy extracts enormous sums from the economy and redistributes them in accordance with policy guidelines.” Is it not a price worth paying?

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