Chap. 6 POPULATION, EMPLOYMENT AND UNEMPLOYMENT (T. McIndoe-Calder)

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1 Chap. 6 POPULATION, EMPLOYMENT AND UNEMPLOYMENT (T. McIndoe-Calder) 1 Introduction (Table 6.1) Growth in E: Table 6.1

2 Down from 2.11m in 2008 to 1.83m 2012, back to 2.01m in 2016? UE = 15.7% 1993; 4.6% 2006; c 14.5% 2011 to 2013; 8.5% end Population P (2026) depends on: P (2016), plus natural increase, plus net migration Natural increase (Table 6.3): around 40K per annum

3 DR depends on age distribution. BR depends also on age distribution, partly Huge variation in net migration (Table 6.3 and chart later) 1900 to 1951, natural increase = migration; 1950s, 0.5m migrated (see Brooklyn ); 1970s, some inmigration; 1980s, 0.5m migrated; 1990 to 2006, huge in-migration; 2007 to 2016 (see chart) Composition (Tables 6.4 and 6.5). Destination, age, occupational level Net versus gross migration (see chart below). Could have zero former but large gross flows

4 Nationality (Table 6.4). Huge social change brought about. Age profile (Table 6.5): 1m now aged under 14 Population (Table 6.2): now at 4.6m, increased every year during recession: 1841, 6.5m; 1901, 3.2m; 1971, 3.0m; 1991, 3.5m; 2016, 4.6m Absolute size: tiny. One third size of Paris

5 Geographic distribution: even pre Famine; regional policy today Density, etc. Netherlands v Ireland. Higher the density the lower the cost per head of electricity, transport, water and sewage etc

6 3 Labour Supply (L) 1. L = (P). (Pa/P). (L/Pa) 2. L = E + UE 3. (E/P) = (E/L). (L/Pa). (Pa/P) 4. (E/Pa) = (E/L). (L/Pa) Working Population Pa/P (Table 6.6): young share decreased from 1980s, hence Pa/P increased

7 L/Pa (Table 6.7); huge increase in L/Pa for females but still below others: 63% Irl, 76% Denmark, 69% US, 58% Greece Male rates: 78% Irl, 83% Denmark, 79% Greece, 80% US Immigrants: enter ranks of UE or return home when jobs lost? Former if settled here with children 4 Employment (E): Growth and Composition (E/L)

8 Overall (Table 6.8) Small scale: 2.0m Irl, 9m Netherlands, 33m UK Failure to grow in 1980s Staggering growth 1995 to 2007 Dramatic decline , but huge increases again since 2013 E/Pa still only 63% here: due mainly to high UE. 76% Denmark and Netherlands, 72% UK. US the surprise, down to 62% low participation rate for married females: not compared to all EU countries though

9 Part-time and temporary work (Table 6.9) Most of E increase in full-time work Gender difference striking; females p/t 37%, males 10%; Netherlands 60% and 17%; UK 39% and 10%. Not involuntary though: implies desired Temporary work: Ireland not out of line Sectoral Composition of E (Table 6.10) Dominance of services Construction story : decline of 170K 2007 to Increase in

10 2014= K decline in industry. Little declines and some increases in other areas: e.g. IT, education and health 5 Unemployment (UE): Extent and Features International comparisons (Table 6.11): Ireland rate well down since then Dramatic changes since 2006: see earlier: huge increases everywhere, except UK and Germany

11 Measurement: valid over time and between countries? Are Greek and Spanish figures believable? LFS and LR in Ireland; give totally different figures. Latter much higher but former best measure Same in Germany: but in UK, LR figure below LFS. LFS best for international comparison Invalidity v unemployment benefit

12 Germany v UK, Netherlands v Ireland US v Spain, QNHS or LFS v LR: former 35% lower than latter as seen earlier Long-term UE (Tables 6.12 and 6.13): 62% of total UE. Extraordinary swings: 2% in 1982, 9% in 1992, 1.5% in 2005, 6.4% 2015

13 Could be lower in some countries because of discouraged worker effect Flow from STU and length of time in LTU the key factors Youth unemployment v youth inactivity (Table 6.14) For example: 100 youths, and say 80 in education and 20 in labour force. 10 of these in E and 10 in UE. UE rate = 50%, inactivity rate = 10%. 6 Solutions: Adapting to New Technology and other Global Factors Single Market, Trade and Technological Change

14 They affect ALL countries; hence outside domestic control Trade alters composition of E: maybe increase in skilled E and decrease in unskilled E Increases living standards and reduces working year (Table 6.15) But so what if you an unskilled worker who has lost job? Investment going to low-wage countries (e.g. China and Poland)? Investment two-way: e.g. China big investor in Europe and Africa Globalisation and spread of technology

15 Increased trade means more competition. More competition means search for innovation and new technology. Implies decreased in E? Tractors for horses, computers for people: the Luddite debate! Driverless trains and maybe cars soon means less E? e-banking and e- shopping means less E? Huge E in developing new technology

16 Also employment in e-shops and insatiable demand for new services Affects composition not level of employment But can we adapt to change quickly enough? Lump of labour fallacy. Always work to be done unless all have all needs fully satisfied US v Europe: adaptation costs. Is US better at forcing through change? Labour Market Integration Immigration from Eastern Europe: complements or substitutes?

17 Effect on unemployment and wages unsure. Effect on consumer prices; decreased wages lead to lower prices for consumers. As always, losers and gainers Political issues: UK and France. Of long standing in both countries. Not new. Enoch Powell in 1980s Perception v reality: rise of Ukip and National Front in France

18 Skills Adaptability Adaptable labour markets key; vital to adjust skills to face increased competition and new technology Employment for life maybe but not in same job or always full time Early school drop-out creates huge long term problems

19 Choice of subjects: at secondary and third level. Always an issue. Generic v specific skills debate. Type of secondary education: Germany has three, ranging from academic to skills to more practical Employer involvement and internships: German/Austrian models. On-going education/training; formal education just start German educational/employment model: out of vogue in 2000s but very much back, for now anyway. As very low UE and high E/Pa there.

20 7 Solutions: Flexibility in Labour Market US/UK (free market) v Nordic (social partnership) v Rhineland Models (consensus, TUs on Boards, etc) Wage and price flexibility essential Union membership (Table 6.16): 76% Denmark, 12% US, 30% Irl, so no pattern Competition in product markets: means cannot pass on wage increased to prices. Why competition authority essential for NT sector (see earlier lectures) Membership of euro zone; cannot adjust for increased wages through

21 devaluation. Anyway, devaluation decreases real incomes Minimum wage (Table 6.17); level the key. The higher it is the more commitment on both sides: more reliable employees and employers invest in your human capital Flexi-security (prepared to reduce working week if demand low) Wage is an income for a person/family (and humans react to price, unlike bananas, ipads etc) Flexible labour supply - Hiring and firing rules (see later) - Labour mobility: Norman Tebbitt story. Spain to Germany/UK today

22 - Work sharing (suits people with young children or elderly parents maybe) Tax/Social Welfare Systems (see later). Decreased price of L, through less taxes, leads to increased Demand. And also decreased tax leads to increased Supply, especially for low-paid labour. Hiring and Firing Regulations Benefits to employees: job security. Jim Larkin dealing with appalling work conditions

23 Most TUs today though in protected public sector Can push up labour costs and hence decreases demand for L Strictness indicators (Table 6.18): Irl 1.6, Neths 2.7, Spain 3.2, UK 1.1, US 0.2. Which comparison most relevant? Result of high numbers, short-term contracts and dual labour market (e.g. Spain but changes there

24 recently). debate. Insiders v outsiders Taxation Employer PRSI and Demand (important for low income jobs and danger of UE traps) Employee PRSI, income tax and Supply (again very important at lowincome levels Unemployment and poverty traps (especially for those with children). These exist but how many people really affected? Taxation also affects high-income internationally-mobile labour

25 8 Solutions: Long-term Unemployment Key problem in past and today See Table 6.13: problem even in US today Deskilling (e.g. dentist or surgeon or electrician) Demotivation: how not if idle for several years

26 Outside labour market: implies not pushing downward pressure on wages and hence labour D Why drift from STU to LTU? Social welfare payments (may be the key factor) Undoubted huge benefits for those genuinely unemployed. 38% of previous earnings in Irl on average, 32% Denmark, 23% in UK, 11% in US. Thus generous here. US the outlier but also with low UE. Three things matter: level of payments, duration of payments and operation of system

27 May cause UE though (Table 6.19): Ireland has one of highest levels of payment - leisure for work; less loss of income and less incentive to find work without strict checks - increases bargaining power of unions (if UE means good redundancy and UE payments) - favours black economy (perhaps the most serious consequence if not strict checks) Payments v duration of payments v enforcement of rules Evidence of effects on UE: mixed Enforcement the key - verification checks for fraud

28 - availability for work - active labour market policies Active labour market policies LTU an economic and social issue Cannot depend on market Withhold benefit US (low or no benefits) v Nordic experience (high benefits but very strict checks, with compulsory training/jobs)

29 Irish experience and OECD critique (very slow progress) Employment counselors Regular contact, must apply for jobs on constant basis, must accept suitable job 8 Conclusions Full employment 1998 to 2007 Re-emergence of high UE and outmigration 2007 to 2013

30 Still E 95% higher than 16 years ago Migration patterns central to story LTU the core of any UE problem Reduce UE by emigration? Employment growth v increased inequality Unemployment and social unrest Increased E now and infrastructure issues (traffic jams on M50, crowded public transport, shortage of housing, etc) Increase E through immigration?

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