Take a walk through any medium-sized town in Ireland, particularly down the little uninspiring streets off the main drag, the streets named after lesser patriots, second-rate saints or the next small town you’d get to if you kept walking. There you will see them, the real victims of the recession: young men and women with nothing to do.
The CSO just released figures on the state of the jobs market and the movement in wages and what we see is that 200,000 people in Ireland are now long-term unemployed. This means that they have been out of work for more than a year. At the beginning of the recession, the vast majority of people losing their jobs were men. This was mainly the result of the collapse in house building and the evaporation of jobs on the sites.
In the past year, this has changed. We are seeing the rapid feminisation of unemployment. In the 12 months to June, long-term unemployment among women rose more than three times faster than among men. Male long-term unemployment went up by 4pc, while it shot up 13.6pc for women. In total, four out of 10 unemployed people have been out of work for more than a year.
We all know that it is harder to get a job when you have been out of work for a while, not only because of the hole in your CV, but also because it can be demoralising emotionally and physically. Anyone who has had a family member on the dole or has been out of work understands what it does to your self-esteem.
As unemployment rises, we would expect wages to be falling throughout the economy.
At least this is what basic economics teaches us. As the wage rates fall to reflect the increased amount of people looking for work, the price of labour falls and companies should take on more of these cheaper workers. That’s what the theory says, but it is not happening.
In fact, the survey from the CSO shows something quite different. According to the CSO, average weekly earnings rose by 0.7pc in the year from Q1 2011-Q1 2012 but was down by 0.8pc from last quarter Q1 2011. Average hourly earnings are down in the same year period by 0.2pc but up from last quarter by 0.7pc.
Average weekly paid hours increased by 1pc from Q1 2011. Weekly earnings increased in 9 out of 13 sectors since Q1 2011. However, this figure is from gross earnings and doesn’t take into account any tax deductions. I’m sure you will be screaming: “Hey my wage packet is smaller now”. This is true but average weekly wages are not falling but static.
There is also a public-versus -private disparity since the recession began. The average weekly paid hours in the public sector fell by 1.6pc since 2008 but weekly wages in the private sector fell by 5.7pc.
So why is this? Why has the collapse in domestic demand in Ireland been reflected in the dramatic increase in the rate of long-term unemployment and not a fall in wages? Why have these 200,000 people suffered much more than anyone else?
This disparity is what is termed the insider/outsider phenomenon in the jobs market. When demand collapses, employers have a choice: either they can cut everyone’s wages or they can fire people and keep the wages of those who stay more or less the same.
In the public sector it works differently because when the employer — the State — goes bust, the public sector unions must move to protect their members, otherwise they wouldn’t be doing their job. It’s up to the Government — the employer — to make the choice. With the Croke Park agreement, we have a choice of sorts.
But ultimately in both the public and the private sector, the choice has been to let people go rather than cut wages.
So where does this leave us? It leaves us with one part of the population paying a much fiercer price from the recession and another part protecting themselves. The insiders are protected and the outsiders are left to fend for themselves.
But here’s where the problem gets more tricky because the interests of the unemployed and the employed clash.
The army of unemployed people wants to get back into a job and, typically, is prepared to accept lower wages for the chance of work. So it is in their interest to see the general wage level drop. But it is not in the interest of the people still in work to see the general wage level drop because they will lose out. So those in work use all their efforts to keep wages up and those who lose their jobs get locked out.
And we see the results of this in the rise of long-term unemployment creating two distinct groupings. Those in work want wages to rise or stay stable until the moment they lose their jobs. Thereafter, they have a personal interest in wages falling, which might give them a chance of getting work.
The implication of this dynamic is not just the rise in long-term unemployed, it is also the evidence we need to know that the idea of internal devaluation within the eurozone doesn’t work either. Within the euro, countries are supposed to regain competitiveness through falls in wages and prices. But this isn’t happening. It rarely does. So we get long-term unemployed instead of a swift re-adjustment of competitiveness through lower wages.
This means we can’t become competitive versus our trading partners quickly. The only way we could do this is via a devaluation of our own currency, but we can’t do this and we won’t accept lower wages, so we are stuck.
The boost to demand we need has to be internally generated. This is why the Government’s announcement of a €2.25 billion stimulus is welcome. But we can’t spend our way out of this with money we don’t have. This is why a coordinated, rapid and meaningful budgetary expansion across the eurozone is essential.
Will this happen? In fact I think it will eventually because otherwise the euro will fall apart and the pressure will come politically from the dead-end streets of towns all over Europe.
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I’m dubious about this. With JobBridge alone I would say that we have seen massive cuts in wages accross the public and private sectors as previously advertised posts are replaced with internships and “training opportunites”.
Excellent article as usual David! Not sure that Govt or EU stimuli methods work to create jobs – these tend to support larger companies and encourage imports. Given that SMEs account for the vast majority of jobs the key is to create the environment to encourage their growth. The evidence would suggest that despite the marketing and spin, AIB and BoI while not actually refusing credit facilities are prolonging the application process to such an extent that it amounts to the same thing. The availability of credit / cashflow is critical for both domestic and exporting SMEs. A new Govt… Read more »
Referring to the previous theme, Searching for Real Growth, here is a sane view from a Chinese Official: “Real Economy” Growth Required, Not “Neoliberalism” Li Congjun, president of Xinhua News Agency, contributed an op-ed to the New York Times, “Rebalancing The Global Economy,” which speaks to American economic policy and the need for international cooperation with China. The concluding section of the editorial reads: “What can be done? First, we cannot expect neoliberalism — privatization, deregulation, free trade — to revive growth. The credit paradox is only narrowly a financial crisis — it is a crisis of faith, one that… Read more »
We are paying ourselves more than we are worth. We have a culture that persistently celebrates nothing. We have a leadership, that does not show any. We have banks that have no money. (and anecdotal evidence points to them restricting withdrawls). We have a massive state system, that is ineffectual. We have regulation that comes down heavy on small scale breaches, and plays golf with the big offenders. We have pasport control that is meaningless. We have a media where large sections are owned by tax-non-payers, but which loves to wave the green jersey. We have a massive real estate… Read more »
Morning David I believe the subject of your article is a real “hot potato” and ,without patronizing you , I commend you for taking it on. As you know,I am one of the long term unemployed, over eighteen months now.Although I realize your article is not about “me” I would like to point out some of my experiences and opinion in attempting to get gainful employment. Wages or a salary have dropped dramatically.I have applied for countless jobs with no reply,this seems to be a common occurrence.Some Companies advertise jobs that do not exist.They do this to give the impression… Read more »
Nice article David. And yet the IMF claims high welfare benefits are responsible for the “low exit rates” from the live register. Not every country in Europe is experiencing the extreme economic conditions of Ireland, sadly I think the more stable economies of the EU will prefer to just go their own way. I cannot imagine any sane politician in Germany or elsewhere persuading their citizens of the merits of what you suggest, sadly.
RR6 I opened a small restaurant in Dungarvan 6 weeks ago. “The Smokehouse Bar-B-Que” We are at The Stables Bar Abbeyside Dungarvan Co Waterford I have to say I have favorable rates per week, got it going for cheap and I am doing well considering. One of the reasons is my offering has a twist, it is actually good food. Not only is it good, its really really good. And its not boring. When you get a basket of my BBQ ribs, available on Saturdays, they exceed your expectations. I make and bottle my own BBQ sauce. Not the vinegary… Read more »
The increase in female unemployment is a result of contraction in the quantity of retail firms in the economy.
Retailing is being concentrated. Local authority rates are causing unemployment.
The defining moment with respect to the stupidity at national leadership, came when Cowen opened a Tesco outlet in the Midlands as Taoiseach. He stated that it was evidence of job creation.
When this is the calibre of leadership that predominates in your country, then you should prepare for some long difficulties ahead.
Good article David, and hard to stomach if you really read into it, because we all ultimately want to get as much as we can for ourselves. As an IT contractor (albeit a slightly unwilling one as it happened because of the 5 job offers I’ve had in the last 3 years, not a single one has been permanent), I see myself caught in the illusory trap of accepting short term inflated pay as an alternative to unemployment and hoping that a perm job appears somewhere. The fact that my last 3 so-called “permanent” jobs no longer exist is a… Read more »
Deco you raise interesting questions about female unemployment. Are they collateral damage or part of an overall trend? Its difficult to tell. I think its also related to lower pay, a concentration in retail, possibly a large scale return to black economy practices in largely female sectors such as child minding and cleaning. It deserves close analysis.
David, Speaking as an employer, one issue with your logic is that in fact employers have little or no grounds for reducing wage rates per employee. I have two businesses. One employs five people. In that business, I asked everyone which would they prefer, one role is made redundant or everyone takes a pay cut. To a person, they decided on a pay cut. In the other business, I employ up to 120 people in the busy season. However, managers in that business outright refused to take a pay cut and I was unable to persuade otherwise. The result, people… Read more »
Hi David, It is in NO ONE’S interest for wages to fall. There is a cost benefit in going to work ie the level of income must cover the cost. What’s needed is liquidity in the system to allow people with the skill and the work ethic the opportunity to make a job for themselves. The government is doing the opposite in that it is taking currency out of circulation. If a business is insolvent working harder even for no income at all will only bankrupt the person faster in a direct ratio. Ie the harder I work the faster… Read more »
Just heard of another receiver appointed this morning (kpmg)again. Man had dealt with Bank for thirty years. Loans called in on Monday. Receiver appointed on Wednesday. Let the fees and arse covering roll on.
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Sorry, David, but I have to disagree with some of the figures you’ve used in your latest article. Wages have dropped all over the country. My wife used to earn €14.50 an hour when she was working full/part-time in a civil engineering company’s office back in 2009. That company closed down back in April 2009 owing to management decisions that quite literally drove the business ‘into the ground’.Now she works for an agency and she only gets €10.50 an hour. That’s one hell of a reduction in spending power!! If you were to compare that with what is generally going… Read more »
I am at a loss…… Ipads for the government. this is just getting more and more sick. http://www.independent.ie/business/irish/government-spends-16000-on-shiny-new-ipads-2907510.html On another note, Why is there so little about the MASSIVE Libor scandal in the MSM. this is so big it is almost impossible to comprehend. I have been searching all over the internet as I cant get anywhere with the news to find out what impact this may have on mortgages and loans in europe. Could there be a possible default by holders of said loans…. Any insight would be greaty appreciated as I know this is early days and after… Read more »
I understand the genral thrust of the article however is not the over hang of personal debt one of the major problems in getting people to accept pay cuts?
With reference to David’s Article and Preind’s response above, I said before in there is work but there are those who would rather see others on the dole rather that take a pay cut but when they don’t they then end up paying more tax to pay for people on the dole and in turn they may support dole cut and pension cut so to reduce their tax liabilities this is a zero sum game. There are more long term advantages to keeping people employed than on the dole. The issue is not about cutting the dole low vs. high… Read more »
I was pleased to read this article because it tells the truth and we have to deal with the ugly truths we are storing up for our future society. Inequality is rising and that tells us all we need to know about the priorities of Irish politicians After the tosh I read in the Indo last week about the virtues of being part of the Austerity drive the voice of reason finally breaks through. There is no virtue in wondering where you next pair of shoes is coming from beleve me and I know that the author realises this. There… Read more »
Couldn’t agree more with what you had to say Pauldiv and that’s how it’s been since the foundation of the state.Those at the top have stayed there on the backs of everyone else.You didn’t see the ‘insiders’ emigrating in droves during the 50’s and 60’s, did you? They just kept on making their money and to hell with everyone else and it’ll stay that way until people come to their senses and start hitting the insiders where it’ll hurt most, in their wallets!!
So David is highlighting something that has been obvious for a long while – wage rates are not falling across the economy. So public sector employees who have taken serious pay cuts in this recession to date and who are struggling to survive day to day might rightly feel that the constant calls for further reductions to their wages are a little hard to stomach..
David,to quote from your article “There is also a public-versus -private disparity since the recession began. The average weekly paid hours in the public sector fell by 1.6pc since 2008 but weekly wages in the private sector fell by 5.7pc.” There is nodirect connection between these figures. Wages in the public sector over that period fell by more than the 5.7% than they did in the private sector. I’m disapointed with what you wrote, I hope it was a error on your part and that you will clarify this as soon as possible.
I disagree with you article here. You have narrowed the debade down to A & B and ignored C, D, E etc.
The debade should no be about lowering wages of the employed to reduce the longterm employed.
The debade should be about decapitating the elite, banksters, polititions, tax exiles etc who have legged it with most of the wealth. We need to reclaim these resorses from these scum and return it to the people of Ireland.
Allow me to think out of the box for a moment on this very relevant article. Essentially, it is the equivalent of NAMAISING the under-employed human resources of our country. How about converting unemployment benefit into a state wage and that the unemployed be hired by a State HR agency. This agency could then use it’s bargaining power to offer it’s contractors into both the public and private sectors at a break-even cost plus a 10% margin to pay overheads and ongoing training etc., Using an inverted sliding rule these contracts would be fixed time contracts, ie., the younger the… Read more »
Have you looked at jobs.ie recently. There are a huge amount of Banking jobs on offer almost all in the restructure area of lending. So we now have it Banks bailed out, balance sheets stabilised, now outright pursual of borrowers who can’t get bailed out because they are not in a sector deemed strategic. Own a Bank get a bailout, own a hotel get out and the bailed out Bank takes your hotel. End game the last three generations of employers in serious danger of losing everything,advisors to coin it in and the governmant to stand back and watch. People… Read more »
Very good that people here have not lost focus : Pair hired to clean up Irish banks named in HSBC scandal! THE Irish Government faces huge embarrassment today after two key figures appointed to help clean up the Irish financial system were named in an explosive US investigation into global banking giant HSBC. Chairman of state-owned AIB David Hodgkinson, and Michael Noonan‘s top NAMA adviser Michael Geoghegan, are both named in a 330-page report that follows an investigation into HSBC by a US Senate subcommittee set up in the wake of the 9/11 terrorist attack on New York. HSBC is… Read more »
We now live in a Irish society known as Economic Apartheid .
And more on HSBC, the original, unaltered Dope Inc bank, right now in a finance dept near you. Key players in Irish finance enjoyed long careers with HSBC MICHAEL Geoghegan and David Hodgkinson are two of the most important figures in Irish finance, but their business careers go back much further than their current positions at the Department of Finance and Allied Irish Banksrespectively. A Dubliner, Mr Geoghegan joined HSBC at the age of 20 in 1973 and moved through the ranks until he was appointed to the top job in the firm in 2006. While Mr Geoghegan has been… Read more »
Sometimes the past tells us about tomorrow just like yesterday reminded us about something a long time ago .Today is all we think about because we are too busy to know why anything else matters . I am reminded in my recollection of what I studied in economic history that period when Europe was a ‘feudal order’after the fall or the Roman Empire .This was a highly extractive system where the peasants were serfs and the King was judge , bishop and police .Serfs were in a ‘tied system’ with severe committment and much unpaid . Subsequent to the Great… Read more »
You make me think and that is why your work is valuable. Because it’s valuable is the reason you receive flak. Take the flak and keep doing it because the more flak you get the more it will convince you that you are doing a proper job. Tommy Burns knew all about flak Keep hustling for work and keep trying. We need small entrepreneurs who can show us what is possible using a brain and little resources. The white heat of the technological revolution has arrived 50 years after Wilson coined the term. For anyone with the self belief and… Read more »
I do not think a lot of Irish indiginous businesses will withstand another tough budget. I believe a lot are staying open by delaying or not paying rent rates prsi or vat. They are only staying open because they have no safety net. It cannot last however. More and more will close with another incease in unemployment in next twelve months.
With reference to David’s Article and Preind’s response above, I said before in there is work, but there are those who would opt see others on the dole rather that take a pay cut, but when they do they then end up paying more taxes to pay for people on the dole and in turn they may support dole and pension cuts so as to reduce their tax liabilities, this is a zero sum game. There is obviously more long term advantages to keeping people employed than on the dole. The issue is not about cutting the dole, low vs.… Read more »
I really like this opinion piece by David- more that any I have read, I would love to have the time to discuss and criticize but my typing skills are stopping me, it is a topic that should be a national and international debate but I think our 3 minute culture will not allow, well it used to be 3 minutes I don’t know what it is now- by the time I have typed a response it will be old news-SAD tell I am wrong? Why do we not have a national forum on our society o do we have… Read more »
Public servants’ full pay sick leave to be slashed in half
http://www.independent.ie/national-news/public-servants-full-pay-sick-leave-to-be-slashed-in-half-3173885.html
I have twice written a posting and submitted only to find my net connection had terminated and the comments were lost. a few minites ago I wrote an extensive piece in the reply box. It took considerable thought and effort. I sumitted to be informed I need to be logged in. If I am not logged in I do not have a box to write in so this time the system blitzed me. Together with the removal of previous comments by the blog. Not once but twice leads me in a sad state of mind. I have wasted too much… Read more »
http://www.youtube.com/watch?NR=1&v=c8VuCLZ3lLQ&feature=endscreen
Listen to what Ron Paul said years ago. Accurate foracts as a free market economist..Nobody listened then either.
This site has done it the second time tonight. I am logged in, write an entry and when I post it says sorry you have to be logged in. another essay gone up in smoke! Get the thing fixed or stuff it. You will be stuck with the deceit of bon bon and his untrue statements about austrian economics, his misleading inferences on Hamiltonian banking. Hamilton was a centrist banker and lawyer. He formed the the First bank of the US. Had it create money out of thin air on credit. Issued bonds that it never intended to repay: started… Read more »
Today, Microsoft reports its first loss ever of 500M USD approx. Nokia is becoming irrelevant (it is relying on Microsoft to save it with Windows 8 mobile. Most HiTech (Internet related/ IT/ Telecoms) firms are getting hammered right now. 50-80% drops over last quarter is common. Never mind the share price. Just look at the numbers on orders/ revenue/ margin. Chinese operations are getting a major hit. I think the above reflects a world slowing down dramatically even over the last 90 days. The next 90-100 days are looking no better. I just do not see how our leaders can… Read more »
This is turning out to be a very valuable article. Like Steve Pavlina says people want value and if we provide information of value people will remember. A fair hours work for a fair hours pay is mutually beneficial It is great to see many posters have been inspired by ideas flying around the posts regarding what can be achieved by people looking to start some kind of small one or two man operation. It is nice to feel positive once again and it’s keeping my head up People want sound information on specific questions and this is where the… Read more »
David might appear to be getting worried about the sales of his next book as he finally seems to be focusing on how to fix the economic mess…???
People are stuck, but not because of various local wage arguments, rather because of a collision of dying empire with modern republics, a paralytic freezing up of banking living off vice, with investigations widening. There is a monstrous rush to war to avoid a political solution. NGO Finance Watch: Glass-Steagall Regulations Might Have Prevented the LIBOR Swindle PARIS, July 20 (Nouvelle Solidarité)–The Brussels based non-governmental organization (NGO) Finance Watch, an independent group of experts created by 200 elected officials to counter the international banking lobby, issued a statement that under Glass-Steagall regulations, the type of fraud seen in LIBORgate would… Read more »
By Padraic Colum. “Old Woman of the Roads O, to have a little house! To own the hearth and stool and all! The heaped up sods against the fire, The pile of turf against the wall! To have a clock with weights and chains And pendulum swinging up and down! A dresser filled with shining delph, Speckled and white and blue and brown! I could be busy all the day Clearing and sweeping hearth and floor, And fixing on their shelf again My white and blue and speckled store! I could be quiet there at night Beside the fire and… Read more »
We had 165 comments by 1am and now we have 200.
More people are staying home on Saturdays
http://www.youtube.com/watch?feature=player_embedded&v=KtDmPh22j_o
Gregg hunter interview of Ron Hera
There are no free markets
All is rigged
corruption reigns, no end in sight for the crime wave.
The real economy in deflation
financial economy in inflation
Only haven is to own solid assets, no debt. Property, silver, gold.
http://www.youtube.com/watch?feature=player_embedded&v=KtDmPh22j_o
Can’t wait for David’s dénouement, ‘the way forward’,
lead us to the ‘New jerusalem’, Exodus II,…..
On Libor – Not sure it is best advice but could be an intersting avenue http://kenfrostendowment.blogspot.ie/2012/06/barclays-variable-rate-mortgages.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+blogspot/mCKTU+(The+Endowment+Diary) This will also be the case for Euribr or Dibor http://www.thejournal.ie/readme/column-here%E2%80%99s-why-ireland-is-failing-have-you-heard-of-libor-and-dibor/ Beascally the dublin inter bank model. If a contract is based on fraudulent content, whether known or not, is the contract deemed void as the party, in case of mortgage, borrower, is not given the true value of the financial implication of the product, therefor cannot be deemed to have entered into the contract under invalid/fraudulent information? The borrower could also argue that if the true form of the financial implication was revealed… Read more »
Moon WO~BBLE
There is a Moon Wobble next month …I will defer until then ….and I am sure ….we will have something to learn …and certainly a lot will change between now and end of August.
Greeks Charge Eurozone Leaders and IMF with Economic and Social Genocide, Lodge Complaint at The Hague July 21 (EIRNS)–A group of Greeks have gone to International Criminal Court to charge Eurozone leaders and the International Monetary Fund creditors with social and economic genocide. The complaint is being sponsored by a group of Greek personalities including publisher, and popular radio-television journalist George Trangas, former New Democracy MP Dimitrios Konstantaras, and journalists Panagiotis Tzenos and Antonios Prekas. The formal complaint names IMF Managing Director Christine Lagarde, German Chancellor Angela Merkel, German Finance Minister Wolfgang Schäuble, and European Commission President José Manuel Barroso.… Read more »
LIBOR linked to mortgages – investgation opened. Italian Prosecutors Open Investigation on Euribor July 21 (EIRNS)– Trani prosecutor Michele Ruggiero has opened an investigation on the four Italian banks on the Euribor panel: Unicredit, Intesa San Paolo, Monte dei Paschi di Siena, and Ubi Banca. Ruggiero has created a team of independent experts to find out whether someone at those banks had manipulated the Euribor rate, creating damages to Italian mortgagers of at least EU3 billions, according to figures provided by the consumers association Adusbef, in a legal brief which was the basis for Ruggiero’s investigation. The legal brief was… Read more »