Friday, October 16, 2009

Economics 16/10/2009: FAS - rotten outcomes on top of rotten culture?

Here is an interesting illustration of how ineffective was (and is) FAS is addressing the issue of long-term unemployment.
Of course, the tricky thing is: if FAS premise to up-skill and up-tool workers to match the future needs of our labour force holds any water, then we should expect FAS to be able to have a positive effect on reducing long-term unemployment. Of course, as the graph above shows, they never managed to do this, with long-term unemployment remaining at persistently high levels relative to overall unemployment through 2007. Only an onset of rapidly rising new unemployment since the inception of labour market crisis in Q1 2008 has changed long-term unemployment share in total joblessness. As newly unemployed multiplied in numbers, the overall weight of long-term unemployment in total unemployment temporarily has fallen.

So there you go - reforming FAS must take radical forms!

Oh, and on personal note of response to Denis O'Brien's comment today about 99% of economists who did not predict this crisis and 1% who predicted it long before it happened:

Per Irish Economy blog: "RTE reports the following comments from billionaire businessman Denis O’Brien while speaking at a Dublin Chamber of Commerce: Mr O’Brien also said the country’s third level sector supported 250 academic economists whom he accused of ‘writing blogs, twittering and taking out ads to stop NAMA’. He said they generally made a nuisance of themselves - which would be fine if 99% of them had not failed to predict the economic meltdown facing the country. He said the other 1% predicted doom all the time. ‘I have a sense that all these economists need to come and work for real businesses to really understand how the economy works and see the actual stress and strain of running a business… only then will they have something to contribute,’ he said.

Point 1 for Mr O'Brien: I work for real businesses - both in this country and abroad. In fact, I also run my own business.

Point 2 for Mr O'Brien: last week I lectured Mon-Friday each day for 6 hours in TCD, Wed-Fri for additional 2 hours in UCD, and on Saturday - for 3 hours at TCD again. In between, apart from Twittering and blogging, I also wrote several press articles, worked on two research papers and had a number of business meetings. I also worked on a long-term private sector research project and advised my clients in the US.

Point 3 for Mr O'Brien: in 2004-2007 I warned repeatedly that Ireland is facing a crisis in public spending, housing markets and private sectors debt. I did so from various platforms, including his own Newstalk106 and TodayFM. In 2008 I was at the fore front of private sector economists who were pointing at the depth of developing crisis. I also made a point of always offering a potential solution to every problem I was able to identify. Not that I called everything right in my life, but Mr O'Brien's statement is a bit rich.

Point 4 for Mr O'Brien: it is precisely
  • because we are seeing real businesses being squeezed by the banks in anticipation of Nama,
  • because we are seeing people sliding into perpetual dependency on the dole,
  • because we are seeing the depth of the crisis,
  • because we are seeing the taxpayers of this country being destroyed by wrong policies,
  • because we are seeing people losing their entire retirement savings to the same ideas and policies that now back Nama,
that we are warning about the risks that Nama and other Government policies have.

Mr O'Brien might not see it this way - and it is his right to disagree - but throwing about silly statements in an attempt to ingratiate oneself with those in power is a strange position for a successful entrepreneur and businessman like Mr O'Brien.
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