2/7/2013: EU Youth Unemployment: Promises of Urgency Urgently Promised

After much hoopla about the need to do something about youth unemployment, the EU leaders have managed to produce a strategy to do something about youth unemployment. As strategies go, this one is about as likely to deliver on the objectives (which remain undefined in any real tangible sense) as all other EU strategies. But, the good news is, the EU has managed to agree the strategy with the social partners.

So here;s the link to the EU's "comprehensive approach to combat youth unemployment": http://consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/137634.pdf.

The promise is to "speed up implementation of the “Youth Employment Initiative”, which should be fully operational by January 2014, and concentrate spending in its first two years". Now, wait a second, the EU already has a strategy to combat youth unemployment? Yes, it does. And the new over-hyped 'initiative' is to… speed up the old overhyped initiative that worked marvellously so far. Yes, it is.

And there is more: the EU "will also speed up implementation of the “Youth Guarantee”, which is designed to get young people who are not in education, employment or training back to work or into education or training within four months". So again, speeding up the past well-working initiatives is apparently makes for a new initiative, which, of course, will be even better working.

"In addition, unspent funds from the EU budget will be reallocated to support employment, especially for youth, as well as innovation and research. This is made possible by the flexibility of the EU budget, or Multi-annual Financial Framework, for the next seven years." What that? Ah, that will be EUR6 billion that the EU now plans to spend over 2 years to… yes… right… combat youth unemployment.

Perspective: in May 2013, 5.525 million young persons (under 25) were unemployed in the EU27, of whom 3.555 million were in the euro area. So that works out at EUR543 per unemployed youth. Overwhelmingly bold move by Europe, then, to combat the crisis…

Perspective: 26.522 million men and women in the EU27, of whom 19.340 million were in the euro area, were unemployed in May 2013. The other urgent crisis the EU faces, the banking crisis, has cost so far some EUR740bn (http://trueeconomics.blogspot.ie/2013/04/2342013-updating-cost-of-banking-crisis.html) and that runs at around EUR27,901 per each unemployed (not just youth unemployed) in EU27. Let us assume that these net liabilities are at least partially recoverable (you know, those AIB shares are worth something, and the bad loans in bad banks are not all completely and totally bad), so let's say the figure is more like EUR13,900 per unemployed.

Perspectives 1 & 2 imply the relative urgency in the EU strategic responses to the crises as follows (higher number = higher priority): Banks : Unemployed at 12:1.

With that in mind, recall that the "European Council also agreed on measures to promote cross-border mobility, including for vocational training. The “Your First EURES Job” programme will be strengthened and the “Erasmus +” programme should be fully operational from January 2014. High-quality apprenticeships will be promoted via the European Alliance for Apprenticeships to be launched in July." Sounds good? Of course it does, because one might think the programme is going to result in inefficient apprenticeships systems in countries like Portugal or Ireland becoming Swedish-styled or Austrian-styled super-efficient? Not really. This is more about Apprenticeship Programmes Administrators talking to their colleagues at more junkets. So chop down that EUR543 per young unemployed dish-out by few bob to cover the cost of 'cross-border mobility' of junkets.

But do read the document the EU produced, as linked above. it contains real pearls, like the following:

Paragraph 1.1: "All efforts must be mobilised around the shared objective of getting young people who are not in education, employment or training back to work or into education or training within four months, as set out in the Council's recommendation on the "Youth Guarantee". Building on the Commission's communication on youth employment, determined and immediate action is required at both national and EU level."

So basically - no idea what to do here. The Eu leaders admit as much by offering not a single programme solution, but stressing instead that something (anything? whatever?) must be done and that solutions must be 'determined and action is required'.

Overwhelmed yet?

17/4/2012: EU27 - Minimum wages v unemployment

A very good infographic on relationship between minimum wages and unemployment from one of the blog readers linked here. Please keep in mind: correlation does not mean causation. There is much of a debate in economics as to the causal links (or their absence) between minimum wages and unemployment (general unemployment, rather than age-specific and skills-specific).

05/11/2011: Jobs destruction in Ireland 2008-2010

So we had the Celtic Tiger, now we are having a Celtic Bust. Our extreme (for a young, small open economy with high levels of tertiary education - in numbers, if not quality - etc). But how do we stack up against other advanced economies in this area?

Here's some data from the OECD covering the period of the crisis (2008-2010, no annual data for 2011 yet) on jobs destruction in Ireland, compared to same in other advanced economies.

For a small economy, even in absolute terms, the number of jobs lost in Ireland in 2008-2010 period was 261,000 or 8th largest loss in the sample of 24 advanced economies. Net of new jobs created (+11,000), Irish economy lost 251,000 (note rounding differences) jobs in the period covered. The net loss we sustained in terms of jobs destruction in absolute terms was the 5th largest in the advanced economies sample.

Chart below puts the above numbers in relative context. As a percentage of total employment, Irish net jobs destruction was 12.2% - second highest after Estonia.

In terms of sectors most severely impacted by losses, Construction leads with 87.8% share of all jobs changes during the crisis. Surprisingly - being the source of so much destruction via Irish domestic banking collapse - Financial Services jobs category posted the shallowest jobs declines at 15.1%. This is most likely due to the lack of layoffs in the state-controlled banking sector, plus the resilience of the IFSC. The only sector that saw increases in jobs numbers is the sector of Community, social and personal services.

Economics 6/04/2010: QNHS - the figures of despair

Time to take a closer look at the latest data from Quarterly National Household Survey - released a week ago. The focus below is on less recognized trends, so endure the charts...

Chart above shows the dramatic declines in our labour force and an even more dramatic decline of those in the labour force who are currently employed. In effect, unemployment has consumed two years worth of gains in jobs, plus another 3.5 years worth of increases in participation. Overall, we are now back in Q2 2004 when it comes to employment figures.

As a result, unemployment soared, but what we tend to forget in looking at the headline figure is that long term unemployment - lagging ordinary unemployment by some 12 months or more - is now precipitously rising...
Chart above shows that contrary to all the talk about 'bottoming out', the latest fall-off in unemployment recorded in Q4 2009 is seasonally consistent with normal patterns, implying that in all likelihood, unemployment figures will remain on the rise from Q1 2010 on.
Looking at employment changes broken down by occupation, it is clear that the crisis has seen most of jobs destruction focused at the bottom of earnings distribution - in areas that are less skills-intensive. There are, most likely, several reasons for this:

• Professional and Managerial grades are usually occupied by people with longer on-the-job tenure, making them more expensive to lay off, and more likely to be part owners of businesses and professional practices;
• Sales and Other are more flexible workforce components, linked closely to internal demand;
• One interesting change is amongst operative workers. This category includes some construction workers, but in general, it does appear to suggest that exporting sectors growth over 2008 was more likely underpinned by transfer pricing by multinational rather than by real expansion of physical production.

Overall, however, it is worth noting that occupations with greater human capital intensity of production are holding up much much better than those where people are closer substitutes for technology and machinery.

Change in working hours also reveals some interesting features of the changing labour force:
We clearly are having a secondary crisis in terms of under-employment, whereby workers might be retaining jobs, but their hours worked are being cut back dramatically. Percentage of full time jobs has clearly declined, while part-time jobs are on the rise.

And unemployment is becoming a long-term condition for an increasing number of workers:
The numbers are pretty self-explanatory, except that one must add to these figures an observation - long-term unemployed are much harder to shift off the welfare than those in shorter term unemployment. Note that 29,400 long-term unemployed back in 2007 were pretty much unchanged since the beginning of the century. Since then, however, we just added 59,700 more of those who are risking to becoming permanently unemployed into the future.
While unemployment increases (chart above) were the feature of 2008 labour market collapse, job seekers (both in education and outside), underemployment rises and full-time employment fall-off were the main features of of 2009. These are likely to remain dominant in 2010 as well as unemployment reaches deeper into skills distribution over time.

This is confirmed in the following chart:
Notice that S3 and S2 (broader) categories of stressed workers are rising faster through out 2009 than the more narrow unemployed category. Should the positive move in Q4 figures be reversed (see above discussion), there is significant likelihood that these broader categories will continue to increase at a faster pace than simple unemployment measure, further increasing surplus capacity in the economy and putting more income uncertainty onto the shoulders of those still in full-time work.

Returning back to the issue of skills: chart above shows that both in 2008 and 2009 workers with greater human capital attainment were in lower risk of unemployment than those with lower educational attainment. Of course, this is a result of several forces:

1. Workers with higher educational attainment tend to be more productive in same occupations;
2. Workers with higher educational attainment tend to have better aptitude;
3. Workers with higher educational attainment are also more likely to engage in continued up-skilling and on-the-job training;
4. Workers with higher educational attainment tend to possess more flexible sets of skills;
5. Workers with higher educational attainment tend to be employed in more competitive and exports-oriented sectors and companies, etc.
   

All of this, however, suggests that human capital matters even in amidst a wholesale collapse of the labour market experienced in Ireland.
And, as chart above shows, workers with higher human capital attainment are also more likely to be fully engaged in the labour force. Which means two things:

1. Human capital is an important differentiator in a recession; and
2. Those currently fuelling longer-term unemployment are more likely to be with lower skills, and thus are more likely to exit labour force and remain outside the labour force for a much longer period of time.

In short, we are now at risk of creating a permanent underclass of under-skilled and under-employed.

And to conclude - two charts on comparisons between Ireland and the rest of EU27:
Participation figures above clearly show that our labour force has experienced a much more dramatic collapse than in any other country in the European Union. At the same time, our unemployment has risen less drmatically:
Which suggests that the gap between us and the worst performing European countries (Spain and the Baltics) masks a much more troubling reality: Irish unemployed are much more likely to drop out of the labour force (and thus out of unemployment counts) than those in other European countries.

This, of course, is a sign of much deeper despair.

Economics 03/08/2009: EU unemployment - no Green Shoots in sight

EU unemployment still climbing up: in June - the latest available data - 21.5 mln people, 8.9% of the labour force - were out of work in the EU27. The unemployment rate reached 9.4% for the Eurozone, the highest level since 1999. Spain (18.1%), Baltics (Latvia 17.2%, Estonia 17%, Lithuania 15.8%) led the EU27 in unemployment rate, followed by Ireland (12.2% and catching up).

The number of people unemployed increased by 246,000 in June relative to May. This is much slower than the gain of 646,000 recorded in March, but it nonetheless a continued increase.

So see if you can spot the 'green shoots' or bottoming out in unemployment that the EU has been talking about on the back of the latest figures (chart above). No flattening in the rate of increase since April 2009 moderation on March disastrous figures...

The above tow charts are rather telling as well.