12/6/19: Irish Self-Employment Data: What It Says About the Entrepreneurial Nation

Official Ireland is quick to promote Irish indigenous entrepreneurship as evidence of a diversified economy, with domestic risk-takers bent on capturing international markets with new, innovation-intensive and modern goods and services. The reality, of course, is somewhat different. In 2017, based on the IMF estimate, sales of iPhones (not physically manufactured in Ireland at all) accounted for 25% of the state's GDP growth. And, on the other side, domestic self-employment, the cradle of entrepreneurship, has been on a decline.

Here are the latest statistics and trends:

Share of Irish labour force participants in employment that were engaged in self-employment has declined, on trend, from the late 1990, as did the share of those in self-employment with employees has been down-trending since around 2000-2001.  Some might think that the trend is driven by the self-employed construction workers, but that is not the case, since they bump in share of all self-employed run below the trend line in 2003-2006, and many of these workers exited employment in the crisis.

What about self-employed as the share of overall relevant (age 15 and older) population? Similar trends:

Current total self-employment share in overall population is on-trend, and that trend is down, not up. Self employment with employees trend is similar.

So about that entrepreneurship, and about the claims that the younger generations are becoming even more entrepreneurial, and about all those universities and ITs offering vast arrays of entrepreneurship programs, and about the preaching of entrepreneurial ethos and values... ahem...

20/2/19: Broader Measures of Irish Unemployment 4Q 2018

The latest Labour Force Survey for 4Q 2018 for Ireland, published by CSO, shows some decent employment increases over 2018, and a welcomed, but shallow, rise in the labour force participation rates. Alongside with a decrease (over FY 2018) in the headline unemployment rate, these are welcome changes, consistent with overall economic growth picture for the state.

One, much less-reported in the media, set of metrics for labour markets performance is the set of broader unemployment measures provided by the CSO. These are known as Potential Labour Supply stats (PLS1-PLS4). The measures also show improvements over 2018, just in line with overall employment growth. However, these measures clearly indicate that after 11 years running, the 2008-2014 crises remain still evident in the labour force statistics for Ireland.

Here is a chart of all four PLS measures, compared to their pre-2008 averages:

Note: Increase in PLS2-PLS4 series at 3Q 2017 is down to change in assessment methodology under the LFS replacing QNHS, with data pre-3Q 2017 adjusted to reflect that change by the CSO.

As a reminder, the above data series are defined as:

• PLS1 adds discouraged workers. These are individuals who are out of work but who have become disillusioned with job search. 
• PLS2 includes all individuals in Potential Additional Labour Force (PALF). The PALF is made up of two groups: persons seeking work but not immediately available and persons available to work but not seeking, of which discouraged workers make up the largest number. 
• PLS3 includes all those in the previous two categories (PLS1 and PLS2) along with persons outside the labour force but not in education or training. 
• PLS4 is the broadest measure of unemployment or potential labour supply and is calculated by adding part-time underemployed workers to PLS3. Part-time underemployed workers are individuals currently working part time who are willing and available to work additional hours. The broadest measure of unemployment (PLS4) stood at 13.7 per cent in 4Q 2016. At 4Q 2017 it was 18.7 per cent and by 4Q 2018 it was down to 17.5 per cent.

7/6/2012: QNHS Q1 2012: Sectoral Decomposition

In the previous post I covered the top-of-the-line data on QNHS for Q1 2012. This time, lets take a look at some sub-trends by occupation and public v private sector numbers.

A handy summary table to outline changes by occupation:

Few surprises in the above table are:

• Twin (q/q and y/y) rises in Wholesale & Retail Trade category, 
• Y/y rise in Accommodation and food service activities with a level increase of 8,600. This appears to confirm the Government claims on the sectoral jobs creation on the foot of jobs stimulus. The problem with comparatives is that the y/y increase comes on foot of a sudden decline in employment in the sub-sector in Q1 2011 when it fell to surprisingly low, seasonally-unjustified level of 102,900. Sub-sector employment remains down on Q1 2010 when it stood at 123,700 or 12,100 ahead of Q1 2012, and it is down on Q4 2011 when it was at 113,400 against Q1 2012 at 111,600. The core factor in Q1 2012 differential on Q1 2011 might have been not so much jobs creation as the increased expense of jobs reductions under Budget 2012. This, however, is speculative argument at best. My suggestion would be to wait and see how the numbers employed in the sector pan out in Q2 2012.
• Another surprising thing is that in the category of skills closely aligned with Accommodation and food service activities there was a decrease, not an increase, y/y in terms of employment. Caring, leisure and other service category of workers saw employment drop from 142,300 in Q1 2011 to 141,500 in Q1 2012. Something is not adding up, unless the jobs created in the sub-sector were managerial and/or associate professional and technical.
• Not surprisingly, ICT sub-sector grew employment y/y with 6.81% increase on Q1 2011 - the only private sector sub-sector that posted an increase in jobs on 2007 levels (+5.31%), with only other two sectors adding jobs on 2007 levels being Education (+4.64%) and Human Health and Social Activities (+6.57%).
• For all the claims of MNCs employment gains, the core sub-sector of Professional, Scientific and Technical Activities has seen employment shrinking, not rising in Q1 2012 relative to Q4 2011 (-0.53%), to Q1 2011 (-7.56%) and on 2007 (-15.44%). Striking feature of these changes is that this sector was the hardest hit in Q1 2012 of all sub-sectors listed by CSO, amidst the robust IDA and Government claims that jobs creation in MNCs is ongoing and that R&D and innovation activities are booming.

In the core series for sub-sectors:

• There was a recorded rise in Education sub-sector. Employment in education stood at 144,200 in Q1 2012 - up 2.2% (or 3,100) on Q4 2011 and down 2.2% (-3,200) on Q1 2011. Since Q1 2007, employment in the sector grew by 4.64% or +6,400.
• Employment levels in Health and social work activities fell q/q by 1.96% (-2,000) but are up on Q1 2011 by 1.72% (+4,000). Compared to Q1 2007, Q1 2012 employment in the sector is up 6.57% (+14,600). 
• The two sectors above represent front-line services in their definition.  Between them, during the austerity period the two sub-sectors added 29,700 new jobs.

And lastly, two charts on dependencies ratios. Without any comment.

7/6/2012: QNHS Q1 2012: First results

The latest QNHS results for Q1 2012 are out. Headline readings from CSO release:

• There was an annual decrease in employment of 1.0% or 18,100 in the year to the first quarter of 2012, bringing total employment to 1,786,100. 
• This compares with an annual decrease in employment of 0.8% in the previous quarter and a decrease of 2.9% in the year to Q1 2011.
• On a seasonally adjusted basis, employment fell by 7,300 (-0.4%) in the quarter. This follows on from a seasonally adjusted increase in employment of 11,100 (+0.6%) in Q4 2011.
• Unemployment increased by 13,300 (+4.5%) in the year to Q1 2012. This brings the total number of persons unemployed to 309,000 with male unemployment increasing by 3,600 (+1.8%) to 205,400 and female unemployment increasing by 9,800 (+10.4%) to 103,600.
• The long-term unemployment rate increased from 7.8% to 8.9% over the year to Q1 2012. Long-term unemployment accounted for 60.6% of total unemployment in Q1 2012 compared with 55.1% a year earlier and 40.9% in the first quarter of 2010.
• The seasonally adjusted unemployment rate increased from 14.5% to 14.8% over the quarter.
• The total number of persons in the labour force in the first quarter of 2012 was 2,095,100, representing a decrease of 4,800 (-0.2%) over the year. This compares with an annual labour force decrease of 32,800 (-1.5%) in Q1 2011.

We have the above data to offset the incessant chatter from the Government about stabilizing unemployment and jobs creation. The success of the Irish State unemployment activation programmes and training schemes is clearly some time off, despite more than a year of current policies and the build-up of similar activation efforts under the previous Government.

Now to more detailed analysis. This post will focus on top-of-the-line numbers and subsequent posts will look at sectoral breakdown and other details.

Labor force participation has fallen to 2,107,800 in Q1 2012, down from 2,113,400 in Q4 2011 and down on the peak of 2,251,400 in Q1 2008. The annual rate of decline of 0.3% in Q1 2012 is shallower than Q1 2010-2011 rate of -1.6% and Q1 2009-2010 rate of -2.6%. Which is good news, kind of.

Numbers of those not in the labor force rose to 1,390,500 in Q1 2012 up from 1,389,600 in Q4 2011 - a shallow hike. Year on year, the rise was 0.2%, much more mild than 1.75% hike in Q1 2010-2011 and 2.94% rise in Q1 2009-2010. Again, sort of good news.

Numbers in employment fell to 1,800,300 in Q1 2012 from 1,807,600 in Q4 2011. (See breakdown of full v part time employment below). Again, the anual rate of change trend is toward shallower declines. In Q1 2011-2012 the rate of decline was 1.0%, against -2.85% in Q1 2010-2011 and -5.46% in Q1 2009-2010. At the peak, there were 2,140,600 in employment, now the number is down 340,300.

Overall number of unemployed rose from 307,300 in Q4 2011 to 312,800 in Q1 2012. At the lowest point in recent history we had 94,200 unemployed. Unemployed counts rose 4.6% y/y in Q1 2012, compared to growth of 8.13% in Q1 2011 and 24.54% in Q1 2010.

Both full-time and part-time unemployment levels shrunk in Q1 2012. Full-time employment is down to 1,383,500 in Q1 2012 from 1,385,000 in Q4 2011, while part-time employment is down to 417,900 in Q1 2012 from 422,300 in Q4 2011. Y/y full-time employment is down 0.6% compared to Q1 2011 y/y decline of 4.47% and Q1 2010 y/y drop of 7.25%. Part-time employment is down 2.1% in Q1 2012, against a rise of 3.24% in Q1 2011 and a rise of 1.847% in Q1 2010.

Unemployment rate has now reached its crisis-period peak of 14.8, more than erasing the slight moderation achieved in Q3 2011 to Q4 2011 (drop from 14.6% to 14.5%). A year ago, just as the new Government came to power, the unemployment rate stood at 14.1%. Of course, the previous Government has presided over much more dramatic rise in unemployment rates. In addition, economic conditions that the current Government has inherited clearly do not warrant much of optimism, especially in such sticky series as unemployment. Thus, the current numbers are not the matter for a blame game.

Participation rate has remained flat at 60.3% in Q1 2012, same as in Q4 2011, but is down from 60.4% in Q1 2011. At the peak we had participation rate of 64.1%.

The above has meant that our dependency ratios worsened in Q1 2012. Ratio of those employed to the rest of the working age population has fallen from 65.35% in Q4 2011 to 65.22% in Q1 2012. In Q1 2011 this ratio stood at 65.80% and in Q1 2010 it was 70.90%. At the beginning of the crisis the ratio was 98.80%. In other words, the proportion of those working in the economy is declining.

Summary of headline stats:

13/5/2012: Sunday Times 06/05/2012: Irish labour costs competitiveness

This is my Sunday Times column from May 6, 2012 (last week), unedited version.

Latest research from ESRI shows that, contrary to the prevalent opinion in the media and official circles labour earnings in Ireland have been rising, not falling, during the early years of the crisis. This trend, on the surface, appears to contradict claims of wages moderation in the private sector, the very same claims that have been repeatedly used to argue that structural reforms and changes in Ireland during the crisis have seen a dramatic return of productivity growth.

The ESRI research, carried out by Adele Bergin, Elish Kelly and Seamus McGuinness used data from the National Employment Surveys on the changes in earnings and labour costs between 2006 and 2009. Per authors, “despite an unprecedented fall in output and rise in unemployment, both average earnings and average labour costs increased marginally over the period.”

Surprising for many outside the economics profession, these findings actually confirm what we know from Labour Economics 101.

Firstly, wages and earning are sticky when it comes to downward adjustment. In other words, while wages inflation can be rampant, wages deflation is a slow and economically painful process. This is precisely why currency devaluations are always preferred to cost deflation (or internal devaluations) as the means for correcting recessionary and structural imbalances.

Secondly, wages deflation  is even slower in the economies where collective bargaining is stronger. Ireland is a strong candidate for this with its Social Partnership and tenure-linked pay structures.

Thirdly, average earnings movements reflect not only changes in wages, but also changes in the composition of the national and sectoral employment. More specifically, as the ESRI study concludes, the core drivers of rising earnings during 2006-2009 period were “increases in both the share of and returns to graduate employment and a rising return to large firm employment”. Of course, both of these factors are correlated with the destruction of lower-skilled and less education-intensive construction and domestic services jobs.

Lastly, increases in part-time employment also drove up average earnings. In fact, the latest figures from the Eurostat show that a total of 7.4% of our currently employed workers are classified as part-time employees willing to work longer hours, but unable to secure such employment. This is the highest proportion in the entire EU27, and well above the 3.9% reading for Greece.

Overall, ESRI researchers concluded that “a good deal of the downward wage rigidity observed within Irish private sector employment since the onset of the recession has largely been driven by factors consistent with continued productivity growth.”

In my opinion, this is not a foregone conclusion. Irish labor productivity may have risen during the period of the crisis, but much of that increase is probably accounted for by the very same four forces that drove increases in earnings. Higher proportion of jobs in the economy within the MNCs-dominated exporting sectors, higher survival rate for jobs requiring higher skills, and the nature of the early stages of public sector employment cuts most likely simultaneously explain changes in both earnings and productivity.

The latter aspect is worth explaining. In the early part of the crisis, all public sector employment reductions took place out of cuts to part-time and contract positions, thus most heavily impacting lower earning younger workers. This would simultaneously increase the proportion of higher paid public employees and the average productivity in the sector. Post-2009, cost reductions have been running via early retirement schemes, but these are not reflected in the 2009 data.

In other words, on the surface, it might appear that Irish labour productivity has grown over time, but in reality, it is the reduction in less productive workers’ employment that has been driving these ‘improvements’. Incidentally, this story, not the ESRI conclusion, is consistent with the situation where domestic economic activity has contracted more than domestic employment.

In brief, our ‘productivity gains’ outlined by the ESRI might be a Pyrrhic victory in the Irish economy’s war for internal devaluation.

And the said victories continued since 2009 – the period not covered in the ESRI study.

Since January 2010, earnings have been falling in Ireland as jobs contraction became less pronounced and as public sector entered the stage of early retirement exits. Irish average hourly labour costs peaked at €28.0 per hour in 2009, 5.7% above the Eurozone average. In 2011, however, the average hourly labour cost in Ireland stood at €27.4 per hour, 0.7% below Eurozone average. If in 2009 Ireland had the eighth highest average hourly cost of labour in EU27, by 2011 we were 11^th most expensive labour market.

According to the Eurostat, across the Irish economy, labour costs rose 7.7% in 2007-2009 period followed by a drop of 1.6% in 2010-2011. However, over the period of the entire crisis, the labour costs are still up 5.2%. The only good news here is that our euro area competitors have all posted higher labour costs inflation. The same pattern is repeated in Industry, Services and across the Public Sectors. Only ICT and Financial Services broke this pattern, driven by fixed wages in the state-owned domestic banking, robust demand for IFSC and ICT specialists. In Professional, Scientific and Technical Activities, earnings rose 6.3% between 2007 and 2011, with wages moderation kicking in only from 2010 with a relatively strong decline of 4.8%. Still, this is just half the rate claimed in the official promotional brochures extolling the virtues of decreased labour costs in this area in Ireland.

With relative stabilization of unemployment and longer duration of joblessness, our average earnings are now set to decline over time as younger educated workers come into the workforce to replace retiring older workers. In the mean time, our productivity metrics will continue to improve in specific MNCs-dominated exporting-heavy sub-sectors. Competitiveness will improve, but not because real productivity will expand. Instead, continued re-orientation of economy toward MNCs will drive headline numbers as we become more and more a tax haven, rather than indigenous entrepreneurship engine.

These accounting-styled gains in productivity and cost competitiveness are likely to coincide with stagnation of Ireland’s GNP. In the period since 2007, Irish after-tax earnings have actually suffered significant deterioration compared to our counterparts in Europe. This deterioration is strongly pronounced for demographically most productive part of our workforce – those in the 25-45 years of age.

Eurostat data shows that in 2007-2011, after-tax earnings in Ireland have increased only for single persons with no children earning 50% of the average wage (a rise of 2.3%) and households with two parents and two children on 100% of the average wage income and sole earner (up 1.8%). The smallest declines in after-tax earnings occurred for the category of single person households with no children earning 100% of the average wage (down 0.8%), families with two earners and no children bringing in 200% of the average wage in combined earnings (down 0.8%), and families with similar income (down 0.6%). At the same time, the largest declines in after-tax earnings were recorded for single persons and families with no children and earnings of 167% of the average wage (declines in the range of 2.3% and 3.7%). Above-average after-tax earnings drops were recorded for all other types of households, including families with children on combined earnings in excess of 133% of the average wage. In other words – younger households and households with two earners have been the hardest hit by the recent trends.

With decline in net after-tax earnings, Irish economy is now facing a number of pressures. Costs of living, commuting and housing are likely to continue rising in months and years ahead, driven by the state desire to extract more in indirect taxation and the market structure that is largely captured by the less competitive state enterprises and defunct banks. Direct tax burden will also continue to rise, while pre-tax earnings will fall. These pressures will imply further reductions in consumer spending and domestic savings. The latter means, among other things, that we will see renewed pressure on banks (as part of our savings reflects repayment of household debts) and on domestic investment.

CHARTS: 

Box-out:

The latest Community Innovation Survey for Ireland for the period of 2008-2010 has been released by the CSO, detailing some very interesting trends in overall innovation activity in Irish economy. Headline figure shows that 28% of enterprises in the industrial and selected services sectors had product innovations in 2008-2010, with 33% of enterprises engaged in process innovations. However, only 18% of enterprises were engaged in both process and product innovations. Not surprisingly, foreign-owned enterprises led Irish-owned enterprises in terms of product innovation 38% to 25%, in process innovation 40% to 30%, and in dual product and process innovation 25 to 16%. Irish-owned enterprises derived slightly more of their total turnover from adopting innovations new to the firm, while foreign-owned enterprises led strongly (more than 2.5 times) in terms of new to market innovations. This suggests that Irish enterprises strength remained in adopting new innovations developed outside, while foreign-owned enterprises are strong leaders in creating new products, services and processes for the market. Not surprisingly, of €2.5 billion spent on innovation in 2010, just 49% went to finance in-house R&D. The most innovation-intensive sector of the MNCs-dominated economy was, not surprisingly Manufacture of petroleum, chemical, pharmaceutical, rubber and plastic products (72.5% of enterprises with technological innovation activities), while the most intensive traditional sector was Manufacture of beverages and tobacco products (91.7%). Did someone mention booze and pills sciences?

14/4/2012: Latest data on EU27 ICT skills

In a recent (April 1, 2012) article for the Sunday Times (link here) I wrote about the results of the Eurostat computer skills survey across the EU27 member states. The report this was based on is E-Skills Week 2012: Computer skills in the EU27 in figures (http://eskills-week.ec.europa.eu/).

Quoting from the article:

“One core metric we have been sliding on is sector-specific skills. This fact is best illustrated by what is defined as internationally traded services sector, but more broadly incorporates ICT services, creative industries and associated support services.

Eurostat survey of computer skills in the EU27 published this week, ranked Ireland tenth in the EU in terms of the percentage of computing graduates amongst all tertiary graduates. Both, amongst the 16-24 years olds and across the entire adult population we score below the average for the old Euro Area member states in all sub-categories of computer literacy. Only 13% of Irish 16-24 year olds have ever written a computer programme – against 21% Euro area average. Over all survey criteria, taking in the data for 16-24 year old age group, Ireland ranks fourth from the bottom just ahead of Romania, Bulgaria and Italy in terms of our ICT-related skills.”

So here are the details of my analysis of the Eurostat data. Note, ranks reference EU27, plus Norway, Iceland and 3 averages treated as countries – EA12 (old euro area states), EU27 and Small Open Economies of EU27. In other words, ranks are reported out of 29 countries and 3 averages.

In terms of the overall proportion of computer graduates amongst all graduates, Ireland performs close to the mid-range of the overall EU27 distribution. In 2005, 2.9% of graduates were in CS disciplines against the EU27 average of 4% and EA12 (old euro area) average of 4.12%. By 2009 this number rose to 3.8% for Ireland, and fallen to 3.4% for EU27 and 3.37% for EA12. However, the averages conceal rather wide dispersion of scores across both the EU27 and EA12. Ireland’s overall performance in this category ranked 12th in 2009 data, below Greece, Spain, Malta, Austria, UK and Norway.

In terms of percentage of population who have ever used a computer as percentage of all individuals, the survey identifies results for two cohorts: aged 16-24 and aged 16-74. In Ireland, 98% of the population 16-24 years of age have used computer, against 81% for those aged 16-74. This compares against: 96.25% for EA12 and 96% for EU27 for those aged 16-24, and 79.2% for EA12 and 78% for EU27 for those aged 16-74. Despite this, Ireland ranks only 19th for 16-24 year old cohort in this parameter.

Now, we should expect a generational effect of higher (statistically) percentage for those of 16-24 years of age. And the gap appears to be present in the case of Ireland – 17 percentage points spread. The gap is consistent with the EU27 and EA12 averages of 18 and 17.8 percentage points. In other words, Ireland’s population computer usage is not exactly stellar to begin with and is not improving at a faster pace than European average with generations.

The survey also assessed what percentage of relevant population used basic arithmetic formulas in a spreadsheet. For EU27 and EA12 the corresponding percentages were: for cohort aged 16-24: 66% and 67% respectively. For Ireland the percentage was 54%, assigning to us rank 30th in the sample, with only Romania and Bulgaria scoring below us. For the full population (16-74 years of age), the EU27 and EA12 averages were 43% and 45.5% respectively, while for Ireland the corresponding percentage was 44%. Again, our inter-generational gap was lower than average either for EA12 or EU27, suggesting that not only we are extremely poorly scoring in this category as a whole, but that our inter-generational change in skills is working against us in comparison to the averages.

As per percentage of those who created electronic presentations, for EU27 and EA12 the averages were 59% and 63.1% for cohort of those aged 16-24 against Ireland’s 36%, earning Ireland 30th rank, ahead of only Bulgaria and Romania. The inter-generational gap for EU27 is 28 percentage points, while for EA12 it was 28.5 percentage points and for Ireland 15 percentage points. Again, we are falling behind and doing so from the weak position to begin with.

In terms of those who have written a computer programme, Ireland’s 16-24 year olds reported 13% of population against EA12 20.5% and EU27 average of 20%. For overall population (16-74 year olds), EA 12 average was 11.6%, EU27 average 10% and Ireland’s 9%. We are ranked 27th in the table in terms 16-24 year olds who have written a computer programme.

In terms of overall score for the younger cohort of 16-24 year olds (summing up percentages for all categories, plus third level CS education proportion multiplied by factor 10), Ireland total score comes in at 321, well below the total score for EA12 (368.5) and EU27 (365). Ireland ranks 28th in the league table in terms of overall computer literacy score, ahead of only Bulgaria, Italy, and Romania. In summing up all ranks, Ireland’s combined rank is 148 against 120 for EA12 and for EU27.

In the last chart above, higher gap signals more advanced skills for the younger cohort compared to general population: Ireland has low rank and low gap, implying that younger cohort skills are advancing at a slower speed than in other countries from already low skills base. In contrast, Finland has relatively low gap combined with high overall rank, implying that Finland's younger cohorts have faster than in Ireland rate of growth in skills compared to much higher overall level of skills already in place for the general population. Slovenia and Latvia are examples of countries where skills are relatively high for the younger cohorts compared to other countries and are growing fast compared to older cohorts.

28/3/2012: Sunday Times 25/3/2012 - Irish emigration curse

Below is the unedited version of my article for Sunday Times from 25/03/2012.

Last week, as Ireland and the world celebrated the St Patrick’s Day, close to fifteen hundred Irish residents, including close to a thousand of Irish nationals, have left this country. In all the celebratory public relations kitsch, no Irish official has bothered to remember those who are currently being driven out of their native and adopted homeland by the realities of our dire economic situation.

According to the latest CSO report – covering the period from 1987 through 2011, emigration from Ireland has hit a record high. In a year to April 2011 some 76,400 Irish residents have chosen to leave the country, against the previous high of 70,600 recorded in 1989. For the first time since 1990, emigration has surpassed the number of births.

Given the CSO methodology, it is highly probable that the above figures tell only a part of the story. Our official emigration statistics are based on the Quarterly National Household Survey, unlikely to cover with reasonable accuracy highly mobile and less likely to engage in official surveys younger households, especially those that moved to Ireland from East Central Europe.

For example, emigration numbers for Irish nationals rose 200% between 2008 and 2011, with steady increases recorded every year since the onset of the crisis. Over the same period of time, growth in emigration outflows of EU15 (ex-UK) nationals from Ireland peaked in 2008-2009 and halved since then. Prior to 2010, Irish nationals contributed between 0% and 10% of the total net migration numbers. By 2010 and 2011 this rose to 42% and 68% respectively. Meanwhile, the largest driver of net migration inflows prior to the crisis - EU12 states nationals - were the source of the largest emigration outflows in 2009, but their share of net outflows has fallen to 39% and 13% in 2010 and 2011 respectively. There were no corresponding shifts in Irish and non-Irish nationals’ shares on the Live Register. In other words, unemployment data for non-Nationals does not appear to collaborate the official emigration statistics, most likely reflecting some significant under-reporting of actual emigration rates for EU12 and other non-EU nationals.

There are more worrisome facts that point to a dramatic change in the migration flows in recent years. Back in 2004-2007 there were a number of boisterous reports issued by banks and stockbrokerages that claimed that Irish population and migration dynamics were driving significant and long-term sustainable growth into the Irish economy. The so-called demographic dividend, we were told, was the vote of confidence in the future of this economy, the driver of demand for property and investment, savings and consumption.

In 2006, one illustrious stockbrokerage research outfit produced the following conclusions: “The population [of Ireland] is forecast to reach 5 million in 2015… The labour force is projected to grow at an annual average 2.2% over the whole period 2005 to 2015. Combined with sustained 3% annual growth in productivity, this suggests the underlying potential real rate of growth in Irish GDP in the five years to 2010 could be close to 5.75%. Between 2011 and 2015, the potential GDP growth rate could cool down to around 5%.”

Since the onset of the crisis, however, the ‘dividend’ has turned into a loss, as I predicted back in 2006 in response to the aforementioned report publication. People tend to follow opportunities, not stick around in a hope of old-age pay-outs on having kids. In 2009, only 33% of new holders of PPS numbers were employed. Back in 2004 that number was 68%. Amazingly, only one third of those who moved to Ireland in 2004-2007 were still in employment in 2009. Almost half of those who came here in 2008 had no employment activity in the last 2 years on record (2008 and 2009) and for those who came here in 2009 the figure was two thirds.

In more simple terms, prior to the crisis, majority (up to 68%) of those who came here did so to work. Now (at least in 2009 – the last year we have official record for) only one third did the same. It is not only the gross emigration of the Nationals and Non-Nationals that is working against Ireland today. Instead, the changes in employability of Non-Nationals who continue to move into Ireland are compounding the overall cost of emigration.

In order to assess these costs, let us first consider the evidence on net emigration in excess of immigration. In every year – pre-crisis and since 2008, there were both simultaneous inflows and outflows of people to and from Ireland. In 2006, the number of people immigrating into Ireland was above the number of people emigrating from Ireland by 71,800. Last year, there was net emigration of 34,100. Between 2009 and 2011, some 76,400 more people left Ireland than moved here.

Assuming that 2004-2007 period was the period of ‘demographic dividend’, total net outflows of people from the country in the period since 2008 through 2011 compared to the pre-crisis migration trend is 203,400 people. In other words, were the ‘demographic dividend’ continued at the rates of 2004-2007 unabated through the years of the current crisis, working population addition to Ireland from net migration would have been around 2/3rds of 203,400 net migrants or roughly 136,000 people. Based on the latest average earnings of €689.54 per week, recorded in Q4 2011, and an extremely conservative value added multiplier of 2.5 times earnings, the total cost of the ‘demographic losses’ arising from emigration can be close to 8% of our GDP. And that is before we factor in substantial costs of keeping a small army of immigrants on the Live Register. Some dividend this is.

This is only the tip of an iceberg, when it comes to capturing the economic costs of emigration as the estimates above ignore some other, for now unquantifiable losses, that are still working through the system.

In recent years, Ireland experienced a small, but noticeable baby boom. In 2007-2007, the average annual number of births in Ireland stood at just below 60,000. During 2009-2011 period that number rose by almost 25%. 2011 marked the record year of births in Ireland since 1987 – at 75,100. In the environment of high unemployment, elevated birth rates can act to actually temporarily moderate overall emigration, since maternity benefits are not generally transferable from Ireland to other countries, especially the countries outside the EU. Even when these benefits do transfer with families, new host country benefits replacement may be much lower than the benefits in Ireland. Which, of course, means that a number of emigrants from Ireland can be temporarily under-reported until that time when the maternity benefits run their course and spouses reunite abroad.

Even absent the above lags and reporting errors, net migration is now running close to its historic high. In 2011, there were total net emigration of 34,100 from Ireland against 34,500 in 2010. These represent the second and the first highest rates of net emigration since 1990.

At this stage, it is pretty much irrelevant – from the policy debate point of view – whether or not emigrants are leaving this country because they are forced to do so by the jobs losses or are compelled to make such a choice because of their perceptions of the potential for having a future in Ireland. And it is wholly academic as to whether or not these people have any intentions of returning at some point in their lives. What matters is that Ireland is once again a large-scale exporter of skills, talents and productive capacity of hundreds of thousands of people. The dividend is now exhausted, replaced by a massive economic, not to mention personal, social, and political costs that come along with the Government policies that see massive scale emigration as a ‘safety valve’ and/or ‘personal choice’.

Charts:

Box-out:

On 14^th of March, Governor of the Central Bank of Ireland, Professor Honohan has told Limerick Law Society that Irish banks should be less inhibited about repossessing properties held against investment or buy-to-let mortgages. This conjecture cuts across a number of points, ranging from the capital implications of accelerated foreclosures to economic risks. However, one little known set of facts casts an even darker shadow over the banks capacity to what professor Honohan suggests they should. All of the core banking institutions in the country currently run large scale undertakings relating to covered bonds and securitizations they issued prior to 2008 crisis. Since 2008, the combination of falling credit ratings for the banks and accumulation of arrears in the mortgages accounts has meant that the banks were forced to increase the collateral held in the asset pools that back the bonds. In the case of just one Irish bank this over-collateralization increased by 60% in the last 4 years. This is done in order to increase security of the Covered Bond pool for the benefit of the Bondholders and is achieved by transferring additional mortgages into the pool. In just one year to December 2011, the said bank transferred over 26,000 new mortgages into one such pool. As the result of this, the bank can face restrictions and/or additional costs were it to foreclose on the mortgages within the pool. Things are even worse than that. In many cases, banks now hold mortgages that had their principal value pledged as a collateral in one vehicle while interest payments they generate has been collateralized through a separate vehicle. The mortgage itself can potentially even be double-collateralized into the security pool as described above. The big questions for the Central Bank in this context are: 1) Can the banks legally foreclose on such loans? and 2) Do the banks have sufficient capital and new collateral to cover the shortfalls arising from foreclosing mortgages without undermining Covered Bonds security?