12/12/19: Ireland's Jobs Creation Track Record: Raising Some Questions

Doing some research on the state of precariat in modern labor markets, I came across some interesting data from the 'poster country' of the post-GFC recovery: Ireland.

Ireland's economy and its recovery from the crisis are both characterised by the huge role played by the internationally-trading multinational corporations. In recent years, these companies have been gearing up for the upcoming OECD-led BEPS reforms (more on this coming up next month in my usual contribution to the Manning Financial publication, but you can read academic-level analysis o the BEPS here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3406260). The strategic shift this entails involves MNCs domiciling into Ireland intangible property and new business functions to create a larger 'footprint' in the economy. With this, employment in MNCs operations in Dublin and elsewhere boomed.

Why is this important? Because the main story of the Celtic Tiger revival has been about the aforementioned jobs creation and accompanying dramatic drop in official unemployment. Less covered in the media and politicians' statements, over the same period of time as 'jobs creation' was allegedly booming, Irish labour force participation remained well below pre-crisis levels (meaning there were more discouraged unemployed who stopped being counted as unemployed). Even less attention has been paid to the quality of jobs creation.

The above chart partially reflects the latter concern. It shows that full-time employment as a a share of total working age population has improved from the bottom of the series at the peak of the recession, but the rebound has been largely incomplete. Similarly (not shown in the chart) the percentage of those in part-time employment as a share of total number of those in employment has remained above pre-crisis levels. Over 1998 through the first half of 2008 (the pre-crisis period), that share averaged 17.5 percent. This rose to above 23 percent in the years of the crisis (2H 2008 - 2013). It remained at around 23 percent through 4Q 2016, and has declined to around 20.3-20.5 percent since then. This too signals that the quality of jobs being added even in the mature stage of the recovery is still lagging the quality of jobs in the pre-crisis period.

Now, imagine what these figures would have been were it not for the MNCs latest tax shenanigans...

30/7/18: Broader Unemployment vs Official Unemployment: Ireland

In the first post (see above) looking at the broader measures of unemployment and dependency ratios, recall that CSO publishes several extended series for broader unemployment rates. 

The official unemployment rate at 1Q 2018 stood at 6.4 percent (well within the pre-crisis historical range of the average of 5.31 percent and the 99% confidence interval of (3.70%, 6.92%). In more simple terms, statistically, the current official unemployment rate is indistinguishable from the average rate prevailing in 1Q 1998 - 4Q 2007. Which is the good thing, implying that in official terms, Irelands economy has recovered from the crisis at last. In fact, the recovery in official terms has been attained in 4Q 2017.

However, the CSO also reports the PLS2 measure of broader unemployment. The Above analysis was based on reported PLS1 data, covering unemployed plus discouraged workers, as a percentage of the labour force. Adding to the PLS1 those in potential additional labour force (basically able bodied adults who are neither employed nor unemployed, nor discouraged, and are not in studies or formal training), the CSO gets PLS2 measure of broader unemployment. In 1Q 208 this number read 10.2% of the Labour Force, plus Potential Additional Labour Force, which was statistically higher than the pre-Crisis average of 6.1% (falling into the 99% confidence interval range of (4.39%, 7.81%). In other words, the economy has not yet recovered from the Crisis based on PLS2 broader unemployment measure.

Extending PLS2 to cover all unemployed, plus those who want a job and not seeking for reasons other than being in education or training, in 1Q 2018 the broader PLS3 unemployment measure stood at 14.2 percent, unchanged on 4Q 2017. As with PLS2, the 1Q 2018 reading for PLS3 falls well beyond the range of the pre-crisis historical average of 8.36% (with 99% confidence interval of (6.52%, 10.20%).

As noted above, by two broader unemployment measures: PS2 and PLS3, Irish economy has not recovered from the crisis, even if we take a relatively benign recovery measure of the economy reaching the pre-crisis 1Q 1998 - 4Q 2007 average rate of unemployment. 

Worse, taking 4 year moving average and a 4 year rolling standard deviation in PS3 rates, 1Q 2018 PLS3 rate of 14.2% is closer to the upper margin of the 99% confidence interval for 1Q 2018 based on prior 4 years of data (the CI is given by (9.81%, 15.63%) range). Which means that 1Q 2018 data shows no statistically significant break-out from the PLS3 broader unemployment dynamics of the past 4 years. The same holds for the 5 years MA and rolling STDEV. 

So while the official unemployment readings are showing a very robust recovery, broader measures of unemployment continue to trend in line with the economy still carrying the hefty legacy of the recent crises. 

20/6/18: Irish Labour Force Participation Rate: Persistency of a Problem

With the latest CSO data reporting on labour force participation figures for 1Q 2018, time to update the chart showing secular decline in the labour force participation rate in the country since the start of 2010:

As the chart above shows, despite low and falling unemployment, Irish labour force participation rate remains at the lows established at the start of 2010 and is not trending up. In fact, seasonal volatility in the PR has increased on recent years (since 1Q 2016), while the overall average levels remain basically unchanged, sitting at the lowest levels since the start of the millennium.

Taking ratio of those in the labour force to those outside the labour force as a proximate dependency indicator (this omits dependency of children aged less than 15), over 2000-2004 period, average ratio stood at 1.685 (there were, on average, 1.685 people seeking work or employed for each 1 person not in the labour force). This rose to 1.895 average over 2005-2009 period, before collapsing to 1.630 average since the start of 2010. Current ratio (1Q 2018) sits at 1.600, below the present period average.

While demographics and education account for much of this, overall the conclusions that can drawn from this data are quite striking: per each person staying out of the labour force for various reasons, Ireland has fewer people working or searching for jobs today than in any comparable (in economic fundamentals terms) period.

24/11/15: Over-skilled & Under-Employed: Welcome to the Brave New World of Europe

Irish policymakers are keen telling us that jobs creation has been robust and of high quality in recent years. Which, thus, begs a question: why does OECD data show Ireland as having one of the most severe mismatches between workforce skills and employment?

Apparently, based on OECD data, Irish economy is not exactly offering jobs on par with our fabled skills. And, apparently, based on OECD data, our illustrious workforce holds a big untapped potential for productivity gains that are not being realised by the inflows of MNCs and FDI and domestic economy jobs creation to-date.

OECD doesn't quite offer an Ireland-specific explanation of this paradox, but it does offer an insight as to why the same phenomenon plagues virtually all of Europe:

Apparently, the quality of firms (or their systems for allocating Human Capital or both) in Europe is just not up to par. It turns out that the Irish disease of underemployment is a European disease.

This is especially tragic, given that we have a huge over-skilling present in the economy - in basic terms, our skills levels are too high for what our economy is capable of absorbing:

Few years ago, I quipped in my Sunday Times (now defunct) column that we are heading for Unemployed PhDs crisis. It looks like we have arrived.

So welcome to the Brave New World where years in education and training and years of on-the-job experience count for zilch when it comes to affording pensions, savings and investments.

24/9/15: Ireland's Remittances and Foreign Workforce

In a recent post, titled  "Ireland: a land of un-remarkable savers",  I covered EU Commission research on savings rates across different countries.

One interesting finding in the report relates to the issue net remittances or transfers from the country to foreign destinations net of inflows of funds from abroad into the country. These figures cover household remittances, so no direct effect of FDI and other investment flows in them.

Take a look at the following chart:

In absolute terms, Ireland leads the EU in terms of net remittances outflows abroad as percentage of the Gross National Income. Keep in mind - Cyprus was in an emergency funding situation from January 2012 on (when the country first received Russian emergency loans) and requested assistance from the EU in mid-2012, with actual bailout package agreed a year later. In other words, much of 2012 net outflows of household funds from Cyprus was probably down to relatively panicked situation in the country financial sector.

Ireland's net remittances outflows were running, in contrast, against more stabilised situation and inflows of funds from a number of emigrants who left during the crisis. Demographically, these can be divided into three categories:

• Returning migrants (who have little connection to Ireland and, thus, were more likely to take funds out of Ireland on their exit);
• Younger Irish workers (who would have left older family behind and whose earnings abroad would not have allowed for them to become net sender of funds into Ireland) and
• Middle-aged families, who often left properties behind with outstanding mortgages that required regular remittances into Ireland to fund.

The key for Ireland's position at the bottom of the European remittances table is, most likely, foreign workers in Ireland sending their surplus earnings/savings abroad for the lack of interest in investing in Irish assets (property and financial assets). If so, we have a problem: Ireland attracts large numbers of highly skilled younger workers who come here to work in MNCs-led sectors, such as ICT and ICT services, as well as Financial services. These workers, judging by remittances outflows, have little anchoring in the Irish economy.

As the result of remittances (counting only unrecorded remittances, and omitting the deeply negative official remittances), Irish savings rate falls from 14th in the EU to 17th in the EU:

2/9/15: House prices, rents and Irish demographics

Based on latest data from CSO, Dublin has gained disproportionately in population compared to the rest of the country in 12 months through April 2015. At the top level, Dublin population rose 30,700 in 2015 compared to overall state population rise of 25,800, which implies that ex-Dublin, the country lost population at the rate of 4,900. Dublin v rest of the state population changes were even more dramatic when one considers age distribution.

• Population aged 0-19 years rose in Dublin by 15,700 in 2015. The same group numbers increased state-wide by 19,600. Which means ex-Dublin, younger population rose only 3,900 against Dublin's 15,700. This highlights family formation dynamics in Dublin as opposed to the rest of the country.
• Younger working-age population (age 20-29) fell in Dublin by 5,700 in 2015. Across the country, the decline was 25,400. Which means that ex-Dublin, younger working-age population has declined by 19,700.
• The main cohort of working-age population (30-64 years old) has risen in Dublin by 15,700 in 2015 compared to 2014. Across the country the increase was 14,100, which implies that ex-Dublin, the state lost 1,600 adults in the main working age cohort.
• Older population dynamics were also in favour of Dublin. In 12 months through April 2015, population aged 65 and older rose in Dublin by 4,900 and it was up nationwide by 25,800. Which means that ex-Dublin, older age population rose 20,900.

The above dynamics suggest demographic support for rising property prices and rents in Dublin, as was suggested by some analysts. This may or may not be so, since population dynamics work over years, not in simple y/y terms. So let's take a look at relative changes in Dublin population compared to the rest of the state:

Dublin population, as % of state-wide population of core home ownership demographic that transacts on the purchasing side of the market (30-64 year olds) has been rising overall since falling to 27.5% in 2010 and is currently standing at 28.9%, still below 29.6% high in 1996. But the rental demographic of 20-29 year olds has shown different dynamics, reaching period trough in 2013 (at 32.3%) and rising since then to 33.1% in 2015, a level consistent with 2011. Neither suggests huge uplift in demand for rentals or owner-occupied homes.

Of course, these are cohorts of 2015. Back in 2007, when house loans were last available in plentiful supply, large share of purchasers demographic today was… err… renters. And absent credit for house purchases, as this demographic moved into purchasing age, they stayed renters.  This would suggest increased pressures on rents. But the picture is more messed up by the losses of population share in 20-29 years old group, most likely due to emigration. Longer tenure for children staying in parents' homes also should have held rents back. In other words, our traditional view of demographic distribution of buyers v renters has been messed up by the sheer duration of the current crisis.

Take 2010-2015 period. Over that time, Dublin population of 20-29 year olds fell 61,000 and across the rest of the country, this cohort numbers fell 123,000. But cohort of 30-64 year olds rose in Dublin by 60,900 against a rise of 47,600 in the rest of the country. Demand based on demographics, therefore, suggests swing from renting toward purchasing. Similar picture repeats if we take 2011-2015 cumulative changes and 2012-2015 and 2013-2015. And, still, rents were rising.

What is more mysterious is that overall working age population has been relatively mildly altered in recent years. In Dublin, working age cohort (20-64 year olds) has grown by just 10,000 in 2014-2015 period and it is up only 8,000 on 2012. The cohort is still down 13,300 on 2008. Across the country, ex-Dublin, things were much worse: since 2008 the cohort fell 62,200 and compared to 2014 it is now down 21,300. In simple terms, unless children and retirees are buying homes, there shouldn't be any dramatic uplifts in demand for property in Dublin, and most certainly outside Dublin.

Which goes to say that any claims about actual demand (based on numbers of potential renters and buyers) are a bit strained. In 2008, there were 821,200 people of age 20-64 living in Dublin. Today there are 807,900. Unemployment rose over that time too. So where is that tremendous growth in demand coming from to push property prices up? Property prices in Dublin hit a period trough in 2012. Since then, there has been a net increase of just 8,000 in 20-64 year olds cohort living in Dublin. Again, where is that spiking in demand coming from?

In my view, simple demographics do not explain Irish property prices uptick from crisis lows. Speculation and latent surplus of savings in a relatively small category of Irish residents (and ex-past), plus re-distribution within cohorts between renters and buyers are the main drivers on demand side of the equation. Supply side also contributes significantly to prices uptick. And beyond that, there has to be significant behavioural component: our addiction to property - despite all the hopes of Dublin 'planners' for an Amsterdam on the Liffey - has not gone away over the years of the crisis. The first, initial shock to the economy has had an effect of scaring us put of the markets for property. Negative equity contributed more downward momentum. But once we learned to live with our fears, we simply decided o turn back to our old model of family investment: bricks and mortar. 

30/8/15: Migration & Changes in Irish Population: Working Age Population

In two previous posts, I looked at Irish migration and population changes data from the point of:
- Top level analysis of migration and natural changes in population; and
- Migration trends by nationality.

Continuing with analysis of population data from CSO released earlier this week, let's take a look at the age composition of population.

In what follows, I define two key categories within our population:

• Working age group - population aged 20 years through 64 years. This is an approximate definition, and I prefer it to including 15-20 year olds into it, primarily because it allows for more accurate reflection of numbers in full time education. There are many caveats applicable here, so take the approximation for what it is - indicative, rather than definitive.
• Non-working age population (rest of population). Again, that is not to say that younger students do not work (at least part-time) or that people beyond 65 years of age do not work. Some do. Majority do not. When many do work, they work less hours than is required to sustain independent living, so they still rely on either pensions or social transfers or family transfers or any permutations of the three to sustain themselves.

In simple terms, mindful of all caveats, etc, a ratio of working age population to non-working age population tells so a bit about how high is the dependency weight in the society due to age distribution in population. Lower ratio means fewer working age adults having to sustain themselves and non-working age people. By sustain I mean economically sustain - by working and adding value in the economy.


Chart below shows distribution of changes in working age population and non-working age population in y/y and cumulatively from 2008:

What stands out in the chart?

1. Working age population overall has been in decline since 2010. In cumulative terms, number of working age adults has fallen 2.7% on 2008 level by April 2015 - a decline of 75,500. In 2015, the rate of decline was 0.4% - more moderate than in three previous years, but still steeper than 2010-2011 average.
2. Non-working age population remains on the rise for every year covered by the CSO series and the rate of increase in 2015 (at 2%) was the highest since 2010. Overall, over 2008-2015 period, non-working age population those 13.3% or 225,900.
3. The gap between working age population and non-working age population is now at 798,400 - the worst reading in series history and 301,400 worse than in 2008.

As the result of the above trends, ratio of working age population to non-working age population continued to fall precipitously in 2015:

In 2015, the ratio of working age population to non-working age population was 1.42 - meaning that for each non-working age person, there were 1.42 working age adults. This does not correct for the working age adults who are not in the labour force as well as for the unemployed. The best performance year in this metric was 2007 when the ratio was 1.66. In other words, in 2015, there were 24 fewer working age adults per each 100 non-working age persons than in 2007.

25/2/15: QNHS Q4 2014: Broader Measures of Irish Unemployment

In the previous post (http://trueeconomics.blogspot.ie/2015/02/25215-qnhs-q4-2014-labour-force.html) I covered the QNHS results for Q4 2014 from the point of Labour Force Participation Rate (poor news showing decline in the already historically low participation) and Unemployment Rate (goods news with unemployment - absent seasonal adjustment falling to 9.9% and the rate of decline in unemployment on quarterly basis accelerating).

Here, let's consider actual size of the labour force and the broader measures of unemployment, including numbers on state training programmes (e.g. JobBridge) and factoring in estimates of inward and outward migration.

Few definitions are provided in the note below the post, so feel free to consult these.

Now, onto numbers.

Total size of Irish labour force at Q4 2014 stood at 2,152,500 down from 2,172,400 in Q3 2014 and down 10,600 on Q4 2013. This is not good. Compared to peak, current Labour Force is down 147,600 and compared to crisis period trough it is up 15,000. Over the last 12 months, irish labour force average levels were down 117,100 on pre-crisis average. All indicators point to a decline in labour force, consistent with the weak labour force participation rate reported in the previous post. All of this suggests that some share of improvements in unemployment performance is down to people dropping out of the labour force rather than the unemployed finding jobs.

As chart above highlights, remarkably, there has been basically no change in labour force numbers from H2 2010 through Q4 2014, something that is not consistent with our natural demographics, but is consistent with the story of outward emigration and dropping-out from the labour force by working age adults.

Now onto more pleasant news. All broader measures of unemployment have registered declines in Q4 2014 both y/y and q/q:

PLS1 indicator - basically a measure of unemployment fell 2.0 percentage points y/y in Q4 2014 to 10.5%, marking an acceleration in the rate of decline from 1.9% drop in Q3 2014.

PLS3 indicator, capturing those employed, unemployed, discouraged, plus all those not seeking a job for reasons other than being in Education & Training - has fallen from 15.1% in Q3 2014 to 13.3% - a drop of 2.7 percentage points y/y accelerated from 2.4 percentage points decline back in Q3 2014.

PLS4 - the broadest officially reported measure of unemployment that includes PLS3, and also underemployed - has fallen to 18.5 in Q4 2014, marking the first reading below 20% since Q1 2009. The measure is down 3.8 percentage points y/y and this marks a major acceleration in decline compared to 2.9 percentage points drop in Q3 2014.

Adding State Training Programmes participants to PLS$ to produce PLS4+STP puts the broader unemployment measure to 22.34%. This is the lowest reading since Q4 2009 and also marks acceleration in decline exactly matching that for PLS4.

Accounting (and this is rough estimation, so be warned) for net outward emigration, however, PLS4+STP measure of broad unemployment rises to 29.8% in Q4 2014. This marks a decline of 2.8 percentage points y/y and acceleration of decline from 2.0 percentage points drop in Q3 2014. However, the rates of decline in both Q3 and Q4 were shallower than for other measures, save PLS 1.

To summarise, labour force levels are worrying and static at and around crisis trough. Broader measures of unemployment show significant improvements, but the levels of unemployment, especially adjusted for state training programmes and potential adverse effects of net emigration are still high and more worrying than the headline unemployment measures suggest. While we do not know exactly, indications are - the data is consistent with at least some declines in unemployment officially recorded by the CSO coming not from jobs gains, but from emigration, state training programmes and exits from the labour force.

For example, compered to H1 2011, there were 23,373 more individuals that were participating in state training programmes who are not counted as unemployed. Furthermore, estimated net 94,800 individuals of working are have left Ireland between end of Q1 2011 through end of Q1 2014. They too are no longer counted in the labour force or in employment/unemployment statistics.


Note:

• PLS1 indicator is unemployed persons plus discouraged workers as a percentage of the Labour Force plus discouraged workers.
• PLS2 indicator is unemployed persons plus Potential Additional Labour Force as a percentage of the Labour Force plus Potential Additional Labour Force
• PLS3 indicator is PLS2 plus others who want a job, who are not available and not seeking for reasons other than being in education or training as a percentage of the Labour Force plus Potential Additional Labour Force plus others who want a job, who are not available and not seeking for reasons other than being in education or training.
• PLS4 indicator is PLS3 plus part-time underemployed persons as a percentage of the Labour Force plus Potential Additional Labour Force plus others who want a job, who are not available and not seeking for reasons other than being in education or training.
• PLS4+STP is the indicator combining PLS4 above and State Training Programmes Participants but excluding those of working age who emigrated (net of those who immigrated). 
• PLS4+STP+migration numbers reported below are reflective of PLS4+STP measure and add estimates of net emigration from Ireland based on latest available data extrapolated linearly over the year from May 2014 and adjusted for working age and labour force participation rate in the economy.

5/12/2013: Irish Education: In Need of Serious Reforms

This is an unedited version of my column in October-November issue of the Village Magazine.


Over the last two decades, Irish economic growth has been primarily driven by a series of financial and investment bubbles. Each one was fuelled by the ad hoc nature of our policymakers’ responses to shifts in global economic trends and their penchant for fetishizing foreign policies fads.

In the mid-1990s, on foot of the US-led dot.com industry explosion, Ireland became the focal point of the investment bubble that saw the state policies and funds inflating the already out-of-touch valuations of the companies. Promising to plug our economy into the Internet of Things, entities from Baltimore Technologies to MediaLab Europe, and everyone in-between, were hovering public and private funds in a race to leapfrog this sleepy island into the 21st century.

In the 2001, at the onset of dot.com hangover, government investment became the new rage. Social Partners climbed over each other to get funding for awe-inspiring schemes usually described as Global Centres for Excellence. This bubble too was based on fads that came to Ireland from abroad, namely from Brussels. To continue fund our fetishes for spending cash we built bungalows at an ever-increasing pace. From 2001 on, Irish economy became an economy built on breezeblocks.

With the bust and the ensuing Great Recession, one could have hoped for a mature review of the policies past and a shift away from our dreamt up grandiose plans. Yet, to-date, the entire response of the two successive Governments to the bust was to feed our hopium addiction. Budget 2009 announcements made amidst the ongoing implosion of the domestic economy promoted aggressively the concept of the Knowledge Economy as our salvation. Truth be told, the Innovation Island is a Potemkin Village.


To see this, one needs to look no further than at our ability to create the base on which a knowledge-intensive economy is built: the human capital.

In my recent speech at TEDx Dublin, I offered a systemic template for assessing any economy’s human capital potential. That system is called C.A.R.E. as it assesses how well a country can Create, Attract, Retain and Enable its workforce’s technical and social skills, talents, creativity, capacity to innovate, engage in entrepreneurship, willingness and ability to take risks. In the nutshell C.A.R.E. is about systems that should put human beings and their abilities at the centre of our society and economy.

Across the entire spectrum of C.A.R.E. systems, education plays a pivotal role. And it is exactly here that many of our policy gaps become painfully apparent.

Firstly, our education system does not enable seamlessly continuous and high quality life-long cycle of learning and training. Secondly, our education system is incapable of sustaining development of such vital aspects of human capital as creativity, ability to manage risks, and engage in ongoing innovation across various domains of knowledge and skills. Thirdly, our education system is inherently elitist. This prevents it from ever becoming a truly functional creator and enabler of human capital economy. With elitism comes the death of innovation and creativity. Fourthly, our education system is riddled with inefficiencies, protectionism and skewed incentives, which lead to sub-standard educational and research outcomes.


Let’s take some of these claims in detail, omitting many considerations for the lack of space.

Since the Finance Act 2004, Irish governments have been working on expanding indigenous R&D activities. Over the last ten years, billions of euros were poured into the tax credits and investment supports. Billions more went to fund higher education institutions’ efforts to sustain research and innovation.

While some third level institutions – namely the top four or five universities – have produced tangible results in driving research output up, the rest remained far behind. Even tope universities have shown weak performance.

The 2013 Academic Ranking of World Universities (ARWU) lists only three universities for Ireland, with best performer, TCD ranked in 201-300th place in the world. UCD and UCC rank in 301-400th places. On that, Ireland’s presence in top 500 universities as ranked by ARWU runs dry.

QS rankings list eight Irish universities in top 600 in the world, with TCD ranked the highest in 61st place. Second-best, UCD ranks 139th. Only six Irish universities make it into world’s top 300. Back in 2009, we had two universities in top 100, and seven in top 300.

Absurd centralization of education and research policies, coupled with budgetary pressures, centralized and politicized research and teaching funding allocations have accelerate the rate of brain drain from top Irish academic institutions in recent years. This, in part, is the driver for poor ranking performance over the recent years. However, even in 2005-2007, with cash abundant, Irish universities performance was far from stellar.

INSERT TABLE HERE

Meanwhile, across the rest of the higher education sector, both teaching and research remained stuck somewhere in the antediluvian age.

Instead of development of modern, research-capable and skills-based adjunct and clinical faculties, majority of our degrees programmes continue to operate on the basis of full-time faculty teaching out of a textbook and into a pre-set, standardized exam. Furthermore, programmes are often staffed with faculty members who are neither research active, nor have any appreciable experience in applied work relating to their teaching.

While top universities around the world are aggressively moving to new teaching platforms and broadening their programmes by erasing the boundaries between various degrees, in Ireland we still treat a slide projector as a technological enabler. Web-based apps, audio-visual tools, data visualisation and other core tech supports are virtually unheard of in even top-ranked Irish universities.

In many university classrooms, students are more technologically enabled than their lecturers.

Absent deployment of modern strategies and technologies, Ireland embraced the three-year degree system. If anything, lack of proper progression in developing teaching skills and tools should have led to a lengthening of the degree programme to maintain fixed quality of the graduates. Instead we opted to trade down the learning curve in pursuit of higher put-through numbers.

All of this stands contrasted by the fact that in our flagship universities there are some individual teaching and research programmes which operate at a world-class level. Irish academia, it appears, can do excellence, just not across the whole system.


On the research side, things are not stacking up in favour of our education being the enabler of Knowledge Ireland either. New Morning IP, the intellectual capital consultancy firm, publishes regular data on patenting activity by indigenous Irish companies, foreign inventors and Irish academic institutions.

Over the last 12 months, 2,580 patents were filed in Ireland by all types of academic institutions and private sector firms. Irish academic institutions accounted for only 9.1% of these filings. Irish private sector firms are considered to be relative underperformers in terms of R&D output compared to their counterparts across the OECD. Yet, of all patent filings, these firms account for almost four times more patents than all Ireland-based academic institutions taken together.

INSERT CHART

Not surprisingly, the European Patent Office data for 2012 put Ireland in 26th place in terms of total number of patent applications and in per-capita indigenous innovation terms, right between such powerhouses of the ‘knowledge economy’ like New Zealand and Cyprus.

The above data correlates with the poor performance by the country academic institutions in attracting private sector research funding. In August, a study by the Times Higher Education, ranked Ireland at the bottom of global league table in terms of private sector funding per academic researcher. Lower rankings for Ireland can be in part explained by poor innovation uptake by many domestic enterprises. However, these rankings also show that our system of higher education is inefficient in producing market-relevant research. Given the importance of such research to teaching and training future cohorts of human capital-rich workers, this is not a good thing.


Irish system of higher education requires serious and immediate reforms.

At the top, we need more flexible, more responsive public policy formation capable of supporting knowledge-intensive, skills-rich and rapidly evolving education. Fields of research and teaching, such as biotech, stem cells research, content-based ICT, remote medicine, human interface technology, customizable design and development technologies and so on all require a mix of skills we currently struggle to provide. Outside these, the world of business and the overall socio-economic make up is changing rapidly. In previous decades, generic management degrees offered a good starting point for on-the-job-learning. Today we need both specialist knowledge and general human capital as the basis for entering management areas of work. In the past, specialism was the differentiator into growth areas in the economy. Today, encyclopedism and ability to cross boundaries of defined degrees is increasingly a valued skill.

Policy level changes require introducing accountability and direct incentives into education system. Introduction of university-set fees are the starting point for this. Yet, even more institutional autonomy will be required to move to a system of higher education where both success and failure are reflected in actual outcomes. Successful institutions should be incentivised to thrive. Poorly functioning ones should be forced to shut down or be acquired by successful ones. Public funding should follow quality of teaching and research, not political considerations of which constituency is next in line for grants.

We must end political remit over the system of academic research and higher education. The best way to do so is by allowing more competition, imposing tighter quality controls and allowing institutions more freedom to price their offers reflective of both demand for and supply of quality.

3/8/2013: Humanities: Don't Just Discount the Vital Set of Skills

Over a month ago, I wrote in the Sunday Times about the topic of balance in education between the humanities and sciences and led this point toward the reforms needed. Last week, Washington Post run a story worth reading on the same subject: http://www.washingtonpost.com/blogs/innovations/wp/2013/07/30/we-need-more-humanities-majors/

My original article and few more links on the topic is here:

http://trueeconomics.blogspot.ie/2013/07/272013-sunday-times-june-30-2013-irish.html

4/7/2013: Jobs Creation by State Agencies

Per press reports today: "IRELAND'S enterprise development agencies created nearly 9,000 net jobs in 2012, new statistics outlined." The reports reference the findings of the Forfas 2012 Annual Employment Survey (linked at the bottom) which showed that "total permanent full-time employment in agency-assisted companies operating in all sectors amounted to 294,785 in 2012, a net increase of 8,975 jobs or 3.1pc."

The quoted statement above is nonsensical and should not have been made. Here's why:

1. These jobs were created by companies working with the agencies, not by agencies themselves. In simple terms, "Ireland's enterprise development agencies" have not created any of these jobs, although they might have been helpful in bringing these jobs to Ireland or helping companies in developing activities that resulted in these jobs creation. 
2. In some instances, working with the agency involves not much more than obtaining an investment from an agency-supported fund that is not actively administered or managed by the agency. In this case, a company 'client' of the agency does not have much of an engagement with the agency at all. In a sense, such jobs creation by the agency amounts to the jobs creation by the financial investors - they provide funds for jobs that are to be created - with or without them, sometimes - but they do not actively 'create' jobs.
3. Net jobs created claim relates to gross increase in total employment during 2012 over 2011 final figure. This increase in its entirety does not accrue to the company activities with the agencies. For example, a mature enterprise can be engaged with an agency in developing new markets for exports. The enterprise might hire new workers for work totally unrelated to its engagement with the agency. Should the credit for these jobs additions go to the agency? Let's put this differently: suppose you broker a deal between companies 1 & 2 to purchase good X by 1 from 2. Should you get credit for company 1 buying from company 2 good A as well? 
4. Net jobs creation on the year 2011 assumes that these are new jobs added. This is also not true. It might be a job that replaces a layoff or redundancy that took place in 2011, but was not filled for 3-4 (or longer) months and thus hiring took place in 2012. What happens? Level of 2011 employment that serves as a base decreases by 1 job, level of employment in 2012 increases by 1. New jobs created = zero, yet Forfas study reports a net jobs creation of 1.
5. The survey includes Ireland-based MNCs, which have multi-annual jobs rolls, so the point (4) above applies to their activities even more significantly than for domestic enterprises. 5,747 of the 8,975 jobs were 'created' in foreign-owned MNCs
6. The survey also includes a number of larger internationally-trading Irish firms. Some of the jobs added could have been created and announced before the company was engaged with the state agency, but their filling was delayed until 2012 when the company was engaged with the agency.
7.  Many of the firms covered in the survey are mature and established firms and are no longer 'assisted' in any meaningful way by the state agencies, since they have long-term established operations in Ireland. A standard practice in business is when a broker of a deal gets a commission for the deal. The broker usually ceases to be compensated for any future deals signed by the two companies engaged in the original transaction once the original transaction is over. In the case of the Irish state agencies, the credit seems to flow unabated regardless of whether their work does directly contribute to the jobs creation or not.
8. In some cases, 'net jobs created' by agencies-assisted companies can be actually poorly accounted jobs rotations within the economy. Example: an agency providing outsourcing service to, say, Nama moves into the country assisted by one of the international FDI agencies in the state. It creates 100 jobs that are counted as new. Yet it takes on 100 staff from the previously closed domestic agency that was not assisted by the agency. Net jobs creation in state agencies assisted companies +100. Net jobs creation in Irish economy = 0.

These are at least some of the reasons why both the 8,975 jobs additions can be questioned and why in general none of these jobs were 'created' by the state agencies and not all of these jobs relate to the activities with which the state agencies are engaged.

There is also a reason to question the very word 'permanent' jobs. If they are permanent, then why has the employment levels in agencies-assisted firms still running below 2006 peak? Permanent is permanent, right?

And it really is not needed to make silly statements of this sort - some of the agencies - e.g. EI and IDA - are doing excellent work in many areas and are wanting in other. This is natural for any agency and any enterprise. The point is not to brow-beat them for the latter nor to ignore it, and it is also not to over-praise them for the former. What is needed is more precise and more transparent accounting and reporting. Alas, Forfas doesn't really deliver on that and never did. Instead we have a report full of chart, numbers and tables that offer little deep insight and even less real analysis.

Full Forfas report is here: http://www.forfas.ie/media/04072013-Annual_Employment_Survey_2012-Publication.pdf

2/7/2013: Sunday Times, June 30, 2013: Irish education system reforms

This is an unedited version of my Sunday Times article from June 30, 2013.

Note: an interesting related article on human capital and values of innovation and creativity linked to education in humanities is here: http://qz.com/98892/the-humanities-are-not-in-crisis-in-fact-theyre-doing-great/ and on the need to link various fields of inquiry in education systems: http://www.farnamstreetblog.com/2013/06/how-great-ideas-emerge/?utm_source=feedburner&utm_medium=twitter&utm_campaign=Feed%3A+68131+%28Farnam+Street%29


Since times immemorial Irish political and business elites have been fascinated by technocratic ideals. From the 1990s on, the state bodies like Fas and Forfas have pushed forward the worldview in which Ireland required an ever-increasing investment in advanced specialist and technical education and training in ICT, chemical, software, and general engineering.

The ICT manufacturing is now largely the story of the past, as is the dot.com bubble. The pharma story is fizzling out on foot of expiring super-drugs patents, with last week’s patent expiration for Viagra being case in point. Biopharma is too small to replace lost exports revenues and shrinking FDI from pharma.

As the latest quarterly national accounts for Q1 2013 released this week illustrate, traditional specialist areas of exports are no longer sustaining growth in Ireland. Stripping out the contributions by the tax-optimising ICT services multinationals, our economy is in a structural decline. Seasonally-adjusted industry activity is down year on year, and goods exports have fallen 9.2%. Investment is down both year on year and quarter on quarter. All areas of activity that are linked to the real exports production in the country are down. This decline is driven by the fact that we are falling behind the innovation curve in creation of new enterprises, products, services and investment opportunities.

In line with Irish experience, this month Finnish authorities were forced to revise down their own forecasts for 2013-2014 economic growth from an average of 1.0% per annum to 0.4%. The downgrade was linked, in part, to Finland's struggle to maintain competitive edge in traditional manufacturing, which is falling behind on products and services design and innovation, despite, or may be even because Finland concentrated too much of its resources on technical ICT investments and skills.

Still, policies of fetishising technocracy roll on. From science advisory bodies and MNCs HQs, to the IDA and Enterprise Ireland, our decision makers are promoting an economy based on software codes, data analytics and cloud computing. No one seems to think that the resulting education and skills strategies alignment with the technical needs of these sectors can risk being reactive to the immediate global markets demands, instead of moving ahead of the curve.

Recent research and news flow from around the world shows that innovation is becoming more focused on increased customization, design and creativity of products and services. These require the exact opposites of the purely technocratic approach to education and training. This is a bigger and longer trend, and we are nowhere near capturing it in our education and training systems.

Ireland's policy leaders pay vast amounts of lip service to the Silicon Valley - world's largest cluster of technological innovation and investment. The development agencies, like IDA and Enterprise Ireland commonly cite it as an inspirational example in the context of Ireland’s need to promote education in maths, hard sciences and tech. Their logic is that concentrations of locally-based technological skills and research translate into Silicon Valley-styled success. Many in Ireland, contrary to the evidence from the US research, still link academic institutions clustering in the Northern California to the Silicon Valley formation and achievements.

This logic is over-simplifying the reality. Recent studies from Harvard and Duke University show that less than half of all CEOs and chief technology officers working in the Silicon Valley firms hold advanced degrees. Only 37 percent of all degrees held by the Silicon Valley executives are in the areas of engineering or ICT. Only two percent held a degree in mathematics. Vast majority of undergraduate and graduate degrees held by business leaders in the Silicon Valley are in the so-called ‘soft fields’ such as business, finance, and arts and humanities. Put simply, there are more liberal arts graduates steering Silicon Valley companies than physical sciences graduates.

What about the skills demands of the cutting edge innovation firms and start-ups? In 2011 Bill Gates and Steve Jobs publicly clashed in their views on the future needs for skills and education. In his speech to the US National Governors Association, Gates stated that education should focus limited resources on areas and disciplines that are positively correlated with jobs creation. This implies technical ICT skills. Days later, Steve Jobs identified Apple's success with "technology married with liberal arts, married with the humanities".

Jobs was not alone in this recognition. Carol Geary Schneider, president of the American Association of Colleges and Universities says that liberal arts-linked skills and knowledge are critical to the long-term employability of the workforce. Schneider called Gates’ ideas on technically-focused demand-driven education as "much too narrow and unsettlingly dated”. “The question to ask is not: which [degrees] do the best in initial job placement, but rather, which institutions are sending their graduates forth with big picture knowledge, strong intellectual skills and the demonstrated ability to integrate and apply diverse kinds of learning to new settings and challenges,” she said. Per Jobs and Schneider, and many other analysts and business leaders, arts and tech deserve shared credit in driving world's most successful and most important innovative companies since the late 1990s.

The link between humanities, arts, design and value added in business and across economies is now widely regarded as the source for future growth. The global investment community is starting to treat design-focused technologies and innovation as a new Klondike.

This month, the Pictet Report, a quarterly publication aimed at professional and institutional investors produced by one of the largest and oldest private banks in the world, is devoted in its entirety to creativity-driven disruptive innovation. The main focus, of course, is on investment opportunities linked to such innovation.

Last week, Brimingham hosted a major design expo aimed at "showcasing authentic, regionally-based brands and upcoming graduate and entrepreneurial talent". Birmingham-Made-Me Expo is an extension of the UK-wide movement and policy nexus that attempts to re-position design-driven innovation and entrepreneurship at the heart of the future economy. The UK Government is pumping significant resources behind these efforts.

In the mean time, shortages of ICT professionals, while still evident in Ireland, are becoming less acute across the broader world. Reports from India show that the country is producing an oversupply of ICT engineers and technicians, with estimated 50,000 graduates facing a prospect of underemployment in the near future. The problem is acute enough for India's Commerce and Industry Minister, Anand Sharma, to plead with London this week to relax visa caps for Indian ICT workers seeking jobs in the UK.

Even in the fields of big data and cloud computing, technical skills are a dime-a-dozen, as I noted in a recent speech at a cloud computing conference hosted by DCU. What is truly lacking in these areas is the ability to creatively enrich data insights via user-centric visualization of data, and development of applications that drive deeper into customisation of business. Being able to capture, store and process data is a mass-produced commodity. High value-added future opportunities will be found in delivering communicable and actionable insights out of this data that can enable products and services innovation and individualisation.

The world of innovative and high value-added economies is moving in the direction of embracing more broadly-based creativity, intelligent design, consumer-focused disruptive innovation. In this light, Irish education system must be reformed to bring it into the future, not to chase the immediate skills shortages. While we do need to maintain strong efforts in areas of education linked to software programming, design and engineering, as well as maths and sciences, we also need to develop complex aesthetic, social and design-intensive capabilities. And the former is probably less important in the longer run than the latter, especially if we can succeed in aligning ‘softer’ skills with entrepreneurial and business capabilities on the ground.

At the pre-tertiary education level, we need to focus our education on developing basic literacy skills in arts, humanities, as well as in sciences and ICT. Early exposure to web-based applications, even some coding, is a good anchor for such literacy. Alongside, we need to revise our curricula for history, literature and arts. Religious education and mandatory Irish must be absorbed into electives. Time and teaching resources freed from these should be used to give students good anchoring in world history, philosophy, logic, and art.

It is time for investing in specialization-focused schools to reflect not geographic distribution of students, but students’ talents and interests. Specialist curriculum schools focusing, differentially, on arts and humanities, as well as those focusing on sciences and ICT should be prioritized for future development in larger urban areas. Every IT school and University in the country should be required to run significant Young Scholars Academies offering regular engagement opportunities for children with talent and aptitude. These Academies can act as formal facilitators for their entry into higher education.
We also need to remove our reliance on standardized examinations for progression of students through the entire system of education.

Third level education must support the objectives of making our workforce skills and knowledge base broader. We need restore a four-year degree system. Third level degrees curriculum must explicitly require, not just encourage, students’ exposure to studies beyond their immediate major. Students in technical fields must be exposed to basics of humanities and arts. Students in arts and humanities must be literate in ICT and sciences.

Fourth level education too should be used to further enhance the above processes. We need to develop cross-collaborative MSc and PhD degrees and provide for supplementary degree programmes (joint MSc and diploma packages) for students interested in working on the boundaries of diverse disciplines, such as, for example, creative arts and technology, quantitative analytics and marketing, behavioural economics, and product and servcies design. Industry experience and achievement should form the foundation of enlarged and better-structured adjunct faculty. Subject to peer review, industry research should count as an integral part of academic and adjunct faculty evaluations.

In life-long learning, we need flexible programmes allowing for research-focused studies that can stretch over a number of years. Linked directly to work-related projects and topics, these should lead to degrees being awarded in the end, subject, again, to mature students engaging with minimum of a broader curriculum outside their field of competency.

Box-out:

This week, CSO published the latest data on new planning permissions granted in Ireland, covering Q1 2013. The publication was greeted with a chorus of 'good news' reports, as data showed increases in the Number of Dwelling Units approved. Per official statistics, these rose 31% for houses, and 3.9% for apartments. All increases reported reference quarterly rises. There are several problems with the upbeat reports, however. Number of permissions for houses actually fell year-on-year by a significant 9.31% reaching the second lowest level in history of the data series. Number of permissions for apartments also fell, by 18.4% on Q1 2012. More ominously, aggregate activity in the construction sector, as measured by the new permissions granted, shrunk across the board. Total number of planning permissions granted in the state was down 1.35% quarter-on-quarter and down 2.76% year on year, hitting absolute lowest point for any quarter since Q1 1975. Across the board, it is pretty safe to say that the Q1 2013 data does not warrant much enthusiasm, despite the aggressive spin put on it by some media reports.

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:

Economics 02/06/2010: Regional variations in labour markets

While working on a project relating to economic policies in Ireland, I was compiling data on regional variations in various series. Here is a set of interesting graphs detailing the labour force differences across the main regions.

Each data set reflects the latest available QNHS data through Q3 2009 and each is presented in two charts - full history and a snapshot of the crisis dynamics since 2007.

First the unemployment rates
Notice that since time memorial Dublin runs at or below average in terms of unemployment rates. This pattern is no persistently broken, with Dublin unemployment performing remarkably better in this crisis. Also note that the top tier of unemployment black spots in the country also remains relatively resilient over time. This has to put to test any assertion that state policies to deal with longer term unemployment are working.

Take a look at a closer time frame, relating to the current crisis:
You hear a lot about the MNCs and exporting companies holding our line from a total collapse of economy. Well, say the same for Dublin, South-West and Mid-East. Of course, the latter is largely, hmmm, Greater Dublin, really.

The chart above also hints at something more disturbing here. Recall that early rounds of layoffs impacted predominantly construction sector and associated services. Well, look at Midlands and South-East. It does appear that the two regions were experiencing significantly faster rates of jobs losses in the early parts of the crisis than any other region.

One wonders what is the exact distribution of jobs in the country relative to places of residence. This, of course, is a long running question that CSO is refusing to ask on QNHS. What trouble can there be, folks, in asking a recipient to state where they physically work. It would tell us a lot about people's commuting patterns (helping to better plan transport systems) and about where people are actually employed (helping us to better plan associated business services provisions). But no - CSO staunchly refuses to ask. Why? Because the state is most likely unwilling to admit that the National Spatial Strategy and the IDA/EI mandates to produce jobs for regions is failing. Ireland has natural hubs of jobs and jobs creation potential - Greater Dublin area, Cork area, Galway-Limerick area. This is where jobs concentrate and where companies want to be. So how about a challenge to CSO - ask an important question, will you? Have some gumption...

Back to data: labour force participation rates next
What the charts above show is the precipitous decline in labour force participation rates since the peak of H2 2007. And these declines are worrisome, for we normally tend to ascribe the destructive effects of the economic crises to unemployment, forgetting about those who leave the work force altogether. Well - take a look at charts above.

Another disturbing realization on the foot of the above charts is that regions with lowest participation rates also tend to be regions with higher unemployment. This is important because it signals that even in a small country like Ireland, mobility between residential location and work location is still restricted (by distance, lack of proper roads, transport shortages etc). It also suggests that in the long run, areas with higher unemployment tend to become traps for non-participation in labour force. The vicious spiral of being jobless in an area with no jobs creation leads to becoming disillusioned and dropping out of the work force for good.

And this implies higher rates of overall dependency. Remember - these are numbers for able bodied adults. So if we take the rate of unemployed and add to it the rate of those who are not in the labour force, we get a proportion of population that needs someone else to work for them to sustain themselves. Now, a caveat here - of course some of those who are not in labour force are gainfully engaged in work at homes - non-market activities that are productive and include, among other very important ones, like carrying for the elderly or ill, raising children etc. These, however, are not the majority in these numbers. Nor are they likely to be distributed predominantly into higher dependency areas of the country. So conclusions presented below stand:
Predictably, the lowest dependency ratios are in high work regions: Mid-East and Dublin. And although these ratios rose in these two regions through the crisis, they are still well below the national average and leagues below the dependency ratios for the likes of Border and South-East regions. Here's a closer look:
Of course, what these trends mean is that throughout the entire series duration (from 1998) Dublin and Mid-East have acted as a subsidy generating regions for the rest of the country. Someone had to pay for the higher dependency rates in regions that are above country average (since the welfare rates are not varied geographically).

Economics 20/04/2010: Fas training for ex-Dell workers

Last week, media report (Silicon Republic, 16/04/10, 300 out of 1,900 former Dell workers received FAS training) provided some evidence that was supposed to show us just how effective Fas training systems can be.

"The Steering Committee responsible for advising on the implementation of the European Globalisation Adjustment Fund (EGF) for the 1,900 former Dell workers in Limerick has revealed that 300 have received FAS training so far... The committee ...is chaired by Oliver Egan, assistant director general in FAS. Another meeting is scheduled for towards the end of this month."

So hold on - so far, we know, there were meetings. And more meetings will happen.

"The Minister for Labour Affairs, Dara Calleary TD, commented: “There is a lot which has been done already and is being done with EGF support in the mid-west and which is perhaps only now starting to become visible”."

What is Minister on about here? (italics are mine): "In relation to concrete measures the Minister highlighted:

• The guidance service FAS provided to more than 1,900 former workers to date with some 300 persons receiving training in 2009 [note: this is a standard practice for large scale layoffs. How many of these 'graduates' actually found a job?]
• That in the first quarter of 2010, training and educational activity has increased with more than 200 EGF clients currently enrolled in evening classes, more than 250 EGF clients are registered with the Limerick City Adult Education Service [is that registration a pre-condition for some additional unemployment or other financial support?];
• That both Limerick Institute of Technology and University of Limerick have implemented a broad range of educational programmes for EGF clients [how many are enrolled? what types of programmes? what is the expected completion date?];
• That more than 150 clients having availed of EGF training support grant administered by FAS to date [so we have 1,900 workers laid off enrolled total, 300 completed Fas training, 150 are receiving a special subsidy, 100 more are 'registered'];
• That Fas runs a community-based initiative for more than 100 EGF clients [community-based initiatives rarely lead to gainful employment];
• That some 225 clients are registered with the City and County Enterprise Boards and are undertaking start-your-own-business programmes [Who administers these programmes? What are graduation rates and what are the success rates for new entrepreneurs?];
• The commencement of a dedicated EGF internship programme in partnership with the medical devices sector which will see more than 80 clients attending a series of workshops in April with successful candidates progressing into the full internship programme in June 2010 [This is perhaps the closest that Fas would ever come to giving these workers real hope of a gainful employment].

So, over 6 months after the layoffs, there are absolutely no hard numbers Minister Calleary can supply to show any success in progressing the former Dell workers into gainful employment. Surely, this is disturbing, given that Fas work does not come cheap and given that Minister has managed to set up a score of various schemes and taskforces - none of which are free to the taxpayers.

"I have committed to reviewing the overall programme in June to ensure that we are maximising the reach of the programme and to identify any additional or innovative measures that might be further considered,” Mr Calleary said. Really? So far, there are no indications that the review is going to be effective in assessing Fas' effectiveness in designing, administering and deploying these programmes.

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.