Ciarán Nugent: Young people likely to lose out again for jobs after Covid

Earnings growth for workers since the bank bailout just over 10 years ago has been unequal, with wage growth for people on salaries driving moderate average wage increases for the economy as a whole. 
Ciarán Nugent: Young people likely to lose out again for jobs after Covid

The evidence suggests that, once again, young people have been most likely to be negatively affected over the past year. Picture: Niall Carson/PA Wire

In 2019, before the pandemic, labour market conditions had not recovered from the impact of the financial crisis of over a decade earlier, especially for young people. 

The share of under 35s in employment was still way down relative to the Celtic Tiger era, while conditions for those in employment were more precarious, with more part-time work and temporary contracts.

Despite increasing levels of education across the board, the share of high-end employment did not increase for workers under 35 between 2012 and 2019 either, and a large share of over-qualified workers in Ireland, relative to other high-income EU countries, persisted. 

Precarious employment

In recent years, there has been particularly strong growth in employment in the accommodation and food sector. That's the part of the economy that is the most precarious and  has the lowest average earnings. 

Earnings growth for workers since the bank bailout just over 10 years ago has been unequal, with wage growth for people on salaries driving moderate average wage increases for the economy as a whole. 

Wages for the rest have hardly budged in a decade. 

Ireland stands out among high-income EU states in terms of inequality in hourly wages and young people’s wages, regardless of broad occupational groups, including professionals, managers, craft workers, and clerical workers. 

Hourly wages are down relative to older workers since 2008, and this inter-generational gap has widened more in Ireland than in any other country in the high-income group

The 2020 data  filtering through gives us a glimpse of the unequal impact the current crisis has had on various groups. 

However, it could take six months for the dust to settle and a further six months until we can see the full impact of the Covid-19 crisis. 

The evidence suggests that, once again, young people have been most likely to be negatively affected over the past year. 

Disproportionate numbers of young women —and especially young married women, likely due to a dysfunctional childcare system made worse by the lockdowns — left the labour market in 2020. 

Similarly, people with lower levels of education, people working in occupations with relatively low skill requirements, and those working in sectors shut down by decree (including accommodation, food, wholesale and retail, and construction) were more likely affected.

Over the medium-term, more high-paying sectors may well be of concern to policymakers, with substantial numbers of workers not expecting to return to their employment. 

Approximately 20% of workers affected by the Covid fallout, or 255,000 people, don’t expect to return to the same job

Over half of this group are in high-end jobs such as information and communications, financial, insurance and real estate, professional, scientific and technical activities, education, human health and social activities, and industry. 

The focus after the pandemic should be to tackle the unemployment crisis and promote decent work with decent pay that provides a decent standard of living. Any job won’t do. 

Consumer spending is likely to slow significantly, with unemployment numbers up and the uncertainty of economic conditions, as was the case a decade ago. However, current signals from policymakers do not inspire confidence that the lessons of the 2008 crisis have been learned. 

Language of austerity

The prominence given to low wage and precarious employment in hospitality, the focus on debt accrued to pay for Covid, the fiscal rules on EU governments (that have been suspended), and the echoing of claims by employers that they can’t attract workers at subsistence wages to work in dangerous conditions due to the level of the pandemic unemployment payment are all the language of austerity. It is the language of a vision of development based on a low-wage economy. 

The announcement recently of an updated version of JobBridge and what amounts to a new 'any job' activation for the unemployed with the ending of local employment services show that policymakers are again prioritising keeping wages low over promoting decent work with decent pay.

Internationally, there has been a paradigm shift and an acknowledgement (by many, if not most) that the austerity after 2008 was a terrible mistake

There is a burgeoning consensus, including the International Monetary Fund, the OECD and the ESRI, that now is time to borrow for capital projects to support employment. The German government is even suspending its borrowing rules. In Ireland, many policymakers seem more concerned with protecting their failed records of austerity.

The financial cost of borrowing is highlighted, but the long-term economic cost of not borrowing is completely omitted from the conversation.

State intervention

The State must intervene to support employment growth and to create direct public sector employment in strategic sectors, in particular for a low-carbon economy. 

A retrofitting programme to modernise the social and public building stock is an area that offers high returns for the Irish economy, State and society.

Public research and development spending is extremely low in Ireland relative to peers in Europe. It could be increased to realise the potential for wind and tidal energy technologies to create decent jobs.

Without significant intervention, the labour market will take years to recover. Working conditions still hadn’t recovered by 2019 from the crisis of 2008, even with hundreds of thousands of young people forced to leave the country. This time they will have nowhere to go and the country can’t afford another lost decade.

  • Ciarán Nugent is an economist at Neri, the Nevin Economic Research Institute.

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