Crisis won’t be over until we tackle joblessness

One of the most fundamental rights of any person who wants to work is to be given the opportunity to do so.

Unfortunately, large tracts of the developed world are not providing that opportunity at the moment. Today the unemployment rate in the EU 27 stands at 11% of the labour force, equivalent to 26.5m people, and in the eurozone the rate stands at 12.2%, or 19.3m people. In Spain the rate stands at 26.9%; 26.8% in Greece; 13.7% in Ireland; 12.2% in Italy and 10.9% in France.

These are frightening levels of unemployment and potentially represent a very dangerous situation from a political stability perspective. Unemployed men in their 20s have been responsible for many atrocities over the years, not least the rise of Nazism and the subsequent horrific war.

Anybody who believes the long-running eurozone crisis is over needs look no further than the awful labour market situation across the zone to realise that it is far from the case. If the eurozone economy were functioning properly, it would be generating employment, but clearly that is not the case. Spiralling unemployment reflects a total lack of economic growth, and until that situation changes the eurozone crisis cannot possibly be described as being over.

This week the OECD released its latest assessment of employment prospects for the 34 member countries. It presents a pretty downbeat assessment of employment prospects for the region and it forecasts that by the end of 2014, 48m people will be out of work. Unemployment is projected to rise in France, Italy, Spain and Greece. This is a disturbing forecast, but is very difficult to argue with.

Here in Ireland, the lack of job creation and the unemployment crisis are very evident, although one would be forgiven for missing that point if one observed what has been going on in our dysfunctional parliament over recent weeks. How I wish that our politicians would focus on the really important issues for all of the people who want to work and cannot do so.

Ireland’s unemployment can be characterised as having cyclical and structural elements. Clearly the collapse in the economy has exacted a very heavy price in terms of employment levels, but there is also a massive structural issue as demonstrated by the loss of 177,600 jobs in the construction sector since 2007. The structure of our economy was totally skewed by the exaggerated size of the construction sector, and that structure is now in tatters.

The Government’s policy response has got to include both macroeconomic and structural policies. We need to see the Government pursuing policies aimed at growing the economy. While the current savage fiscal correction continues, we are unlikely to see any cyclical improvement in the economy that would create meaningful and sustainable employment.

The Government can implement micro-policies that could stimulate employment in certain sectors. For example, the Vat reduction from 13.5% to 9% for some tourism services has been very successful and should be extended into 2014. Likewise, a stimulus package for the auto industry should be seriously considered.

The objective of Government should also be focused on reducing the costs of doing business. Commercial rates, commercial rents, employers’ PRSI, local authority charges should all be looked at.

At a structural level, we need to look closely at the impact of the interaction between the tax and social welfare systems in employment creation, and ensure that insofar as possible, those workers being displaced from sectors of the economy in decline are helped to move into other sectors. We also need to look at the role of venture capital initiatives in promoting start-ups.

There is a lot that can be done; I just wish our policymakers started doing it.


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