Young ‘suffer most by being jobless’

The head of the Nevin Economic Research Institute has warned that the percentage of eligible people in work here is stalling, and it is vulnerable young people who are suffering most.

Tom Healy pointed out that the “employment rate” stopped rising in the first six months of this year and has even fallen. The employment rate is the proportion of people aged 20-64 (the so-called working age population) who are in paid employment.

The rate here for the first quarter of 2014 was 66%. That compared to an average across the EU of 68%. Other member states such as Sweden, Germany, Britain, and the Netherlands were more than 75%.

Mr Healy said the good news was that the employment rate had been edging upwards since the beginning of 2012, adding that the recession had hit Ireland particularly severely with a “sharp and sudden” drop in employment rates in 2008 and 2009 reversing significant progress made in the previous 20 years.

Nonetheless, he said, since 2010, the employment rate had been significantly below the average EU 28 rate and, in the first half of 2014, it had not only stopped rising but had even fallen.

“Although official estimates are not provided for the second quarter of 2014, it is likely that it dipped under 66%,” he said.

“This is worrying for two reasons.

“The pace of the jobs recovery may have run out of steam just when we thought that we were looking at a ‘growthless job recovery’, in contrast to the previously more familiar ‘jobless recovery in GDP’ that is observed in previous recessions.

“The pace of recovery is not sufficient to reduce unemployment quickly enough to avoid what some economists call hysteresis.”

Unemployment hysteresis occurs when, as unemployment increases, more people adjust to a lower standard of living. As they become accustomed to the lower standard of living, people may not be as determined to achieve the previously desired higher living standard even when the labour market returns to normal.

“Hysteresis may spell a period of prolonged exclusion from meaningful employment and work experience-rich training opportunities,” said Mr Healy.

He added that one group particularly vulnerable to hysteresis were young people shut out from labour market opportunities and quality employment conditions.

“The recession took a heavy toll on youth employment,” he said. “While the rate of youth unemployment is falling since 2012, it is still much too high. A particular sub-group in the youth population are those who are ‘not in employment, education or training’ [NEET].

“The NEET rate in the Republic was the 8th highest in the EU in 2013. Focussing on the population of early leavers [18- to 24-year-olds] the employment rate, comparable to the overall rate of 66%, was 21% in Q1 and 25% in Q2. While these estimates are subject to sampling error, they indicate a lower employment rate than any time since the start of the recession in 2008.”