Employment and Unemployment: What do Sectoral and Demographic

Patterns Tell Us?

Aedín DorisDepartment of Economics, Finance & Accounting,

NUI Maynooth

Unemployment Rates

19981999

20002001

20022003

20042005

20062007

20082009

20102011

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0Males

15-19 20-24 Total

19981999

20002001

20022003

20042005

20062007

20082009

20102011

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0Females

Labour Market Reflects Wider Economy

• GNP has fallen by 17.4% since 2007 Q4Result…• Employment has fallen by 14.7% since peak in

2007• Average hours down 2.4% 2008-2011• Weekly earnings down 0.5% over same period

Not Just Any Old Recession…

• Financial crises have greater effects on employment than ‘normal’ recessions– Imbalances in economy that led to crisis are quickly

reversed– Reduced access to credit for firms– Greater uncertainty– In housing crashes, negative equity problem can delay

labour market adjustment• Deeper and more prolonged period of

reallocation of workers

Underemployment

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110.0

5.0

10.0

15.0

20.0

25.0

30.0

UnemploymentS1: Unemployed + DiscouragedS3: Unemployed + Marginally Attached + P-T UnderemployedNew S3

Vacancy Rates

• The Job Vacancy rate (number of vacancies as proportion of total posts) is 0.7%– Average in Eurozone area is 1.6%– Pre-crisis Eurozone average was 2.3% – Only countries with lower rates are Latvia and

Portugal• Tells us that job mismatch is not a significant

problem (so far)• Problem is insufficient jobs

Unemployment Rates by Education Level

0.0

5.0

10.0

15.0

20.0

25.0

30.0Males

All Primary Junior/Inter Cert

Leaving Cert PLC 3rd Level Non Degree

Degree

20022003

20042005

20062007

20082009

20102011

0.0

5.0

10.0

15.0

20.0

25.0

30.0Females

Employment, Selected Sectors (000s)

2004 2005 2006 2007 2008 2009 2010 20110

50

100

150

200

250

300

Farming Food Products Pharmaceuticals

All Construction All Financial & Insurance All Property

All Hospitality & Tourism Wholesale & Retail

Job Creation and Destruction: Lawless, 2012

• Data come from Forfás Employment Survey• Average job creation rate 1972-2006 was

10%, never fell below 7%– Collapsed to 5% in 2009– Slight recovery to 7% in 2010

• Average job destruction rate was 8%, never rose above 10%– Rose to 16% in 2009– Fell to 9% in 2010

Wage Responsiveness

• EHECS shows that in 2008-2009, 65% of firms reduced their wage bill by over 2%– But mainly by reducing employment

• Average hourly earnings rose by 2.5%• Average weekly earnings fell by about 0.5%• Problem with EHECS: compositional changes

Wage Responsiveness II

• CSO Job Churn data show that job stayers’ average weekly pay fell by 3.3% in 2008-2009

• Greater falls for men than for women• Greater falls for young workers than for older ones• Sectoral variation:

– Services: -3.9%– Industry: +1.2%– Construction: -4.8%– Accommodation & Food: -5.6%– Manufacturing: +0.9%

Participation Rates

19981999

20002001

20022003

20042005

20062007

20082009

20102011

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0Males

15-19 20-24 25-34 35-44 45-54

55-59 60-64 Total

19981999

20002001

20022003

20042005

20062007

20082009

20102011

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0Females

Participation Rates

19981999

20002001

20022003

20042005

20062007

20082009

20102011

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0Males

15-19 20-24

19981999

20002001

20022003

20042005

20062007

20082009

20102011

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0Females

Proportion of Population Aged 15+ in Education

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

Male Female

• Of males aged 15-24 who became inactive between 2008 and 2010, 86% became students (Conefrey, 2011)

• Slight drop in educational participation for females out of labour force – 0.7% drop 2008-2010– Compared to 50.7% rise for males

• Suggests males were being ‘pulled’ from education system into work during boom

Conclusions I

• Unemployment problem is a demand-side one• Suggests that supply-side solutions won’t reduce it– But they can direct the employment that’s available in the

direction of those who’ll benefit most– Cycle individuals vulnerable to long-term unemployment

through short-term jobs– Benefit system needs to work efficiently

• Redress pull from education system during boom, especially for males– Problem with training: training for what?

Conclusions II

• Demand-side policies preferable– Subsidies for net employment increases can work, but they’re

expensive• Choose labour-intensive infrastructure projects• One demand-side solution that doesn’t require

government expenditure: reducing minimum wage, but…..

• Non-labour market policies are employment policies too:– Addressing non-labour costs of firms– Policies to reduce savings rate– Credit access for firms