It's official - Government employment policy is failing

Don’t be surprised if unemployment remains high if the Government pursues job-cutting measures. By Michael Taft.

It’s official. The Government’s employment policy is failing. This finding comes from the Government itself, in the form of projections contained in yesterday’s Medium Term Fiscal Framework. The projections are chilling and depressing. Let’s first turn to employment.

employment 2012 to 2015In April last year, the Government was somewhat bullish about employment growth; projecting that the numbers at work would grow by 102,000 by 2015. After the launch of the Jobs Initiative and the Action Plan for Jobs, the Government lowered their forecast to 67,000. Yesterday, they lowered their forecast again – to 18,000.

In 2011, there were 1,810,000 people working (this includes full-time and part-time). By 2015, the Government expects this to rise to 1,828,000. After all the Government’s initiatives, IDA job announcements, protestations that jobs remains at the core of public policy – the Government itself admits that net job creation will only be 18,000 by 2015.

Let’s look at the annual projections.

employment projections to 2015In April last year, the Government expected employment growth to start this year, increasing by 37,000 in 2012 alone. Now, the Government accepts that employment will fall this year (by 22,000) and won’t start growing until 2014. In 2015 net job creation will only be 24,000.

This is grim. During the lifetime of this government, employment will rise only marginally.

We can now see why unemployment is barely moving. In April last year, the Government projected that the unemployment rate would be 10% in 2015 – not great at all, but at least showing some movement downwards. Now the Government projects unemployment to be 13%. That shows almost no movement at all.

unemployment projections to 2015When the Government took office unemployment was 14.2%. By 2015 it is expected to be 13% – a reduction of 1%.

We should acknowledge the difficulties of reducing unemployment – especially after it skyrocketed under the previous government following the property crash. Unemployment is like a huge ship – you first have to stop it, turn it around and start it going in a different direction; not an easy thing to do in the short-term.

However, the Government has pursued policies that have (a) not addressed the underlying problem and (b) actually exacerbated the situation. In regards the former, they have treated unemployment as a supply-side problem (issues of training, wage levels, employers’ PRSI, etc.) when in fact it is a demand-side problem. When you have nearly 30 unemployed for every job vacancy, the problem lies in the lack of demand for labour.

But they have actually worsened the situation by budgetary measures that have actually depressed the demand for labour – cuts in investment and public spending along with regressive tax increases. ICTU projected that the last budget cut nearly 30,000 jobs out of the economy while the Nevin Economic Research Institute projects that Budget 2013 could cut another 29,000 out of the economy. Don’t be surprised if unemployment remains high if the Government pursues job-cutting measures.

The Government has admitted its current policies are not working. They are not generating much in the way of jobs, they are not reducing unemployment. Following this admission, they should now launch a new jobs policy, or at least launch a short, sharp national debate over what that policy should be.

But if official spokespeople come forth and state that they remain focussed on jobs, that they will double their efforts, that jobs remain at the heart of policy – we will know:  not only do we have a Government out of touch with reality, it is even out of touch with its own official projections.