Belfast Telegraph

Thursday 28 August 2014

The human toll of a severe recession

The number of unemployed people has increased

If there is one thing worse than the severity of the Great Recession we are living through, it is its longevity.

Normal recessions can be expected to last an average 18 months. Financial recessions do indeed take longer. In human terms, if not exactly statistical ones, even the 1980s can be said to have scarred the country for five years, from 1982-87.

In one particular area - employment - a prolonged slump does more damage than a steep, short fall in income. This is especially true of long-term unemployment, which is usually defined as being out of work for more than a year.

It is simple arithmetic. The longer an economy sheds jobs, or even fails to generate extra ones, the more people there will be who lost their job, or first started looking for one, more than 12 months before.

With employment having peaked in 2007, it is therefore no surprise to find that the number of long-term claimants on the Live Register has topped 200,000.

That is an increase of more than 5% on last year. By definition, this represents changes in the labour market more than 12 months ago. Total male unemployment has increased by 50,000 since 2009, but the long-term number within the total has risen from 30,000 to 140,000.

Analysing the employment figures for the first three months of the year, the Central Statistics Office noted that it was the first time since the late 1990s that the long-term unemployed made up more than half the total of unemployed.

Particularly in the jobs market, the Great Recession has plunged the country back 15 years. But it is worse even than that.

The late 1990s was a period of growth and falling unemployment. We have passed that mark while still on the way down. It also illustrates how long job recovery takes, since most analysts date the start of the recovery to 1987.

There is also the uncomfortable fact that these figures may understate the scale of the problem. The strict definition of employment - one hour's work in a week - finds 188,000 long-term unemployed, while the Live Register number tops 200,000.

The gap is smaller for long-term unemployed - presumably, and depressingly - because a higher proportion have not worked at all in 12 months. The figure is certainly around 200,000.

The harsh truth is that government efforts can make only a marginal impact on jobs. Ireland's case is particularly difficult because of more than 100,000 jobs lost in construction.

Those jobs are not coming back, and those who had them - mostly younger men - may have limited education and skills to equip themselves for other work.

Since 2009, however, unemployment has risen faster among women than men, as the crisis deepens in the retail and hospitality sectors.

Just as alarming as discouragement is the job losses among the 20-24 age group.

Irish firms appear to have cut costs mainly by reducing jobs and hours worked rather than cutting wages. One can see that this is easier, and that it is easiest of all to get rid of junior staff, but it may do more long-term social and economic damage than asking those in work to take less pay.

We will have to wait for the end of the Great Recession globally to see any significant increase in jobs. Stimulus programmes can contribute, but talk of creating 100,000 jobs - a 5% increase in employment - seems highly fanciful.

The other idea - that there is a growth machine waiting to crank into action if the austerity programme is eased or slowed - is even more fanciful.

Government's best role is to equip people for jobs as and when they do become available. Here the record is lamentable.

The Government has its 'Pathways to Work' programme to give the unemployed more direct assistance in training and job-seeking, and to get tough on those who do not seem particularly keen to work or train.

In a recession like this, some 'make-work' projects to keep people in touch with the world of employment may have merit.

Abandoning good ideas because they were not implemented properly, instead of implementing them properly, is becoming something of a habit.

Without improvements in all these areas - many economists fear - recovery, when it comes, could quickly run short of suitable workers and peter out.

That would represent a tragedy to follow a disaster.

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