Tom McDonnell, Medium-term trends in the Irish labour market and possibilities for reform
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The document summarizes medium-term trends in Ireland's labor market from 1998-2017. It finds that while employment doubled over this period, the employment rate remains below other Northern European countries. There was a shift away from industry and agriculture towards healthcare and education. Female labor force participation lags the EU average, and regional employment growth has not significantly favored Dublin. Wage and productivity growth in Ireland has also been comparatively weak. Key barriers to employment include the high cost of childcare and lack of an industrial policy following industry declines. Volatility in employment may be difficult to avoid in small open economies.
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Tom McDonnell, Medium-term trends in the Irish labour market and possibilities for reform
- 1. Medium-term trends in the Irish labour market and possibilities for reform Dr. Tom McDonnell Senior Economist NERI (Nevin Economic Research Institute) Dublin [email protected] 6th Annual Labour Market Conference 22nd May 2018
- 3. Working Age Population by Gender (000’s), ROI, 1998-2017 The 2007-08 crisis halted rapid growth in working age population
- 4. Labour Force Participation (LFP) Rates (ILO) by Gender, ROI, 1998-2017 Female LFP was increasing 1pp per year from 1998 to 2007
- 5. Male LFP Rates by Age, ROI, 1998-2017 Major shifts are for 20-24 years and 60-64 years
- 6. Female LFP Rates by Age, ROI, 1998-2017 LFP is up over 25pp for 45-54 years, has doubled for 55- 59 years and more than doubled for 60-54 years
- 7. LFP Rates by Region, ROI, 1998-2017 Consistently strongest in Dublin/Mid-East and Weakest in Border
- 9. Total Employment, ROI, 1998-2017 Female share increased over 6 pp between 1998 and 2013; Employment had been sub 1.2 million as recently as 1993 – doubled in 15 years
- 10. Composition of Employment by Employment Status, ROI, %, Q3 Type 1998 2002 2007 2012 2017 PP shift 1998 to 2017 Self- employed (paid employees) 5.5 5.2 5.4 4.4 4.6 -0.9 Self- employed (no paid employees) 11.4 10.5 10.0 10.9 10.1 -1.3 Employees 81.6 83.1 83.7 83.7 84.7 +3.1 Assisting Relative 1.5 1.1 0.9 1.0 0.6 -0.9 Notable shift away from ‘assisting relative’ - absolute decline Consistent shift away from self-employment - though no absolute decline
- 11. Composition of Population Aged 15 Years and over by Principal Economic Status, ROI, % Type 1998 2002 2007 2012 2017 PP shift 1998 to 2017 At work 52.7 56.6 60.0 49.9 55.5 +2.8 Unemployed 5.3 4.1 3.7 10.7 5.5 +0.2 Student 9.9 9.9 9.1 10.6 10.3 +0.4 Engaged on home duties 20.3 17.8 14.9 14.0 8.9 -11.4 Retired 8.9 8.5 8.7 10.8 14.7 +5.8 Other 2.9 3.1 3.6 4.0 5.1 +2.2 Only negative shift is – ’engaged on home duties’ – declines from 1 in 5 to 1 in 11 Largest positive shift is for ‘retired’ – increases from 1 in 11 to more than 1 in 7
- 12. Low Hours (under 20) as a Share of Employment, ROI, 1998-2017 ‘Low Hours’ became more prevalent between 1998 and 2011 – much higher incidence for females
- 13. Variable Hours as a Share of Employment, ROI, 1998-2017 Notable downward shift since 2012
- 14. Employment Rate (15-64), ROI, 1998-2017 Sharp drop for males between 2007-09 (construction sector); Female rate is up 10pp since 1998 but male rate has declined
- 15. Employment Rate by Age, ROI, 1998-2017 Major shifts are for 55-59 and 60-64 group (up) and 20-24 group (down)
- 16. Male Employment Rate by Age, ROI, 1998-2017 Note decline for 20-24 years
- 17. Female Employment Rate by Age, ROI, 1998-2017 Substantial increases for older cohorts
- 18. Sectoral Employment, ROI, 1998-2017 Wholesale/retail has replaced industry as the largest sector – hollowing out of the middle Note volatility in construction as well as the rise of ‘healthcare activities’
- 19. Composition of Employment by Economic Sector, Seasonally Adjusted, Q3 ROI, % Type 1998 2002 2007 2012 2017 PP shift 1998 to 2017 Agri,culture, forestry, fishing 8.4 6.5 5.0 5.8 5.0 -3.4 Industry 20.1 17.5 14.3 12.4 13.0 -7.1 Construction 6.9 8.5 10.5 4.4 5.8 -1.1 Wholesale & Retail 14.1 14.3 14.6 14.7 13.8 -0.3 Transportation & Storage 4.2 4.7 4.0 4.4 4.3 +0.1 Accommodation & Food Services 6.6 6.1 6.4 6.6 7.4 +0.8 Information & Communication 4.1 4.3 3.7 4.9 5.4 +1.3 Financial, Insurance & Real Estate 4.1 4.5 5.0 5.5 4.9 +0.8 Professional, Scientific/Technical 4.6 5.0 5.7 5.7 5.9 +1.3 Admin & Support Services 3.2 3.6 4.5 4.1 4.2 +1.0 Public Admin & Defence 4.2 4.5 4.5 4.7 4.4 +0.2 Education 5.9 6.0 6.2 7.4 7.6 +1.7 Human Health & Social Work 7.8 9.3 10.6 13.7 12.8 +5.0 Shift away from ‘industry’, ‘agriculture’ and towards ‘health’, ‘education’
- 20. Composition of Employment by Occupational Group, ROI, % Type 2007 2012 2017 PP shift 2007 to 2017 Managers/Directors/Senior Officials 6.3 7.9 8.8 +2.5 Professional 15.0 18.7 19.9 +4.9 Associate Professional & Technical 9.3 11.3 12.3 +3.0 Administrative & Secretarial 12.0 11.0 9.6 -2.4 Skilled Trades 19.8 14.6 14.2 -5.6 Caring, Leisure & Other Services 6.8 8.0 8.0 +1.2 Sales and Customer Services 8.8 9.3 7.9 -0.9 Process, Plant & Machine Operatives 7.6 7.3 7.5 -0.1 Elementary 14.1 11.6 11.1 -3.0 Other/Not Stated 0.3 0.4 0.5 +0.2 Shift away from ‘skilled trades’ and towards ‘professional’
- 21. Proportion of Employment in Dublin and outside Dublin, ROI, 1998-2017, % Narrative that employment growth in Dublin is outperforming the rest of ROI is not borne out......
- 22. Composition of Employment by Region, ROI, % Type 1998 2002 2007 2012 2017 PP shift 1998 to 2017 Border 9.7 9.8 10.2 9.5 10.8 +1.1 Midland 5.2 5.4 5.9 5.7 5.4 +0.2 West 9.3 9.5 9.6 10.0 9.2 -0.1 Dublin 32.0 30.7 29.6 29.6 30.1 -1.9 Mid-East 10.5 11.1 11.7 12.1 11.8 +1.3 Mid-West 8.7 8.6 8.0 8.2 7.9 -0.8 South-East 10.1 10.5 10.4 10.0 10.3 +0.2 South-West 14.6 14.4 14.7 14.9 14.4 -0.2 Surprisingly there has been a compositional shift away from the regions with the 4 largest cities..........2nd most positive shift has been in the Border region – a peace dividend? – will Brexit reverse it?
- 24. Total Unemployment (000’s), ROI, 1998-2017 Consistent decline since 2012 but still well up on pre-2007 levels
- 25. Long-term Unemployment (000’s), ROI, 1998-2017 Twice as high as pre-crash levels but declining rapifly
- 26. Youth Unemployment (000’s), ROI, 1998-2017 Declining rapidly and almost down to 1998 levels
- 27. Unemployment rate (15-64), ROI, 1998-2017 UR has averaged over 10% since 1983 UR is now below 6% - difficult to estimate NAIRU for a small open economy
- 29. Average Hourly Earnings by Economic Sector, ROI, 2008-2017, € Nine year earnings growth = 4.4% Accommodation and food services is the lowest paid sector – highest is education
- 30. Real Average Weekly Earnings, 2008-2017 Real weekly earnings fell in each of 2010-2014; Weak inflation and falling unemployment has boosted real earnings growth in recent years
- 31. Real Average Hourly Earnings, 2008-2017 Real hourly earnings fell in each of 2010-2014 and again in 2016 (Q3 basis)
- 33. Participation rate (20-64), ROI and EU, 2001-2017 Female LFP lags the EU average – female specific barriers to LFP in Ireland? – cost of childcare?
- 34. Employment Rate (20-64), ROI and EU, 2001-2017 Pre-crisis over performance by male employment rate is reversed by the crash – now above EU average Female employment rate has more closely tracked the EU average
- 35. Employment Rates (20-64), ROI and Selected Countries, % 2008 2012 2016 Iceland 85.3 81.8 87.8 Sweden 80.4 79.4 81.2 Germany 74.0 76.9 78.6 United Kingdom 75.2 74.1 77.5 Netherlands 79.7 75.4 77.1 Ireland 73.5 64.4 71.4 Poland 65.0 64.7 69.3 Spain 68.5 59.6 63.9 Italy 62.9 60.9 61.6 Greece 66.3 55.0 56.2 Ireland significantly underperforms the rest of Northern Europe – Are there Ireland specific barriers to employment? Why is Ireland different?
- 36. Unemployment rate (20-64), ROI and EU, 2001-2017 Ireland has moved below the EU average but still underperforms the best performers e.g. Czech Republic, Germany
- 37. Unemployment Rates (20-64), ROI and Selected Countries, % 2008 2012 2016 Iceland 2.2 5.3 2.8 Germany 7.5 5.4 4.1 United Kingdom 4.8 6.9 4.3 Netherland 2.4 5.2 5.5 Poland 7.0 10.0 6.1 Sweden 5.1 7.1 6.3 Ireland 6.1 14.4 7.7 Italy 6.4 10.3 11.5 Spain 10.6 24.3 19.3 Greece 7.7 24.3 23.5 Significant between country differences – Northern vs Southern Europe
- 38. Nominal Wage Trends, ROI and Selected Countries, € 2004 2008 2016 Change: 2004-16, % Denmark 26.5 30.3 36.2 36.6 Belgium 20.6 23.9 28.4 37.9 Ireland 22.2 24.8 26.2 18.0 Netherlands 20.8 22.9 26.2 26.0 Finland 19.1 20.9 25.9 35.6 Sweden 19.4 21.2 25.7 32.5 Germany 20.3 21.8 25.6 26.1 Austria 18.5 19.5 24.1 30.3 France 18.8 20.9 23.8 26.6 United Kingdom 17.7 17.7 22.3 26.0 Italy 15.6 18.2 20.2 29.5 European Union 14.9 16.4 19.3 29.5 Recent wage growth has been comparatively weak in Ireland
- 39. Nominal Labour Cost Trends, ROI and Selected Countries, € 2000 2008 2016 Denmark 27.0 34.6 42.0 Belgium 27.0 32.9 39.2 Sweden 31.6 38.0 France 31.2 35.6 Netherlands 23.0 29.8 34.3 Finland 22.1 27.1 33.2 Germany 24.6 27.9 33.0 Austria 26.4 32.7 Ireland 19.7 28.9 30.4 Italy 19.7 25.2 27.8 United Kingdom 19.7 20.9 26.7 European Union 16.7 21.5 25.4
- 41. Takeaways • Employment has doubled since the early 1990s • Compositional shift away from industry and agriculture and towards health/education • Only small compositional shifts between regions • Increasing female share of employment and increasing employment rates for older women • Female LFP trails EU average • Employment rate is well below that of other Northern European countries
- 42. Possible lessons • Cost of childcare is a barrier to LFP by lone parents and 2nd earners – Gender dimension to this • Decline of industry/manufacturing is associated with decline in productivity growth in Western Economies and a hollowing out of the labour force (polarisation) – Can we articulate a 21st century industrial and enterprise policy? – The German model ay not be replicable – National Systems of Innovation approach? Entrepreneurial state? • Volatility of employment/unemployment - has been higher than the EU average – Exacerbates hysteresis with implications for the human capital base) – May be a feature of small open economies – Can be ameliorated with countercyclical fiscal policy and macro-prudential regulation • Caution needed re tax cuts and weakening of financial regulation!