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The Great Stagnation. Michael Taft Research Officer UNITE the Union . Exiting the Great Recession into . . . . The Great Recession is nearing the end Employment is expect to bottom out this year though domestic demand may still fall marginally over the next year or two.
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The Great Stagnation Michael Taft Research Officer UNITE the Union
Exiting the Great Recession into . . . • The Great Recession is nearing the end • Employment is expect to bottom out this year though domestic demand may still fall marginally over the next year or two. • We are in danger of entering into a Great Stagnation – a statistical recovery but a continuing peoples’ recession characterised by a number of economic and social crisis. • The following focuses on 3 of these
1st Crisis: Unemployment • Over the life-time of this Government – after the Jobs Initiative, the Action Plan for Jobs, two self-styled ‘job enhancement’ budgets and the recent 10-point employment plan - the coalition now projects that unemployment will fall by only 1 percentage point. • The subjective PES measurement shows an even higher level of unemployment: 17.3 percent compared to the official 14.8 percent (seasonally adjusted). • The IMF projects unemployment to be close to 12 percent in 2017. Double-digit unemployment will be with us for some time.
Under-Employment • Another feature of the crisis is the rise in under-employment – those who are willing and able to work extra hours but can’t access the work. This is giving rise to the phenomenon of precarious work and the precariat. • This is likely to predominate in the low-paid sectors – especially as the Government incentivised part-time work through the reduction of the low-rate Employers’ PRSI. • MANDATE, in a survey of its own members in the retail sector conducted by Behaviour & Attitudes, found that 38 percent were actively seeking additional hours.
Employment Projection Revisions • When the Government took office, employment was projected to increase by 104,000 between 2011 and 2015. • A year later, this was revised downwards to 62,000 • In Budget 2013, this was revised downwards again – to 31,000. • Long-term projections, based on IMF data, suggests that we won’t return to pre-crisis levels of employment until 2022.
Long-Term and Structural Unemployment • Employment in managerial and professional grades has increased during the crisis. Non-manual and manual working classes have been disproportionately hit. • The danger of long-term and structural unemployment becoming embedded – with the social issues that raises. • This will further depress wages and living standards in domestic sectors.
3 Areas of Concern • 1. Between 2000 and 2007, nearly 60 percent of all new employment came from construction and non-market services.This doesn’t count business, financial and personal services reliant upon property activity. Nor does it factor in the demand created in other domestic sectors. • Future employment, on current trends, will not be able to rely on the construction or non-market sectors to drive employment. • 2. With domestic demand expected to remain subdued, employment growth will `remain sluggish. • 3. Even when the output gap closes – unemployment will still be in double-digits.
2nd Crisis: Deprivation • Last year the IMF applauded Ireland for protecting its citizens against rising poverty. They produced a graph showing that relative poverty had not significantly increased up to 2010. This is absolutely correct. And the conclusion – • ‘Ireland’s strong social supports have avoided a rise in poverty during the crisis’ • is absolutely wrong. • The reason relative poverty did not rise? Median income fell - the only EU-15 country to do so up to 2010. • When the bottom half of society is getting poorer, it is no consolation to the tell the poorest that though they are getting poorer they not getting relatively more poorer
Deprivation Measurements • The CSO and Eurostat measure the level of deprivation experiences. CSO’ uses 11 deprivation experiences: • Home and Clothing: unable to afford heat / keep house adequately warm / two pair of strong shoes / new clothes / replace worn out furniture / waterproof coat • Food: unable to afford meat/chicken/fish every second day / roast once a week / • Social Participation: unable to afford to go out in last 2 weeks / have friends/family over for a meal/drink once a month / to buy presents for family/friends once a year
Deprivation • Over 1,000,000 people experience multiple deprivation experiences. This has doubled since the crisis began. • Nearly 340,000 of these are children. • Deprivation is not a phenomenon of the ‘welfare class’. Nearly 25 percent of one-income households (and 10 percent of two-income household) experience multiple deprivation. • Deprivation persists into higher income deciles. • This data is from 2010 – reasonable to assume, after three regressive budgets, and poor economic performance, that deprivation levels are even higher today.
Food Poverty • The DSP commissioned a study into food poverty. Criteria: • Inability to afford a meal with meat or vegetarian equivalent every second day • Inability to afford a roast or vegetarian equivalent once a week • Whether during the last fortnight, there was at least one day when the respondent did not have a substantial meal due to lack of money • Another word for food poverty: hunger
Eurostat: Severe Material Deprivation • Eurostat has a harsher measurement: severe material deprivation which measures those who cannot: • pay their rent, mortgage or utility bills * keep their home adequately warm * face unexpected expenses * eat meat or proteins regularly * go on holiday * afford a television set * a washing machine * a car * a telephone. • Satisfies the criteria if respondent cannot afford 3 of the 9 deprivation
3rd Crisis: Investment • Investment has fallen to the lowest level in the Eurozone and is projected to remain a bottom dweller for the foreseeable future. • By 2017, Irish levels of investment will be nearly half that of the Eurozone average – equivalent to nearly €17 billion.
Challenges to Investment • The Government is aggressively cutting its own investment expenditure. Between 2011 and 2015 it will cut investment by over 36 percent. • However, even were this reversed, would only make up a small difference between Ireland and Eurozone average. • Need to create the conditions, the incentives and vehicles to increase business investment. • The historical trends not encouraging. In the period prior to the recession – Irish corporate investment and non-building investment lagged behind EU-15 averages.
One Perspective to the Challenge • In early 2010 Davy Stockbrokers assessed the increased in capital stock since 2010. They found: • “investment by private sector in 'core' productive stock (was) pitiful . . .” • “the increase in our 'core' productive capital stock was related to the state or semi-state sectors. It was not driven by private enterprise.” • Over 2/3 of increased productive investment came from state and public enterprise sectors. • Historical patterns and surveys pose the challenge of how we can maximise public and private capital into productive infrastructure.
Conclusion • In 2010 economists and analysts published an open letter warning the Government that austerity would result in a lengthy period of low-growth, high unemployment and high debt. UNITE and the trade union movement signalled this warning even earlier. Unfortunately, there is nothing to suggest that they will be wrong. • Austerity is working – and that is the problem • An economy carrying high levels of unemployment, rising levels of deprivation, and generating low levels of investment is not a natural candidate for long-term fiscal stability.
Conclusion • The potential of political economy – crude reductionist benchmarks can only remain acceptable if consent is given. To date, that consent has been given - by many, reluctantly so. But the future is not certain and certainly not inevitable. • If that consent is withdrawn, if the contest heats up if you will, throwing out more choices – then a more constructive debate may emerge. • It won’t make up for the damage that has been done to date – but it might just limit the damage that is waiting for us in the future.
