Download + Economy of Ireland Tutorial 2 HT Unemployment

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Economy of Ireland
Tutorial 2 HT
Unemployment
General
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 Office
hours: Tuesday 12.30-13.30
 Website:
http://www.tcd.ie/Economics/staff/johagan/ec2020%20HT/
 Slides: Will be
 The
put online at the end of each teaching week.
Plan for Today: E1 (iii) F1 (i) (ii) from your Hilary term
hand-out
 Topic: Population, employment and
 Refer to:
unemployment
Chapter 2 & Chapter 6 in the book
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E1 (iii)
Outline some key features of unemployment in
Ireland,paying particular attention to long-term and youth
unemployment/inactivity. Comment on the
measurement/comparison difficulties that arise.
 Some key features
of unemployment in Ireland
 Discuss long term unemployment/inactivity
 Discuss youth unemployment/inactivity
 Comment on
arise
measurement/comparison difficulties that
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Unemployment in Ireland & in context
16
14
12
10
8
6
4
2
0
1990
2000
2005
2010
Unemployment %
2011
2012
2013
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Long term Unemployment/Inactivity
 Those
unemployed for more than twelve months
 Serious issue: Social Cost >
Economic Cost
 Becomes a social problem
 Deskilling, loss
 Recent rises
of confidence
in LTU as a result of economic crisis are
therefore very worrying
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LTU in Ireland & in context
16
14
12
10
8
6
4
2
0
1990
2000
2005
2010
Unemployment %
2011
2012
2013
LTU Rate %
70
Belgium
60
Denmark
50
Greece
40
Ireland
Netherlands
30
Norway
20
OECD
10
UK
0
USA
2000
2006
2012
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Youth Unemployment
 Can be
 Huge
misleading: inactivity vs unemployment
variation across Europe
 Social vs
Economic Issues
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Youth Unemployment in Ireland & in context
35.0
30.0
25.0
20.0
Youth Unemployment
15.0
10.0
5.0
0.0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
70.0
60.0
Belgium
50.0
Denmark
Ireland
40.0
Greece
30.0
Spain
20.0
France
Italy
10.0
Netherlands
0.0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
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Comparison & Measurement Difficulties
 Are
all countries using the same methods of defining
and compiling data?
 Is
there a consistent time series for Ireland?
 Are
some groups excluded?
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F1 (i) & F (ii)
 Discuss
the causes & solutions of unemployment, as they apply
to any economy, using the following divisions and using the
latest evidence available in the core book.
 (i)
global factors such as new technology and increased trade
and migration
 (ii)
labour-market flexibility, such as wages, industrial relations
and employment protection legislation
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F1 (i)
 Lets
take a minute to look at what we are being asked to do!
 F1 (i): Discuss
 Global
 New
the following as causes of unemployment:
Factors such as…
Technology
 Increased
trade
 Migration
 Comment on the
potential solutions
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Global Factors: New Technology
 Technology
 Increases
in Productivity  Increases in Real Income
Technological change involves:


Job Destruction in older firms, industries & occupations
 Job

central to the process of growth (Solow Model)
Creation in new, emerging firms, industries & occupations
Technological unemployment followed by large technological
driven expansion of jobs

Overall: fears largely unfounded!
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
Global Factors: Increased Trade
Globalisation of economic activity, removing barriers to trade:
increasing intensity of trade and integration

This should lead to higher incomes:
 Comparative
 Demand

Advantage
and Supply
Can also lead to displacement of labour from certain sectors,
expansion of labour in others. Due to intensity of competition in
globalised economy

Net impact? Positive (Caveat: as long as labour and product markets
function effectively & wages flexible)
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
Global Factors: Migration
Impact of immigration on unemployment
 Especially contentious in
times of high unemployment
 Economic Theory:
In a world with zero unemployment there
would be winners & losers from labour migration
 Without
migration: allocation of productive factors inefficient
 Home/Foreign
 Low
wage story
Skilled vs High Skilled Composition
 Complements or
Substitutes?
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Global Factors: Solutions
 Importance of Education,
 Change in
the competencies required from workforce
 Different
qualification and skills
 Highly flexible –
 Possible
permanent stable position no longer the norm
solution to maintaining and increasing employment
 Improved
 Need
Skills and Adaptability
ability to adapt and absorb new technologies
to identify areas for employment growth and ensure
matching of skills and requirements for these areas
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F1 (ii)
 F1 (ii): Discuss the
 Labour
following as causes of unemployment:
Market Flexibility such as…
 Wages
 Industrial Relations
 Employment protection legislation
 Comment on
the potential solutions
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Labour Market Flexibility: Wages
 Structural rigidities in
labour markets: explanation for high
unemployment
 Wages
linked to distribution of income and social justice
 Wages
above market-clearing rate can lead to excess supply –
lower levels of employment
 Minimum Wage:
adverse impact is negligible
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Labour Market Flexibility: Industrial Relations
 Need
to consider response of wages to market conditions
against backdrop of Industrial Relations
 Role of
Trade Unions & Institutional Arrangements
 Anti-Competitive Behaviour: lower
 Trade-off
 Level
demand
between pay and employment!
of Unionisation of labour force is important
+ Labour Market Flexibility: Employment Protection
Legislation
 Refers to
rules governing ‘hiring and firing’ of workers
 Imposes constraints on
firm behaviour that can raise labour
costs and impact on hiring decisions
 Seen
as key factor impacting labour market inflexibility
 Unemployment Payments: Choose Leisure
 Taxation:
Unemployment & Poverty traps
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Labour Market Flexibility: Solutions
 Flexible labour markets important to
unemployment
 Wage
& Price Flexibility
 Flexible labour supply
 Role of
Taxes :specific groups
minimise effects of