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+ Economy of Ireland Tutorial 2 HT Unemployment General + 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 + 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 + Unemployment in Ireland & in context 16 14 12 10 8 6 4 2 0 1990 2000 2005 2010 Unemployment % 2011 2012 2013 + 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 + 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 + Youth Unemployment Can be Huge misleading: inactivity vs unemployment variation across Europe Social vs Economic Issues + 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 + 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? + 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 + 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 + 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! + 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) + 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? + 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 + 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 + 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 + 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 + Labour Market Flexibility: Solutions Flexible labour markets important to unemployment Wage & Price Flexibility Flexible labour supply Role of Taxes :specific groups minimise effects of