Elish Kelly ESRI Seamus McGuinness ESRI Philip OConnell UCD Geary Institute Conference on Irish Economic Policy Programme 1 st February 2013 Outline Background Objectives Data Descriptives ID: 160249
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Slide1
Activation in Ireland: Are we on the Right Path?
Elish Kelly (ESRI)Seamus McGuinness (ESRI) Philip O’Connell (UCD Geary Institute)Conference on Irish Economic Policy Programme1st February 2013Slide2
Outline
Background ObjectivesDataDescriptivesEconometricsActive Labour Market Policy: What Works?Impact of Pathways to WorkSlide3
Background
Ireland’s unemployment rate has increased from 4.4% in 2006 to 14.8% today.Long-term unemployment is a growing problem, and currently accounts for almost 60% of total unemployment.Many of the long-term unemployed are also structurally unemployed having been previously engaged in industries, such as construction, with limited growth potential.The composition of unemployed has changed since the recession e.g. growth in unemployed males with post-leaving cert qualifications and females with third-level.Slide4
Objectives
We use new data to examine the nature and rates of labour market transitions among the unemployed in 2006 and 2011.We consider the extent to which unemployed persons transition to employment and inactivity, and the degree to which the factors determining the transition to employment have changed.We consider the implications of our evidence for activation policy in Ireland.Slide5
Data
Quarterly National Household Survey (QNHS) Longitudinal DataPre-Recession: Q2 2006 – Q2 2007Post-Recession: Q2 2011- Q2 2012Balanced Panel: Focus on individuals unemployed on entering the panel who are present in the panel for five consecutive quarters (e.g. Q2 2006 through to Q2 2007)Eradicate the impacts of migration from using balanced panelWe examine the impacts of age, gender, nationality, education and unemployment duration on escaping to employmentSlide6
Transition Rates
Continuously UnemployedInto EmploymentInto Inactivity
Into/Out of Employment/Inactivity
2006
21.3
33.9
29.3
15.5
2011
49.0
19.9
26.6
4.6Slide7
Gender Profile
Continuously UnemployedInto Employment
Into
Inactivity
Into/Out of Employment/Inactivity
Males
2006
29.2
2011
64.2
2006
40.5
2011
18.9
2006
23.5
2011
14.9
2006
6.8
2011
2.1
Females
2006
10.9
2011
27.6
2006
25.2
2011
21.3
2006
36.9
2011
43.1
2006
27.0
2011
8.1Slide8
Age ProfileSlide9
Educational AttainmentSlide10
Unemployment DurationSlide11
Escape to Employment: Personal Characteristics
2006
2011
Male
0.034*
0.004
Age
(Ref: 55Plus)
:
15-19
0.020
0.016
20-24
0.012
0.046**
25-34
-0.029
0.029
35-44
0.000
0.024
45-54
-0.033
0.039**
Irish
0.115***
0.021Slide12
Escape to Employment:Educational Attainment
2006
2011
Educational Attainment
(Ref: Primary or Less)
:
Junior Certificate
0.015
-0.006
Leaving
Certificate
0.045
0.005
Post-leaving
Certificate
0.033
0.016
Third-level
Non-degree
0.086**
0.001
Third-level
Degree and Higher
0.098**
0.036Slide13
Escape to Employment:Unemployment Duration
2006
2011
Unemployment Duration
(Ref: Up
to 3 Months
)
:
3 Up to 6 Months
-0.046
-0.020
6 up to 12 Months
-0.029
-0.031*
12 Months Plus
-0.045*
-0.039***Slide14
Summary I
The proportion of respondents remaining unemployed for at least 12 months has increased from 21% in 2006 to 49% in 2011.Consequently the proportion entering employment has fallen from 34% to 20%.Movements into inactivity appear stable.There has been a substantial fall in marginal attachment over the period.Slide15
Summary II
The econometric analysis reveals that education has become less relevant in determining a successful transition to employment over the period.Location is not an important factor, and gender is not significant in current economic climate either.Unemployment duration emerges as being the main driver in explaining the degree to which people exit unemploymentThose with shorter unemployment durations (up to 6 months) are more likely to escape from unemployment, while the longer a person remains unemployed the less likely he/she is to leave unemployment, especially since the most recent recession.Slide16
Long-term Unemployment has risen steadily during crisis.
It now stands at 60% of total unemploymentReducing LTU remians be a key objective of labour market policy
Source:
Constructed from the
Quarterly National Household Survey
, Central Statistics OfficeSlide17
Active Labour Market Programmes
Supply sideJob Search Assistance/EncouragementInterviews/counselling, job placement services, etcIncrease effectiveness of job search + monitoring & sanctionsTrainingEnhance skills and employment prospectsDemand Side
Public-sector Employment schemes
Retain contact with labour market
Incentives to employers or self-employment
Encourage employers to create new jobs or retain existing jobsSlide18
Key Principles for effective labour market activation
Labour market activation to assist and encourage the individual to return to work should be initiated as soon as he or she makes a claimEffective job search advice and assistance should be delivered to all non-employedJob search activity should be monitored on a regular and ongoing basis An effective activation strategy needs to be backed up with appropriate sanctions for non-compliance with job search and activation requirements.
18Slide19
Research Findings: The Impact of Job Search Assistance
Job Search Assistance – International evidenceEffective for many groupsLow cost
More effective
with regular
monitoring and
sanctions
Irish research (OECD and ESRI):
Ireland has had a poor record in the past
Lack of regular monitoring, assistance or sanctions
Impact of reforms?Slide20
Research Findings:Programmes
with strong market linkages show strong positive effects on employment (1990s, 2006-8)Slide21
Research Findings:Programmes
with strong market linkages show strong positive effects on employment (1990s, 2006-8)Slide22
Research Findings:Programmes
with strong market linkages show strong positive effects on employment (1990s, 2006-8)Slide23
Rough Estimate of Spend on ALMPs for Unemployed c. 2011-12
2/3rds on programmes with weak market links1/3rd on direct employment schemes
Market Orientation
Labour Market Leverage
Weak
Strong
Supply –
Training
General
Education
and Training
c. €430 (33%)
Skills Training
c. €220 (17%)
€650
(50%)
Demand –
Employment
Direct Employment
c
. €440 (34%)
Employment Supports
c
. €200 (16%)
€640
(50%)
Total
€870 (67%)
€420 (33%)
€1,290
Sources: Mainly DPER Comprehensive Expenditure Review dataSlide24
Content and quality of education & training is vital
Education and training programmes should be demand leddriven by the needs of growth sectorsstrongly connected with real jobs Content of training should be driven by needs of enterprisesneed to develop up-to-date intelligence of skill needs.Training initiatives should broadly reflect the education profile of the unemployed. In the current crisis, the educational and skills profile of the unemployed has increased: training programmes should reflect that.Training providers should be chosen on the basis of their ability to deliver high quality effective and relevant training.
24Slide25
Pathways to Work/Intreo
Many positive features:Battle against unemployment as top priority Commitment to reducing Long-term UnemploymentIntegration of income support with activationOne-stop-shop in Intreo officesAdditional training placesStatistical profiling to target those most at risk
Extension of employer PRSI scheme
25Slide26
Moving in the right direction, but:
Pace of change – the crisis started 5 years ago:Intreo roll out over 2 yearsClient profiling still incompleteNeeds to be adapted to new clients and new conditionsImmediate activation for all clients?
New unemployed
Only in
Intreo
offices - Non-
Intreo
, wait 3 months
Current unemployed
Too little too late – insufficient activation
Others not economically active
Capacity?
OECD: insufficient staff to implement activation system before crisis
Live Register has grown from 290,000 in 2009, to 440,000 in 2012
Skills?
Outsource activation role?
26Slide27
The Way Forward: Demand and Supply
DemandPathways recognises the importance of programmes to match labour market needsCan Expert Group on Future Skill Needs + FAS Skills and Labour Market Research Unit meet that challenge?Need for ongoing and up-to-date information
Specific sector skills councils
Ensure nature and content of education and skills are market relevant
Training programmes should include job placement component
Supply
Respond to upward shift in educational profile of unemployed
Provide intensive retraining to tackle structural unemployment among former construction workers
27Slide28
The Way Forward: Providers
Education and Training is excessively provider drivenNot designed to meet training needs of unemployed or skill needs of employersNeed to evaluate impact of 2nd chance educationCan SOLAS + Local Education and Training Boards meet training needs?
Experience, expertise, priority focus?
DSP as broker/coordinator of training?
Providers should be chosen on basis of ability to deliver quality training
Provision could be incentivised according to results (job placements)
Does the academic
calender
meet the need of the unemployed?
Ensure progression from programmes with weak to strong market links
All education, training and employment schemes should be subject to rigorous evaluation:
identify effective interventions
timely restructuring/closure of ineffective interventions
0.04% of the ALMP budget = €500,000 for evaluation….
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