There is some comment today in the newspapers on an EU commission report which states, inter alia, that welfare rates should be cut in the forthcoming budget. They state in a draft report (which doesn’t seem to be publicly available)
“In part this may reflect the structure of the benefits system in Ireland, whereby activation does not increase with the spell of the unemployment duration nor does unemployment assistance generally decline over time.”
The logic here is that cutting the benefits paid to those in longterm unemployment will induce (aka force) them to work. At one level this is trivial – if we cut unemployment benefit to zero then people would starve, emigrate or work and thus there would be no longterm unemployed. At another level it is problematic as it implicitly assumes that there is a mismatch between a stock of longterm unemployed who are better off on the dole and a stock of jobs that they could take if only they were not better off on the dole. There is a very nuanced EU report on benchmarking unemployment benefits etc here , which suggests that looking at EU Averages is not helpful, and countries that appear very generous or stringent with respect to same actually are generally in line with near and cultural neighbours. Although this report does note the lack of tapering off of UA in Ireland, it also notes that there are offsetting reasons for same.
This is nonsense. The structure of unemployed in Ireland by last occupation is given below. The largest part are craft and related, then personal services then clerical. The first are in large measure the construction related workers who were sucked into the industry at the height of the boom.While these are by no means unskilled, their skills are not those that are needed now or prospectively. The second and third groups are dependent on the domestic economy, when people will go for haircuts and take on office staff.
Unemployment traps tend to be discussed as too much dole. The reality is that since at least 1987 with the work of Tim Callan we have known that there are structural welfare traps. A good overview is given here. Report after report have suggested things such as tapering of benefits (whereby if one goes over a threshold of eligibility for a benefit one does not lose all the benefit immediately but instead the benefit is reduced by a (high) percentage of the amount by which you exceed the threshold) and so forth. These are dull technocratic measures which are unlikely to appease the “on yer bike” brigade but which might well just work… A combination of ensuring that domestic demand is somehow reflated, sensible structured welfare reform (perhaps indeed tapering both benefits and allowances as discussed) and some sensible retraining will result in slow erosion of longterm unemployment. Seeking quickfixes wont.
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