Should we cut longterm unemployment payments?

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.


8 thoughts on “Should we cut longterm unemployment payments?

  1. Eric

    Interesting piece Brian. Another big problem we have is that the so called training courses run by FAS/Solas are both inadequate and many are outdated, particularly in IT areas.

  2. TalentCoop Norah B (@TalentCoop)

    Brian thanks for this. I’m not an expert but see a triple dilemma in Ireland of lack of relevant or indeed enough jobs, lack of relevant training/retraining, high living cost.

    Feel it’s easy to pontificate from EU centre, where ‘reality’ exists in a land of milk and honey funded through ever increasing budgets.

    There will always be some who prefer benefits to work but many, many more who abhor the constrained lifestyle, anxiety, fear, mental dis-ease and lack of prospects it creates for them and their families. I’m not alone in knowing people who feel completely trapped at the moment, they can’t get a job, can’t get ‘on their bikes’, many are already professionally qualified, can’t emigrate, nor find employment and setting up yet another small business as a sole trader isn’t an alternative.

    To regard the unemployed as one group, demeans them and also demeans a society. They are individuals, many WERE hardworking, contributing job holders until the rug was pulled from under them by a corrupt financial system aided and abetted by a political system in Ireland and Europe which still has a priority of self protection.

    The unemployed are still taxpayers through VAT and other taxes, yet are often regarded as though they are all chancers, completely feeding well off the taxpayer.

    Everything in life isn’t a numbers game, there are human needs we all have including self esteem, respect, good physical health, enough to eat, housing, providing for our families, mental wellness, work, income – the unemployed haven’t all chosen to be so and in a state where there are NOT enough jobs, they also have rights to quality of life.

    I’d love the report writers to get their hands dirty and come and see how some people are really having to live before they put pen to paper or finger to keyboard.

    We might then have useful proposals produced, rather than the repeated mantra of ‘cut their benefits’. If cuts are to be made, lets start with spending in EU and Government the real centres of leeching off taxpayers.

  3. John Masterson (@theotriangle)

    I could not have articulated it any better Norah.

    For most being ‘in receipt’ of social welfare as sole means is soul destroying and even more so in a climate where work is simply so difficult to find.

    Perhaps the experience is one that ought to be state imposed on all for a set period as a form of ‘National Service’ so that a well rounded collective empathy can be forged with that ‘filthy feeling’ and who knows, perhaps induce a retraction of pious attitudes and pompous prejudices in the matter.

    Signing off. J.

  4. redbarn

    Hi Brian, I see you make mention on your twitter account to my opinion piece in the IT yesterday. I am not an economist, nor a statistician but my reading of the CSO for July 2012 has 789 men and 582 women available for work in the town. Trawling the websites offering work about three ‘real’ jobs and several schemes. How do we square this circle? Regards Brendan

  5. Pingback: Everything in life isn’t a numbers game « RonanFitz

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