Generation Bailout? Putting Jobs Creation First
If the state can become the bail-out of last resort for failed financial institutions, it can become the employer of last resort for young people, according to Unite Economist Michael Taft.
If, as Keynes said last century, ‘you look after unemployment the budget will look after itself’, then no wonder the Government has found itself in a fiscal crisis.
Not only has it failed to look after unemployment, it has actively contributed to it through self-defeating deflationary policies. We are paying for it now – we will be paying for it for years to come. The Live Register only tells us part of the story. A better figure to track is ‘employment’, because the Irish labour market suffers from considerable ‘leakage’, or emigration. In 2008 and 2009, employment fell by 251,000 – a quarter of a million jobs lost. 2010 hasn’t started any better. Already the Government is estimating a further 65,000 jobs will be lost. Redundancies in the first three months came to nearly 18,000, while management consultancies are predicting even higher level of business insolvencies than last year. By the year’s end, over 300,000 jobs will be gone.
European comparisons make for depressing reading. Irish employment will decline by nearly 15 per cent over the three years 2008 to 2010. In the Eurozone, the fall was only 3 per cent. If employment had only fallen by the Eurozone average, there would be nearly a quarter of a million more people at work here by the end of the year. This is the true cost of the Government’s savage deflationary policies.
One could go on and on in similar statistical vein (for instance, at optimistic growth rates, we don’t return to our pre-recession level of employment until 2017, a decade-long jobs recession). But the economy is drowning and it’s of little help to continually describe the colour of the water. Are there measures that can turn this dismal situation around? Yes. Can we afford to do something about unemployment? We can’t afford not to.
The Government would have us believe that employment must wait on the resolution of the fiscal crisis. They have it backwards. Imagine if early and urgent action had been taken to protect employment levels in order to keep job losses to the Eurozone average. How much more tax revenue would 200,000 people at work create? How many more businesses would still be in business due to maintenance of domestic demand? How much would the Government have saved on unemployment costs? Addressing employment is the key to addressing the fiscal crisis, not the other way around. Let’s canvas three areas.
First, our degraded physical infrastructure is one of the biggest impediments to future productivity, competitiveness and growth. Everything from rail, seaport and public transport, electricity and telecommunications, water & waste and green technology: the Global Competitive Index ranks our infrastructure as one of the worst in the industrialised world. To upgrade and modernise is an investment in future growth.
This is investment we have to undertake, regardless of the recession. What better time than now, especially when procurement costs are falling? ICTU has proposed a new public enterprise model – involving a single holding company for all public enterprises with the capability of creating new ones – capable of delivering an investment programme. Not only does this model limit Exchequer exposure – public enterprises have an excellent track record of attracting investment on the international debt markets – it has the capability of creating thousands of jobs. For every €1billion capital investment, we can expect to create over 5,000 jobs – directly and down-stream. A substantial multi-year investment programme could result in thousands of jobs and would pay for itself over the medium-term – the ESRI estimates that such investment creates a return of 15 per cent annually, something private sector companies would jump at.
Second, given that nearly half of the job losses have been in the construction sector, there is an opportunity to employ those skills in creating green wealth. In particular, upgrading buildings to the lowest carbon-efficiency possible. This would reduce energy consumption (and, so, fossil-fuel imports) while freeing up money for households and businesses to increase non-energy consumer spending. An imaginative approach could put thousands to work with no cost to the state. Investment could come via the National Pension Reserve Fund with a charge placed on every building equal to the cost of the upgrade, thus maintaining the Fund’s asset base. Therefore, the work would be free up-front with the charge paid off over years linked to income or profits. If this were initially rolled out in towns/cities outside Dublin, where the construction collapse was particularly severe, the multipliers resulting from this investment would be even more positive.
Third, it is absolutely essential to prevent long-term youth unemployment. Research has shown that an extended period of joblessness in youth creates endemic and persistent problems throughout a young person’s lifetime. Extended long-term unemployment affects job prospects and wage levels for years – it can lead to malnutrition, illness, mental stress, and depression; poor physical health and life expectancy; reduce work experience and skill development; create welfare-dependency and higher than average crime rates; in short, long-term unemployment is a social disaster happening today, tomorrow and for years to come.
If the state can become the bail-out of last resort for failed financial institutions, it can become the employer of last resort for young people. The state should guarantee that no young person will go without work for longer than six months. It can do this through job placements in the public, private and community sectors. It can combine this with personalised up-skilling and return to education – operated through established and competent delivery vehicles like an enhanced VEC. And it should do this at a living wage-rate above the low-pay threshold – this could help combat employers’ exploitation of unemployment to drive down wages in otherwise healthy firms. The cost of this programme would be a fraction of the Anglo-Irish bail-out and would create real economic and social returns – the least of which would be to maintain demand today while preventing higher social costs in the future.
These are just three measures. There are many more. The trade union movement, political parties, social and community organisations have all come forward with thoughtful and innovative proposals to create employment. There isn’t a lack of ideas or enthusiasm. Nor is there a lack of resources.
What there is, however, is a monumental lack of will on the part of this Government that is wedded to failed economic models and prescriptions. That is why it is imperative that progressives put aside old divisions and cooperate in building the economic and political alternative this country needs so badly. But let’s be clear: without the one, there cannot be another; the economic and political is inextricably intertwined.
In short, fighting unemployment is not just a matter of getting the economics right; it’s about getting the politics right as well — working in cooperation within the trade union movement and social organisations, working with political activists who are determined to be serious and constructive. If we start doing this now, we’ll be that one bit closer to our goals.