Transcript (UNITE) The Great Stagnation

THE GREAT
STAGNATION
Michael Taft
Research Officer
UNITE the Union
Exiting the Great Recession into . . .
• The Great Recession is nearing the end
• Employment is expect to bottom out this year though
domestic demand may still fall marginally over the next
year or two.
• We are in danger of entering into a Great Stagnation – a
statistical recovery but a continuing peoples’ recession
characterised by a number of economic and social crisis.
• The following focuses on 3 of these
1st Crisis: Unemployment
• Over the life-time of this Government – after the Jobs
Initiative, the Action Plan for Jobs, two self-styled ‘job
enhancement’ budgets and the recent 10-point
employment plan - the coalition now projects that
unemployment will fall by only 1 percentage point.
• The subjective PES measurement shows an even higher
level of unemployment: 17.3 percent compared to the
official 14.8 percent (seasonally adjusted).
• The IMF projects unemployment to be close to 12 percent
in 2017. Double-digit unemployment will be with us for
some time.
Unemployment Projections
SPU April 2011
14.9
Budget 2013
14.6
14.2
14.1
13.7
13.1
12.7
11.5
10
Coalition
Taking Office
2012
2013
2014
2015
Under-Employment
• Another feature of the crisis is the rise in under-
employment – those who are willing and able to work
extra hours but can’t access the work. This is giving rise
to the phenomenon of precarious work and the precariat.
• This is likely to predominate in the low-paid sectors –
especially as the Government incentivised part-time work
through the reduction of the low-rate Employers’ PRSI.
• MANDATE, in a survey of its own members in the retail
sector conducted by Behaviour & Attitudes, found that 38
percent were actively seeking additional hours.
Under-employment Rate %
8.0
7.6
5.8
6.0
4.5
Q3 08
Q3 09
Q3 10
Q3 11
Q3 12
Employment Projection Revisions
• When the Government took office, employment was
projected to increase by 104,000 between 2011 and 2015.
• A year later, this was revised downwards to 62,000
• In Budget 2013, this was revised downwards again – to
31,000.
• Long-term projections, based on IMF data, suggests that
we won’t return to pre-crisis levels of employment until
2022.
Employment Projections: 2011 - 2015
104,000
62,000
31,000
SPU April 2011
SPU April 2012
Budget 2013
Long-Term and Structural Unemployment
• Employment in managerial and professional grades has
increased during the crisis. Non-manual and manual
working classes have been disproportionately hit.
• The danger of long-term and structural unemployment
becoming embedded – with the social issues that raises.
• This will further depress wages and living standards in
domestic sectors.
Employment: 2007 to 2012
Managerial &
Prof/Tech
Non-Manual
Manual
Elementary
Total
6.8%
-11.6%
-15.1%
-30.6%
-34.5%
3 Areas of Concern
• 1.
Between 2000 and 2007, nearly 60 percent of all
new employment came from construction and non-market
services. This doesn’t count business, financial and
personal services reliant upon property activity. Nor does
it factor in the demand created in other domestic sectors.
• Future employment, on current trends, will not be able to
rely on the construction or non-market sectors to drive
employment.
• 2.
With domestic demand expected to remain subdued,
employment growth will `remain sluggish.
Even when the output gap closes – unemployment
will still be in double-digits.
• 3.
Domestic Demand and Employment
Employment
Demand
15.0%
10.0%
5.0%
0.0%
-5.0%
-10.0%
-15.0%
1986
1990
1995
2000
2005
2010
2014
Output Gap and Unemployment
13.9
Output Gap
Unemployment
14.8
14.7
14.6
14.2
13.4
12
-2.4
2009
-3.2
2010
-2
2011
-2.1
2012
-1.9
2013
-1.2
2014
12.5
11.7
0.1
0.3
2016
2017
-0.4
2015
2nd Crisis: Deprivation
• Last year the IMF applauded Ireland for protecting its
•
•
•
•
citizens against rising poverty. They produced a graph
showing that relative poverty had not significantly
increased up to 2010. This is absolutely correct. And the
conclusion –
‘Ireland’s strong social supports have avoided a rise in
poverty during the crisis’
is absolutely wrong.
The reason relative poverty did not rise? Median income
fell - the only EU-15 country to do so up to 2010.
When the bottom half of society is getting poorer, it is no
consolation to the tell the poorest that though they are
getting poorer they not getting relatively more poorer
Deprivation Measurements
• The CSO and Eurostat measure the level of deprivation
experiences. CSO’ uses 11 deprivation experiences:
• Home and Clothing: unable to afford heat / keep house
adequately warm / two pair of strong shoes / new clothes /
replace worn out furniture / waterproof coat
• Food: unable to afford meat/chicken/fish every second
day / roast once a week /
• Social Participation: unable to afford to go out in last 2
weeks / have friends/family over for a meal/drink once a
month / to buy presents for family/friends once a year
Deprivation
• Over 1,000,000 people experience multiple deprivation
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•
•
•
experiences. This has doubled since the crisis began.
Nearly 340,000 of these are children.
Deprivation is not a phenomenon of the ‘welfare class’.
Nearly 25 percent of one-income households (and 10
percent of two-income household) experience multiple
deprivation.
Deprivation persists into higher income deciles.
This data is from 2010 – reasonable to assume, after
three regressive budgets, and poor economic
performance, that deprivation levels are even higher
today.
Enforced Multiple Deprivation Experiences
Population (000s)
1,006
762
616
610
585
512
2005
2006
2007
2008
2009
2010
Enforced Multiple Deprivation Experiences
Children (000s)
338,496
258,880
195,151
2008
2009
2010
Enforced Multiple Deprivation Experiences
In-Work Deprivation (%)
One Income
Two Income
22.6
17.3
15.1
9.6
5.9
2008
5.1
2009
2010
Enforced Multiple Deprivation Experiences
Deciles – Net Equivalised Income (%)
2008
2010
41.6
32.1
31.4
16.8
13.7
7.4
4.8
0.2
1st - 2nd
3rd - 5th
6th - 8th
9th
0
1.6
10th
Food Poverty
• The DSP commissioned a study into food poverty.
Criteria:
• Inability to afford a meal with meat or vegetarian
equivalent every second day
• Inability to afford a roast or vegetarian equivalent once a
week
• Whether during the last fortnight, there was at least one
day when the respondent did not have a substantial meal
due to lack of money
• Another word for food poverty: hunger
Food Poverty
Food Poverty Rate By Category: 2010 (%)
24
20
16
15
14
10
Total
Population
Find it
Fair, Bad or Activities Lowest 40%
Difficult to
Very Bad Limited due
Income
Make Ends
Health
to Health
Group
Meet
Status
Problem
Chronic
Illness
Eurostat: Severe Material Deprivation
• Eurostat has a harsher measurement: severe material
deprivation which measures those who cannot:
• pay their rent, mortgage or utility bills * keep their home
adequately warm * face unexpected expenses * eat meat
or proteins regularly * go on holiday * afford a television
set * a washing machine * a car * a telephone.
• Satisfies the criteria if respondent cannot afford 3 of the 9
deprivation
Eurostat: Severe Material Deprivation
2010 Population (%)
Greece
Portugal
Ireland
Italy
Belgium
France
UK
Germany
Austria
Spain
Finland
Denmark
Netherlands
Sweden
Luxembourg
11.6
9.0
7.5
6.9
5.9
5.8
4.8
4.5
4.3
4.0
2.8
2.7
2.2
1.3
0.5
Eurostat: Severe Material Deprivation
2010 Households with Dependent Children (%)
Greece
Ireland
Portugal
Italy
France
Belgium
UK
Spain
Austria
Germany
Denmark
Netherlands
Finland
Sweden
Luxembourg
11.6
9.2
9.2
7.5
6.5
6.4
6.2
4.8
4.8
4.6
2.8
2.2
2.1
1.3
0.3
3rd Crisis: Investment
• Investment has fallen to the lowest level in the Eurozone
and is projected to remain a bottom dweller for the
foreseeable future.
• By 2017, Irish levels of investment will be nearly half that
of the Eurozone average – equivalent to nearly €17
billion.
Investment Past and Projections
Eurozone
Ireland
30
25
% of GDP
19.2
20
15
10.7
10
5
1985
1990
1995
2000
2005
2010
2017
Challenges to Investment
• The Government is aggressively cutting its own
investment expenditure. Between 2011 and 2015 it will
cut investment by over 36 percent.
• However, even were this reversed, would only make up a
small difference between Ireland and Eurozone average.
• Need to create the conditions, the incentives and vehicles
to increase business investment.
• The historical trends not encouraging. In the period prior
to the recession – Irish corporate investment and nonbuilding investment lagged behind EU-15 averages.
Government Investment
% of GNI
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
1985
1990
1995
2000
2005
2010
2015
Corporate GFCF
EU-15 Average
Ireland GDP
Irish GNP
14.0
12.0
%
10.0
8.0
6.0
4.0
2.0
2002
2003
2004
2005
2006
2007
2008
2009
2010
Non-Building GFCF
Other EU-15 Average
Ireland - GDP
Ireland - GNI
11.0
10.0
% of GDP
9.0
8.0
7.0
6.0
5.0
4.0
3.0
1998
2000
2002
2004
2006
2008
2010
One Perspective to the Challenge
• In early 2010 Davy Stockbrokers assessed the increased
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in capital stock since 2010. They found:
“investment by private sector in 'core' productive stock
(was) pitiful . . .”
“the increase in our 'core' productive capital stock was
related to the state or semi-state sectors. It was not driven
by private enterprise.”
Over 2/3 of increased productive investment came from
state and public enterprise sectors.
Historical patterns and surveys pose the challenge of how
we can maximise public and private capital into productive
infrastructure.
Conclusion
• In 2010 economists and analysts published an open letter
warning the Government that austerity would result in a
lengthy period of low-growth, high unemployment and
high debt. UNITE and the trade union movement
signalled this warning even earlier. Unfortunately, there is
nothing to suggest that they will be wrong.
• Austerity is working – and that is the problem
• An economy carrying high levels of unemployment, rising
levels of deprivation, and generating low levels of
investment is not a natural candidate for long-term fiscal
stability.
Conclusion
• The potential of political economy – crude reductionist
benchmarks can only remain acceptable if consent is
given. To date, that consent has been given - by many,
reluctantly so. But the future is not certain and certainly
not inevitable.
• If that consent is withdrawn, if the contest heats up if you
will, throwing out more choices – then a more constructive
debate may emerge.
• It won’t make up for the damage that has been done to
date – but it might just limit the damage that is waiting for
us in the future.