Prof james wickhams presentation

After the party’s over...

After the Party’s Over: Ireland’s employment model and the surprising survival of the welfare state tasc lunchtime seminar 30 October 2014 James Wickham

Outline The bubble labour market  Preconditions (‘Openings’)  Employment, debt, emigration and welfare in the crisis  Conclusion 

Goldrush labour markets     

   

Definition of a bubble: Normal rules assumed to no longer apply (cf Patrick Honohan); ‘Boosterism’ (Belich, 2010) Just as asset prices are assumed to rise indefinitely, employment growth is assumed to grow continuously Boundless optimism: Everybody can win (or at least hope to win) The business of the boom [bubble] is boom itself (Belich) Casualisation of recruitment: ‘Hiring any one who shows up’ Bargain of convenience: mutual short-termism, mutual flexibility De-institutionalisation: rules and regulations just get forgotten De-territorialisation: employers face an apparently inexhaustible supply of labour Quantitative expansion: little pressure for innovation

Boosterism 1920-29 1.7m settlers entered California...  ‘Kill Pessimists, Bishop Advises’ Los Angeles newspaper headline, 1920s (cited Belich, Replenishing the Earth: The settler revolution and the rise of the Anglo-world, Oxford UP, 2009: 402)

And in Ireland...  People...‘cribbing and moaning...I don’t know why people who engage in that don’t commit suicide’ Bertie Ahern, July 2007.

Employment rates 1997-2008 80.0

Even at the top of the boom Ireland never reached the Lisbon employment EU27 Germanytarget!

75.0

70.0

65.0

France

60.0

Sweden Denmark Italy

55.0

Greece Ireland UK

50.0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Source: Employment in Europe 2009

Crisis of a Role Model “Today Ireland stands as a shining example of the art of the possible in long-term economic policy-making, and that is why I am in Dublin: to listen and learn” (George Osborne, then UK Shadow Chancellor, 23/02/2006) Osborne highlighted Irish ‘world class’ education, global R&D because of low tax, and 12.5% corporate tax rate 

Gate Openers (1): FDI  

Attracting FDI has been the leitmotiv of Irish economic policy since 1956 No longer low cost manufacturing (e.g. Barry, 2007) » » » » »



Logistics, service, support, headquartering Dell moved production from Limerick to Poland in 2009, but employs 2.200 in support, sales and research Google EMEA headquarters in Dublin Almost entirely US-owned: electronics, software, pharmaceuticals, medical appliances Since 1980s almost entirely non-union

Incentives » Increasingly focused on tax rate rather than location, infrastructure, education



Politics » Transformation of Irish-America: A dramatic example of elite diaspora politics (cf. US Israeli lobbies) with access to US political and corporate elite » Unspoken role of American Chamber of Commerce in Dublin: direct and indirect influence, increasing acceptance of ‘Boston not Berlin’ » Conflict with EU ‘partners’ pre-progammed

Gate openers (2): Financialisation of everyday life     



‘Residential capitalism’ (Schwartz & Seabrooke, 2008) 2000 82% all Irish households owner-occupiers, one of highest in Europe, but c50% then debt free THEN combined with extensive mortgage credit House becomes an asset ‘We are the first in Europe to see property as an asset class. We use it as a substitute for pensions and now are buying overseas.’

Fay Davies, Director of international property at Jackson Stops & Staff, FT 29.10.03).

By 2008 Irish households highest rate of 2nd home ownership in Europe

Lite wealth      

 

Widespread small property ownership Links to development of retail financial services (loans, estate agents, car financing, insurance…)

No longer just consumption property Pension ‘reform’ Share ownership (Eircom privatisation) Fungible assets Facilitate recommodification of pension, health, education Life chances not just determined by occupation

Gate openers (3): Light touch banking regulation The conventional economic argument: Euro-membership plus weak banking regulation generated credit boom But this ignores:  Political commitment to ‘Anglo-Saxon’ financial system  Dublin ‘International Financial Services Centre’ as key element of growth strategy post 1980s crisis – light touch regulation as policy and explicit attraction  The context for » Emergence of new rogue banks and competitive bubble lending to developers » New business elite: A ‘golden circle’ of bankers, property developers and politicians

Gate openers (4): Social partnership 

Tripartite national agreements » Starting 1987 Programme for National Recovery » Widening membership, policy areas; » Also workplace partnership (Roche & Geary, 2000); local partnership (Sabel, 1987)



Consequences » Seen as delivering higher employment, higher wages, low income tax; no major shift towards state services (Teague & Donaghey, 2009); high social welfare benefits and low activation (Grubb et al, 2009): consolidated financialisation » No extension union rights (unions excluded from FDI sector) and increasingly public sector producer lobby; consolidated FDI framework

Crash!

New motors and new mortgages 1990-2012 250,000 231,539

Number of new cars registered

200,000 186,841

Number of new mortgages

150,000

120,037 100,000

99,224 79,874

50,000 34,812 0

8,719

Source: Revenue (car registrations); Department of Environment

Who’s loosing out?

120

Employment and Occupation 2007-2010 110 Managers, self-employed

100

Managers, employed Professionals

90

Associate Prof/Technicians Clerical Craft

80

Pers./Protective Services Sales 70

Operatives Other

60

50 Q4_07

Q2_08

Q4_08

Q2_09

Q4_09

Q2_10

Derived from Muhlau (2012)

Q4_10

Job losses most amongst unskilled and craft building workers

Household debt ‘In Ireland the level of mortgage lending per capita increased 10-fold over the period 1995–2008, the level of creditcard debt per capita rose by just under 700 per cent (Central Bank, 2005, 2010) and the ratio of household debt to disposable income rose by 270 per cent between 1995 and 2008 (Oireachtas Library & Research Service,2010).

Mortgage arrears

More than 12% all personal mortgages now in serious arrears

Old and new credit squeezes I see [possibly illegal] moneylenders knocking on people’s doors and the other thing is I see people with the [hire purchase] catalogues, a lot of people have got into that lately (Stakeholder, Tallaght)

I know quite a few couples who bought the one bedroom apartment thinking that they would do that for a couple of years and then upgrade and they are in such negative equity...the income is not as high and they can’t even think about having families (Stakeholder, Stepaside

Emigration ‘like the Famine’? 





Famine Memorial Dublin

In the Great Famine 1845-9 over 1 million died and 1-2 million emigrated.

Todays’ migrants are educated and/or skilled The poor and unskilled largely stay

Coming and going Immigration and Emigration 1987-2012 200

150

100

50

0

-50

Net migration 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

-100

Emigrants: All destinations Immigrants: All origins

Who’s leaving Emigration and nationality 2006-2012 100 90 80

70 60

Other nationalities (7) EU15 to EU27 states

50

EU15 excluding Irish and UK UK (1)

40

Irish 30

Only from 2011 were most emigrants Irish nationals

20 10 0 2006

2007

2008

2009

2010

2011

2012

New places?

Emigrant destinations 2006-2012 100 90 80 70 60

Rest of world USA

50

EU12 EU15

40

UK 30 20 10 0 2006

2007

2008

2009

2010

2011

2012

Declining unions?

38

Trade Union Density 2004-2012

37 36 35

% employed

34 33 32

Male

31

Female Total

30 29 28 27 26 25 2004

2005

2006

2007

2008

2009

2010

2011

2012

End of partnership 

Partnership institutions allowed to decay » Unions just another pressure group (Culpepper & Regan 2014)

  

Two rounds of public sector pay cuts Unions concentrated in public sector BUT: » Tax increases and wage cuts largely ‘progressive’ » No redundancy agreements » Benefit levels and minimum wage largely maintained



HOWEVER cuts in services, rising poverty...

Welfare state survival Pre-crash

2011

Gini

31.7 (2007)

31.1

At risk of poverty

18.5 (2005)

16.0

At risk of poverty before transfers Absolute deprivation

50.7 11.8 (2007)

24.5

• Initial tax changes and public sector salary cuts progressive • Core cash benefits maintained (monetary welfare state)