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A targeted approach to long-term unemployment may be required

On the face of things, recent falls in long-term unemployment is one of the big good-news stories of the Irish economic recovery. According to the latest numbers from the Central Statistics Office’s Labour Force Survey the total number of long-term unemployed people in Ireland stood at 50,100 (2.1%) at the end of 2018, having peaked at 215,000 (9.8%) in 2012. Indeed, the numbers for long-term unemployment being reported throughout 2018 were the lowest seen at any time since the end of 2008. (Long-term unemployment measures the number of people who have been unemployed for more than a year).

The most recent results from the Labour Force Survey note that In the year to Q4 2018, the number of persons classified as long-term unemployed decreased by 9,900 (-16.4%), bringing total long-term unemployment to 50,100. Over the same period, short-term unemployment – where an individual is unemployed for less than a year - decreased by 3,900 (-4.9%) over the year to 76,200. But the timeframe chosen here hides a slowing in the pace of the reduction in long-term unemployment.

As noted, the long-term unemployment numbers being reported throughout 2018 were the lowest seen in Ireland at any time since the end of 2008. Ireland’s economy and jobs market began faltering from the end of 2007 so given that long-term unemployment numbers are a measurement of those without a job for more than one year and therefore there is a lag effect before negative changes to the labour market will be reflected, this makes sense. However, positive changes (the removal of a long-term unemployed person from the count as a result of them taking up a job) are reflected almost immediately. For this reason what we are seeing throughout 2019 is worrying. Here are the numbers for long-term unemployment during 2019:

Q1 – 50,100

Q2 – 48,900

Q3 – 50,200

Q4 – 50,100

While it may be too soon to say conclusively, it may be the case that long-term unemployment numbers have plateaued, despite the fact overall unemployment continues to fall. (In the last six months of 2018, overall unemployment fell from 144,300 to 128,800 – a 10 per cent fall. Over the same period, long-term unemployment rose slightly, from 48,900 to 50,100).

This is worrying. We expect long-term unemployment to fall as overall unemployment falls, although they will fall at different speeds depending on the point in the economic cycle. There is justifiable concern that the general improvement in employment has done as much as it can to reduce the long-term unemployment numbers and that further reductions will possibly require a more targeted approach.

Indeed, Social Justice Ireland has been arguing for years that a policy focus on economic growth and job creation alone lacks the nuances required to deal with some of the most pressing needs within the labour market. Often, focusing on reducing headline unemployment numbers does little to assist those in long-term difficulty. Most of the measures introduced in recent years in Ireland, and indeed across Europe, to help the unemployed were mainly targeted at those who were “job-ready”, i.e. those in a position to get back to work once jobs are available. As the economy picks up, those who have the skills to get work do so quickly.

Much of this is what we would expect as being the residual effect of a prolonged recession with an accompanying increase (in Ireland’s case a huge increase) in unemployment. Long-term unemployment is often very difficult to reverse. The longer people are away from work, the harder they generally find it to break back into employment. Very often it results in a deterioration of skills and of self-confidence, adding up to an erosion of human and social capital over time. Ireland suffered greatly as a result of the high numbers in long-term unemployment throughout the 1980s and while the problem is not on the same scale as it was then, Ireland may still suffer again as a result of the most recent economic crisis. This stores up further problems not directly linked to the economy. There are significant mental health issues associated with long-term unemployment. Those afflicted are also at greater risk of bad physical health. Long-term unemployment can expose individuals and families to serious financial effects, including poverty and deprivation, home-repossession, and deepening levels of social exclusion. It is important to remember that behind each statistic related to long-term unemployment is a person or family experiencing genuine human suffering.

While it’s true for all age groups that the longer one is away from work, the harder one generally finds it to break back into employment, this is particularly so for older workers who in addition to the problems all workers experience:

  • May find themselves the subject of age-related discrimination;
  • May not be in a position to go abroad to find work like many young people often can;
  • May find themselves in a situation where their skills have become obsolete;
  • May find it more difficult to return to education or engage in re-skilling programmes.

And herein may lie the fault in the policy response to long-term unemployment. Measures put in place have often been too limited or too narrowly focused to assist those out of work for long periods. To properly support the long-term unemployed, the range of supports provided must be broadened. This might include adapting policies to encourage employers to take on individuals through financial incentives, or labour market inclusion efforts like start-your-own business schemes.

The scale and nature of the long-term unemployment situation deserves far greater attention than it has been given. The policy response has been limited, and not sufficiently targeted to deal with the problem. Throughout the first 8 years of the 2000s the long-term unemployment rate was always well below 2 per cent, averaging at 1.4 per cent. It now seems static at around 2.1 per cent for the last year. Social Justice Ireland believes that policymakers should set a goal of reducing this rate to 1.4 per cent.

Annex

The release of the CSO's Survey on Income and Living Conditions is always an interesting time for policy wonks and the 2017 edition, released in December 2018, was no different. One interesting trend uncovered when interrogating the data was that for unemployed people, the poverty rate has jumped from 43.9 per cent to 51.7 per cent between 2016 and 2017. Despite the number of people classed as unemployed by the survey falling from 230,000 to 199,000, the number of people unemployed and living in poverty did not change. This suggests a situation that Social Justice Ireland has long suspected prevails, but for which no data existed; that those who are leaving unemployment were, broadly speaking, not experiencing poverty and that those unemployed most “in need” are also those most distant from the labour market. This implies an area of concern for Government, as it is further suggestion that labour market activation initiatives may not be reaching those who need them most.