Sunday 21 April 2019

Fragile jobs recovery faces many threats as quality and earnings are hit

The most recent figures from the CSO show that there were 2.045 million people at work in Ireland in the first quarter of 2017, up by 320,000 jobs from the 2012 post-crash trough. Stock image
The most recent figures from the CSO show that there were 2.045 million people at work in Ireland in the first quarter of 2017, up by 320,000 jobs from the 2012 post-crash trough. Stock image

Dan White

Irish jobs numbers are almost back to pre-crash levels but while the quantity of employment has recovered the quality seems to have declined over the past decade.

The most recent figures from the CSO show that there were 2.045 million people at work in Ireland in the first quarter of 2017, up by 320,000 jobs from the 2012 post-crash trough and almost back to the 2.074 million people recorded as being at work in the first quarter of 2007.

That's the good news. The bad news is that the Irish labour market is now a very different place from what it was a decade ago.

Average wage growth in the public sector was running at 4.8pc annually in the first quarter of 2007 while average private sector earnings were increasing by between 5.9pc and 11.7pc. Wage growth is now much more subdued with average public sector earnings rising by 1.6pc and average private sector earnings by 1.5pc in the first quarter of 2017.

In other words, average earnings are increasing at somewhere between a quarter and third of the rate at which they rose the last time employment levels were this high.

This relatively weak earnings growth almost certainly explains why the strong growth in employment hasn't fed through into income tax revenues, which were 1.9pc behind target for the first seven months of the year.

So why is the growth in average earnings and income tax receipts so weak at a time when employment is growing so strongly - up by 3.5pc or 68,000 people in the 12 months to the first quarter?

While the number of jobs is almost back to where it was before the crash, the composition of those jobs has changed. While there were 356,000 people in part-time employment (17pc of all jobs) in the first quarter of 2007, this had risen to 440,000 people (21.5pc of all jobs) by the first quarter of 2017.

The number of self-employed has fallen from 335,000 to 312,000 people, 16pc to 15pc of all jobs, over the same period, while the number of those in temporary jobs, which wasn't recorded in the first quarter of 2007, stood at 121,000 or 6pc of all jobs.

Even allowing for a significant degree of overlap between these figures, let us assume that half of all the self-employed and those in temporary jobs are working part-time, at least a third of all those in employment are not in permanent, full-time jobs. "Job certainty is increasingly becoming a thing of the past. There is now a much greater degree of job insecurity," said KBC Bank economist Austin Hughes.

The most recent monthly KBC/ESRI consumer confidence index bulletin shows just how far the pendulum has swung against wage earners since the crash. The bulletin estimates that disposable household incomes (basically wages) accounted for almost 60pc of Irish GNI (the CSO's new Leprechaun-proof estimate of the value of Irish economic output) in 2007. By 2017 it was down to 50pc and falling.

"The share of income as a percentage of GNI has come down quite appreciably. There is a sense that the split of the economic cake has changed in recent years. This is not unique to Ireland. This is a global trend. Since the crisis wages have not performed as well as before. Households' share has deteriorated," says Hughes.

However, in this country these global trends have been reinforced by some uniquely Irish ones. In the immediate aftermath of the crash almost a third of a million jobs, 15pc of the total, disappeared virtually overnight. The disappearance of so many jobs decimated tax revenues and thrust us into the arms of the Troika in November 2010.

The memory of so many jobs vanishing so quickly is still raw.

"We are still in a hangover after the downturn," is how Hughes describes it. "Workers are now prepared to accept job security as a trade-off against higher wage increases. There is a fear factor, a feeling that a job is something to be treasured."

Even when the memory of the massive post-crash job losses begins to fade, other factors will likely combine to keep wage increases low. While total net migration exceeded 170,000 in the six years to April 2015, the number of people entering this country is now exceeding those leaving once again with estimated net inward migration 3,100 in the year to April 2016. This figure is likely to be comfortably exceeded when the 2017 migration figures are published shortly by the CSO.

The return of net inward migration will curb wage increases, particularly for low-paying jobs. While some workers are doing well, particularly those in in-demand sectors such as IT, those at the lower end find themselves increasingly at the mercy of the 24/7 service economy with its preponderance of casual and/or part-time jobs.

Those in relatively "secure" jobs shouldn't take anything for granted either. Last week the euro climbed above 91p as the Brexit drama drags on and on, and US President Donald Trump described Ireland as one of the countries from which US jobs should be "brought back" - demonstrating yet again that he still has Ireland firmly in his sights.

Just for good measure, last year's €13bn European Commission ruling on Apple's Irish tax affairs hasn't gone away. While Finance Minister Paschal Donohoe was telling German newspaper readers that Ireland wouldn't act as a "global tax collector" for anyone else, he may end up having no choice. With the euro soaring into the stratosphere, The Donald on the rampage and the EU determined to force us to take Apple's money, the fragility of Ireland's jobs recovery should be apparent to all.

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