Activation in Ireland: Are we on
the Right Path?
Elish Kelly (ESRI)
Seamus McGuinness (ESRI)
Philip O’Connell (UCD Geary Institute)
Conference on Irish Economic Policy Programme
1st February 2013
Outline
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
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


Background
Objectives
Data
Descriptives
Econometrics
Active Labour Market Policy: What Works?
Impact of Pathways to Work
Background

Ireland’s unemployment rate has increased from 4.4% in 2006 to
14.8% today.

Long-term unemployment is a growing problem, and currently
accounts for almost 60% of total unemployment.

Many of the long-term unemployed are also structurally
unemployed having been previously engaged in industries, such
as construction, with limited growth potential.

The composition of unemployed has changed since the recession
e.g. growth in unemployed males with post-leaving cert
qualifications and females with third-level.
Objectives

We use new data to examine the nature and rates of labour
market transitions among the unemployed in 2006 and 2011.

We consider the extent to which unemployed persons
transition to employment and inactivity, and the degree to
which the factors determining the transition to employment
have changed.

We consider the implications of our evidence for activation
policy in Ireland.
Data

Quarterly National Household Survey (QNHS) Longitudinal Data

Pre-Recession: Q2 2006 – Q2 2007
Post-Recession: Q2 2011- Q2 2012


Balanced Panel: Focus on individuals unemployed on entering
the panel who are present in the panel for five consecutive
quarters (e.g. Q2 2006 through to Q2 2007)

Eradicate the impacts of migration from using balanced panel

We examine the impacts of age, gender, nationality, education
and unemployment duration on escaping to employment
Transition Rates
Continuously
Unemployed
Into
Employment
Into
Inactivity
Into/Out of
Employment/Inactivity
2006
21.3
33.9
29.3
15.5
2011
49.0
19.9
26.6
4.6
Gender Profile
Continuously
Into
Unemployed Employment
Males
Females
Into
Inactivity
Into/Out of
Employment/Inactivity
2006
2011
2006
2011
2006
2011
2006
2011
29.2
64.2
40.5
18.9
23.5
14.9
6.8
2.1
2006
2011
2006
2011
2006
2011
2006
2011
10.9
27.6
25.2
21.3
36.9
43.1
27.0
8.1
Age Profile
Educational Attainment
Unemployment Duration
Escape to Employment:
Personal Characteristics
2006
2011
0.034*
0.004
15-19
0.020
0.016
20-24
0.012
0.046**
25-34
-0.029
0.029
35-44
0.000
0.024
45-54
-0.033
0.039**
Irish
0.115***
0.021
Male
Age
(Ref: 55Plus):
Escape to Employment:
Educational Attainment
2006
2011
Junior Certificate
0.015
-0.006
Leaving Certificate
0.045
0.005
Post-leaving Certificate
0.033
0.016
Third-level Non-degree
0.086**
0.001
Third-level Degree and Higher
0.098**
0.036
Educational Attainment
(Ref: Primary or Less):
Escape to Employment:
Unemployment Duration
2006
2011
3 Up to 6 Months
-0.046
-0.020
6 up to 12 Months
-0.029
-0.031*
12 Months Plus
-0.045*
-0.039***
Unemployment Duration
(Ref: Up to 3 Months):
Summary I

The proportion of respondents remaining unemployed for at
least 12 months has increased from 21% in 2006 to 49% in
2011.

Consequently the proportion entering employment has fallen
from 34% to 20%.

Movements into inactivity appear stable.

There has been a substantial fall in marginal attachment over
the period.
Summary II

The econometric analysis reveals that education has become
less relevant in determining a successful transition to
employment over the period.

Location is not an important factor, and gender is not significant
in current economic climate either.

Unemployment duration emerges as being the main driver in
explaining the degree to which people exit unemployment

Those with shorter unemployment durations (up to 6 months)
are more likely to escape from unemployment, while the longer
a person remains unemployed the less likely he/she is to leave
unemployment, especially since the most recent recession.
Long-term Unemployment has risen steadily during crisis.
It now stands at 60% of total unemployment
Reducing LTU remians be a key objective of labour market policy
16
14
12
10
8
6
4
2
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
06 06 06 06 07 07 07 07 08 08 08 08 09 09 09 09 10 10 10 10 11 11 11 11 12 12 12
Long-term
Short-term
Source: Constructed from the Quarterly National Household Survey, Central Statistics Office
Active Labour Market Programmes
• Supply side
– Job Search Assistance/Encouragement
• Interviews/counselling, job placement services, etc
• Increase effectiveness of job search + monitoring & sanctions
– Training
• Enhance skills and employment prospects
• Demand Side
– Public-sector Employment schemes
• Retain contact with labour market
– Incentives to employers or self-employment
• Encourage employers to create new jobs or retain existing jobs
Key Principles for effective labour market activation
• Labour market activation to assist and encourage the
individual to return to work should be initiated as
soon as he or she makes a claim
• Effective job search advice and assistance should be
delivered to all non-employed
• Job search activity should be monitored on a regular
and ongoing basis
• An effective activation strategy needs to be backed
up with appropriate sanctions for non-compliance
with job search and activation requirements.
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Research Findings: The Impact of Job Search Assistance
• Job Search Assistance – International evidence
– Effective for many groups
– Low cost
– More effective with regular monitoring and
sanctions
– Irish research (OECD and ESRI):
• Ireland has had a poor record in the past
• Lack of regular monitoring, assistance or sanctions
• Impact of reforms?
Research Findings:
Programmes with strong market linkages show strong
positive effects on employment (1990s, 2006-8)
Market Orientation
Labour Market
Leverage
Supply –
Training
Weak
Strong
General Training
(e.g. ECDL)
Specific Skills (e.g. Computer
Assisted Design)
Generally Weak
Strong Positive
- Job search training
- Medium & High level skills
- Employment and wages
Demand –
Employment
Public Employment
(e.g. Community
Employment)
No Impact on
Employment
Employment Incentives (e.g.
JobBridge)
Strong Positive
-In the 1990s
- Now??
Research Findings:
Programmes with strong market linkages show strong
positive effects on employment (1990s, 2006-8)
Market Orientation
Labour Market
Leverage
Supply –
Training
Weak
Strong
General Training
(e.g. ECDL)
Specific Skills (e.g.
Computer Assisted Design)
Generally Weak
Strong Positive
- Job search training
- Medium & High level skills
- Employment and wages
Demand –
Employment
Public Employment
(e.g. Community
Employment)
No Impact on
Employment
Employment Incentives
(e.g. JobBridge)
Strong Positive
-In the 1990s
- Now??
Research Findings:
Programmes with strong market linkages show strong
positive effects on employment (1990s, 2006-8)
Market Orientation
Labour Market
Leverage
Supply –
Training
Weak
Strong
General Training
(e.g. ECDL)
Specific Skills (e.g.
Computer Assisted Design)
Generally Weak
Strong Positive
- Job search training
- Medium & High level skills
- Employment and wages
Demand –
Employment
Public Employment
(e.g. Community
Employment)
No Impact on
Employment
Employment Incentives
(e.g. JobBridge)
Strong Positive
-In the 1990s
- Now??
Rough Estimate of Spend on ALMPs for Unemployed c. 2011-12
2/3rds on programmes with weak market links
1/3rd on direct employment schemes
Market Orientation
Labour Market
Leverage
Supply –
Training
Weak
General Education
and Training
c. €430 (33%)
Strong
Skills Training
c. €220 (17%)
€650
(50%)
Direct Employment
Employment
Supports
c. €440 (34%)
c. €200 (16%)
Demand –
Employment
€640
(50%)
Total
€870 (67%)
€420 (33%)
€1,290
Sources: Mainly DPER Comprehensive Expenditure Review data
Content and quality of education & training is vital
• Education and training programmes should be demand led
– driven by the needs of growth sectors
– strongly connected with real jobs
• Content of training should be driven by needs of enterprises
– need to develop up-to-date intelligence of skill needs.
• Training initiatives should broadly reflect the education profile
of the unemployed.
– In the current crisis, the educational and skills profile of the
unemployed has increased: training programmes should reflect that.
• Training providers should be chosen on the basis of their
ability to deliver high quality effective and relevant training.
24
Pathways to Work/Intreo
Many positive features:
• Battle against unemployment as top priority
• Commitment to reducing Long-term Unemployment
– Integration of income support with activation
• One-stop-shop in Intreo offices
– Additional training places
– Statistical profiling to target those most at risk
– Extension of employer PRSI scheme
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Moving in the right direction, but:
• Pace of change – the crisis started 5 years ago:
– Intreo roll out over 2 years
– Client profiling still incomplete
• Needs to be adapted to new clients and new conditions
• Immediate activation for all clients?
– New unemployed
• Only in Intreo offices - Non-Intreo, wait 3 months
– Current unemployed
• Too little too late – insufficient activation
– Others not economically active
• Capacity?
–
–
–
–
OECD: insufficient staff to implement activation system before crisis
Live Register has grown from 290,000 in 2009, to 440,000 in 2012
Skills?
Outsource activation role?
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The Way Forward: Demand and Supply
Demand
• Pathways recognises the importance of programmes to match labour
market needs
– Can Expert Group on Future Skill Needs + FAS Skills and Labour Market
Research Unit meet that challenge?
– Need for ongoing and up-to-date information
– Specific sector skills councils
– Ensure nature and content of education and skills are market relevant
• Training programmes should include job placement component
Supply
• Respond to upward shift in educational profile of unemployed
•
Provide intensive retraining to tackle structural unemployment among former
construction workers
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The Way Forward: Providers
• Education and Training is excessively provider driven
– Not designed to meet training needs of unemployed or skill needs of
employers
– Need to evaluate impact of 2nd chance education
• Can SOLAS + Local Education and Training Boards meet training needs?
– Experience, expertise, priority focus?
– DSP as broker/coordinator of training?
• Providers should be chosen on basis of ability to deliver quality training
– Provision could be incentivised according to results (job placements)
– Does the academic calender meet the need of the unemployed?
• Ensure progression from programmes with weak to strong market links
• All education, training and employment schemes should be subject to
rigorous evaluation:
– identify effective interventions
– timely restructuring/closure of ineffective interventions
– 0.04% of the ALMP budget = €500,000 for evaluation….
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