Abolishing Long-Term Unemployment

The Right has one big idea:  cut taxes.  They have another big idea:  cut more taxes.  And their biggest idea of all:  cut as many taxes as possible:  income tax, USC, corporation tax (all hail the 6% Knowledge Box).   That’s it.  The manifesto has been written.

If progressives are to capture the popular imagination then they need proposals that are transformative, popular, radical and achievable. Over the next few weeks I’ll be putting forward some ideas for discussion.  Hopefully, this will provoke others to come up with more and better ones.  So let’s start this debate with a proposal to abolish long-term unemployment.

Abolish long-term unemployment?  Seem crazy?  No, what is crazy is that people are left idle for years without work, miring households and communities in poverty and social exclusion.

As always in these grim statistics, Ireland is up there, only trailing the poorer Mediterranean countries.  For males, it is even worse – 65 percent of unemployed males are long-term unemployed.  In these stakes, Ireland ranks second in the EU-15, not far behind Greece.

The situation is worse when it comes to chronic long-term unemployment.

In Ireland, 43 percent of the unemployed have been jobless for two years or longer (93,000); those without jobs for four years or longer make up a quarter of the unemployed (54,000).  These rates are significantly higher than the EU-15 average. Further, these rates have been driven by the recession.  In 2006 (4^th quarter), there were only 15,000 unemployed longer than two years and only 6,000 longer than four years. 

This is a text book example of labour market failure.  We need to go beyond the usual re-training / re-skilling / harassing people into low-paid work response.  But we also have the opportunity to turn this problem into a wider solution – not only for the unemployed; it should also be about the regeneration of communities through democratic participation by civil society organisations in this fight against long-term unemployment.

Jobs for the long-term unemployed, social wealth for communities, economic stimulus for depressed areas:  it’s not a question of whether we can do it.  It’s a question of how.

Reforming the Gateway Programme

Let’s reform the Gateway programme to make it fit for purpose.  The infrastructure is already in place. 

The Gateway programme is a local authority labour activation scheme that provides short-term work and training opportunities for people unemployed longer than two years.  3,000 places have been allocated and the current number of active placements is 1,900.

• Participants work for the local authority for 19 ½ hours a week on 22 months contracts.

• The minimum weekly payment for participants is €208:  Jobseekers’ payment plus a €20 top-up.

• Participants can take up other part-time employment provided it does not interfere with their Gateway work placement.

There are two major problems with Gateway.  First is the coercive element:  those who are eligible for the scheme will be offered a placement on the scheme by the local social welfare office or Intreo centre.  If people refuse the offer without good cause, they may have their social protection payment reduced or even removed altogether. 

Secondly, job displacement:  there is a real danger that long-term unemployed are doing work that should be done by full-time local authority workers. 

Let’s transform this into a programme for job creation, social wealth and economic stimulus:

• Turn the placement into full-time employment, paid at a sum above the national minimum wage on contracts for two years (there could be some provision for part-time work where appropriate).  

• Extend full-time work to all non-profit and civil society groups in addition to local authorities.

• Remove the coercive element and make the programme completely voluntary.

• Target, in the first instance, people out of work for two years or longer with particular (though not exclusive) emphasis on young people and those over 50 years and high unemployment areas.

• Integrate work with training/education – including personalised training

To the extent that local authorities expand their job opportunities, this should only be undertaken where there is a commitment to transition the work to a full-time local authority job, overseen by employers and trade unions.

Now we’re ready to begin the work of abolishing long-term unemployment.

What Kind of Work?

There will be criticism that this programme would largely be make-work.  However, when looking at the employment currently offered by local authorities through Gateway, we can see that there is real work going on.

GIS mapping * HR – to assist in running with Gateway projects * CMAS communications * digitising records, town and country files * ergonomic assessments * sustainable energy projects * Using CRM for health and safety tracking * LCDC administration * marketing and promotional work for local enterprise (buy / source local campaigns) * records management and data entry * social media (website, Facebook, Twitter) * library supports

Basic horticultural work i.e. planting, weeding in parks, walking trails, derelict sites * Amenity improvement schemes – bench-making, carpentry * Biomass Scheme - plant, maintain and harvest areas of willow biomass * graveyard maintenance

Sports development (e.g. walking, basketball and soccer clubs) * local museum supports (research, reception, security, exhibit guide) * historical sites * arts programmes for key groups (e.g. arts and disability) * tourism supports

This is some of the work that is already being undertaken by participants in local authority projects – and they go beyond just ‘pick-up-litter’ schemes.  They are providing a broad range of opportunities up and down the skill ladder, with the potential for people to learn.  Now let’s extend this.

Community Democracy

Under the current Gateway programme only local authorities can ‘hire’ or provide placements.  This should be extended to non-profit groups, civil society organisations and community groups – allowing them to devise programmes that would employ people.  The range of such groups could be considerable:

Geographical-based community groups * single-issue groups (unemployed, arts, drug rehab groups, disability support groups) * local Chambers of Commerce and Trade Union Councils and branches * environmental groups * Development and Area Partnerships * retirement and elderly groups * Youth Clubs * parish councils and church groups * rural support organisations * citizen information centres * literacy groups

The criteria for participation should be that civil society groups are non-profit and the programmes have projected outcomes that are measureable.

One can imagine these groups coming together – under the organisation of the local authority – in small towns, city suburbs, rural areas, and villages to create programmes that would add to the community wealth and the local economy.  This is about community regeneration and repair, community participation and democracy – this is about communities and local populations reasserting some control over their areas.

How Much and How to Fund

Let’s assume an initial roll-out of 30,000 jobs (which could take up to two years, depending on Government priorities and the urgency with which they give this programme).  A weekly 39-hour contract of work/training could be set at €9 per hour, or €18,250 annually. With the state fully funding this programme it would cost in gross terms €547 million. An additional 10 percent would be added for training costs and administration which would come to €55 million.  To employ F30,000 would cost approximately €600 million.

But that’s gross.  Using back-of-the-Excel-sheet’ estimates we can estimate the net cost to the state. 

• A reduction 30,000 social protection payments saves approximately €295 million.  This figure may be slightly on the high side since not all people moving from the Live Register would be on the full €188 a week (e.g. young people, lower payments due to means-testing, etc.). 

• On average, a wage of €18,250 would return to the Exchequer €772 in income tax and USC.  This would come to, in total, €23 million.

Combined, this would reduce the costs to below €300 million.  But there’s more.

• A newly employed person would, on average, experience an increase of €7,700 in disposable income.  Most of this would be returned to the economy through consumer spending, increasing VAT/excise revenue.  Just as important, business turnover would increase – which could lead to new employment and/or higher wages.  This would be an additional gain to the Exchequer.

• The training and administration of the scheme would be labour-dense so a substantial proportion of this would be recouped through tax revenue.

• Expenditure under the current Gateway and TUS programmes could be diverted into this new programme. The latter is a work placement scheme provided by community and voluntary schemes.  A further resource would be to massively scale back on JobBridge, target very particular sectors, and require employers to pay the top-up (and, of course, remove the coercive element).

• The supply-side, or social value-added, benefit - from increased resources to community and voluntary activity.

After factoring all this in how much would it cost?  Much less than €300 million.  When the Nevin Economic Research Institute and the ESRI analysed the impact of increasing public sector employment, they found the cost was fractional and could even reduce the deficit and/or debt; in other words, no cost at all.  Hard to say how this scheme would impact but it would have similar fiscal benefits.

So how would we pay for this less-than-€300 million initial cost?  Well, the tax cuts last year cost over €600 million.  The Government has, so far, estimated that tax cuts in the next budget will cost at least another €600 million (this figure could rise when the Government publishes its Spring Statement).

We have to make choices.

Challenges

There are challenges in all this – a large part being the slow nature of getting the idea into action.  Resources would have to be provided to local authorities to employ the administration throughout their area.  Civil society groups would have to be organised into the process.  Cost estimates would have to factor in dead-weight costs (that is, the cost of employing someone on the programme who would have gotten a job anyway), though I suspect this would be lower given we are dealing with the long-term unemployed.  Quality training and re-skilling would need to be fully integrated into the programme.

A particular challenge would be, at the end of the two-year contract, to create transitions from the programme to work in the economy.  It would have a depressing effect if people fell back into unemployment.  This would have to be co-ordinated with transitions to market economy (private sector) jobs, public sector jobs – a little easier if the moratorium were lifted, and the community sector – as public resources are increased. 

Finally, we have to be realistic.  Is there enough work out there – social benefit work for public agencies, non-profit and community groups?  An initial roll-out of 30,000 jobs is a big ask – what about extending it to all long-term unemployed who want it? 

This programme will not create a full employment economy.  That can only come about when all the levers available to the Government – macro-economy, labour market, fiscal, investment, enterprise policy– are pulling in the right direction.

However, this is a programme to get people back into work, back into the social networks that will help them to explore new life-chance and job opportunities for themselves.  This is an important way-station to the goal of full employment – for the long-term unemployed, for communities and the local economy.

And the great thing is that this is wholly feasible and is being done already on smaller scale.   One thing’s for sure – it’s a great investment.

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Below I provide very approximate impact in three locations:  Gorey, Letterkenny and Limerick City.  Estimates of long-term unemployed (above two-years) are extrapolated from the Census Area Profiles and the change between 2011 and 2014.  I suspect these are under-estimates but there is no current data.

GOREY:  there could be between 500 and 600 people unemployed for two years or longer.  Under the initial roll-out of the above programme, between 150 and 175 could get a job.  This could raise purchasing power in the town by between €1.2 and €1.3 million.

LETTERKENNY: with high joblessness there could be between 700 and 750 people unemployed for two years or longer.  Under the initial roll-out of the above programme, between 200 and 250 could get a job.  This could raise purchasing power in the town by between €1.5 and €1.9 million over the year.

LIMERICK CITY: a real unemployment blackspot, there could be close to 3,000 people unemployed for two years or longer.  Under the initial roll-out of the above programme, up to 1,000 could get a job.  This could raise purchasing power in the city by over €7 million.

 

 

Comments

[ed]

I agree completely with the premise of this article; but would argue with this specific suggestion. Isn't this just more workfare? I see two major weak points.

* It seems unlikely that the machinery of state would allow this scheme to be 'completely voluntary'. Even if it was only on the level of a social welfare officer enquiring as to why the applicant did not take a job that was offered.

* The civil society groups will be vetted by local authorities, which will invetiably represent their interests.

Surely it would just be far more efficient to just institute a Basic Income? Is Basic Income going to be one of the articles in this series?

[Joanne]

This is great, lots to think about. As part of the challenges of this proposal had you considered the element of childcare and if so any idea how that might impact the figures?

[Michael Taft]

Ed, thanks for that. It may be easier to reform the machinery of the state if progressives formed the next government. I take the point re: local authorities but is it always the case that their interest is opposed to that of civil society organisations. You have raised important institutional points - I was merely focusing on the economic / fiscal issues.

Regarding, Basic Income - I have post on a such a proposal which can be found here: http://notesonthefront.typepad.com/politicaleconomy/2014/06/basic-income-an-idea-worth-exploring.html

Joanne - thanks for that. I have written quite a bit on childcare. Here is the latest post put up last year:

http://notesonthefront.typepad.com/politicaleconomy/2012/11/i-want-to-be-an-agent-of-economic-recovery-but-they-wont-let-me-play.html