Patricia Callan, Director of the Small Firms’ Association, recently spoke before an assembled crowd during an event at which I was in attendance. She made an extremely valid point, that the unemployed in Ireland at the moment for the most part are not lacking skills.
Rather, unemployment during difficult economic times (especially due to faltering competitiveness) can often be characterised by people signing onto the Live Register with impressive skill-sets. This is the phenomenon in Ireland currently. The problem is that these people are unable to find jobs that suit them, because companies are cutting costs and reducing expansion.
Thus, government programs that spend so much money retraining and reskilling workers are, at the moment, not what is needed. In fact, they represent a dangerous misallocation of resources given the budgetary crisis. Under different circumstances (for example, unemployment caused by economic reorientation), these programs could be valuable. They could even be efficient where the taxpayer would otherwise be making substantial payments into welfare programs.
It might not be popular. FÁS has for long been a popular tool that demonstrates the government’s commitment to helping everyone in the state get a qualification and a job. However, it does not solve any of the problems that the country is currently experiencing.
It was also not hit nearly hard enough in the supplementary budget. The government needs to realise that most people in the country wouldn’t notice if FÁS suffered a substantial drop in funding. Their refusal to do so, coupled with their extension and continuation of programs such as the “Back to Education” Allowance, represent a misunderstanding of the root of unemployment in Ireland at the moment – and the route towards returned competitiveness.
As noted elsewhere, active labour market policies can be extremely effective in getting people back to work. However, needlessly spending money on qualifications that will not add to Ireland’s productive capacity in the short-term, when considering the exigencies of budgetary policy, is downright irresponsible. In times of high unemployment, that is precisely what most of this spending represents.
It would appear that the government’s recent decisions were made to balance political considerations, and accounting requirements. Such decisions will be regretted, as unemployment languishes in double digits in the future and wage levels are creeping only slowly downwards. This capital, financial and political, should be employed in the encouragement and facilitation of enterprise.
© The Free Marketeer 2009