Covid-19 ‘lost generation’ likely without job investment, forum hears

Ireland is facing a “lost Covid generation” unless public spending on job activation is ramped up at least threefold even while the public coffers cope with “huge numbers” of people depending on State support to survive, the Dublin Economics Workshop has heard.

The conference, which got under way on Monday, is now in its 42nd year and deals with economic policy issues in Ireland. It is attended each year by civil servants, academics, economists and politicians.

In a session on how the Covid-19 pandemic has affected the Irish labour market, speakers on Tuesday painted a bleak picture of the medium- to long-term future for the Irish jobs market and the sustainability of the State’s ability to support those out of work.

John Martin, chairman of the Labour Market Advisory Council, said: "One big worry is the risk of a lost Covid generation of school leavers and other young people who hit the labour market at the worst moment.

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“We know from past recessions that scarring effects are large and long-lasting for many new entrants and young people. Among this cohort, those with low education and skills coming from disadvantaged families and localities are at the highest risk of long-term unemployment or of not being in education, employment or training.”

Labour market

Mr Martin said the latest available data on State spending on active labour market policies is from 2018 when it spent 0.3 per cent of gross domestic product on such measures. This compares with the crisis years of 2009-2012 when the State spent an average of 0.9 per cent of GDP per year.

“We need to ramp up the public spending effort quickly, perhaps to the order of 1 per cent of GDP or more,” he said. “Public spending on such policies was about €1 billion in Budget 2020, so this implies increasing spending threefold, at least.”

Orlagh Lavelle, a policy analyst in the Department of Public Expenditure, said the State had so far spent €6.4 billion on Covid-19-related support schemes. While the number of people in receipt of supports had been dropping in recent weeks, it was now expected to plateau, she said.

“Expenditure on these schemes has fallen to €170 million a week, which is still a significant amount of money in terms of sustainability of expenditure, and also in terms of the costs as we go forward into the recovery and the promotion of new employment and jobs,” she said.

Jobless rate

Ms Lavelle said 19 per cent of the labour force was currently classified as unemployed despite most of the economy having reopened for business.

“At the moment, 84 per cent of those we can classify as unemployed are short-term unemployed, but in another six months they will be classified as long-term unemployed with all the scarring effects and the challenges faced by that cohort,” she said.

“It is definitely emerging that young people, under-25s, have been disproportionately affected. Sixteen per cent of the under-25 labour force is on the pandemic unemployment payment (PUP). That’s almost double the 25-34 year age group.

Ailbhe Brioscú, an economist at the Department of Employment Affairs and Social Protection, added that those who had exited the PUP so far had been higher earners and in prime working age, while those who remained in receipt were the most vulnerable workers in the most vulnerable sectors.