Hospitality workers, builders and young people bear brunt of effort to fight Covid

Hospitality workers, builders and young people are bearing the brunt of the Government’s efforts to combat Covid-19, warns employers’ body Ibec.

Ibec’s Quarterly Economic Outlook Q3 2020, published on Monday, says there is a growing gap between employers and families whose prospects have proven resilient during the crisis and those with falling incomes.

Gerard Brady, the organisation's chief economist, notes that a minority of sectors and workers are being asked to take a significant hit and are "bearing the brunt of the public health measures".

The report argues that exchequer figures showing income tax held up better than expected over the last six months support this.

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Businesses with the sharpest falls in employment – hospitality, personal services and construction – accounted for 19 per cent of jobs, but just 9 per cent of income tax.

Those with the lowest falls in employment, manufacturing, technology and finance, account for almost a quarter of all jobs and 34 per cent of income tax.

Ibec says unemployment fell to 15.4 per cent of workers in August from a peak of 26 per cent in April on the back of the phased reopening. That brought 392,000 people off the Pandemic Unemployment Payment (PUP), a two-thirds reduction.

Hospitality, retail and construction workers still accounted for almost half the 210,000 people still receiving the payment in September, despite a rapid fall in claimants from these industries.

However, Ibec says that the recovery is slowing, potentially leaving a group of workers behind.

“Workers under 25 years old make up 21 per cent of current Pandemic Unemployment Payment recipients, despite representing only 10.5 per cent of the labour force,” the report says.

Unemployment

The study predicts that unemployment will stick at 15 per cent for the rest of the year, falling to 7 per cent by the end of 2021.

“Further efforts in labour market activation and training will be a key challenge to ensure that youth and long-term unemployment do not become lasting problems for the Irish labour market.”

While domestic demand collapsed under a severe lockdown during the second three months of this year, Mr Brady argues that the Republic’s strong export performance gives cause for optimism.

He points out that overseas sales of goods were flat in the second quarter while they fell by between 10 per cent and 40 per cent in most other European countries.

The economist believes that exports will provide the opportunity for the Republic to grow its way out of a difficult situation, but this will only happen if workers in growing businesses can spend their cash locally.

Mr Brady calculates that Irish families saved €9.8 billion during the first seven months of the year, leaving them with €20 billion more than their total bank debts.

By contrast, households owed the banks €70 billion more than the amount they had saved at the start of the last recession in 2008.

Mr Brady says that these resources, combined with exports and State investment, are the key differences between this economic downturn and the last.

“The key to Budget 2021 is not a challenge of a society with too little resources, it is a challenge of finding the right channels to get those resources moving, and people back to work,” he adds.

Stalled

Meanwhile, AIB’s Irish Services Purchasing Managers’ Index (PMI) slumped to 45.8 in September from 52.4 in August, confirming that the recovery has stalled. Any decrease below the benchmark of 50 signals a contraction in business on the previous month.

AIB blamed Covid-19 restrictions for hitting demand, sparking a decline in new business, for services' poor performance last month.