Younger people in Ireland are increasingly experiencing poorer economic outcomes – from above average rates of unemployment to higher housing costs and lower wages – and this is now "an unsustainable process," University of Limerick economist Stephen Kinsella has warned .
He told the Oireachtas Committee on Budgetary Oversight on Thursday that young people were bearing the brunt of the economic crisis brought on by Covid-19 but had also endured "an unequal experience of the post-austerity period from 2013 to 2020, particularly with respect to building up equity in assets like pensions and housing".
Prof Kinsella also noted that younger people were likely to experience higher rates of joblessness even as the economy rebounds from Covid while those already owning assets like housing continue to prosper.
“This is an unsustainable process, much like the expansion of private credit in the 2002-2008 period, and unsustainable processes always stop,” he said.
Prof Kinsella said the current suite of economic forecasts from the Government, the Central Bank and the Economic and Social Research Institute (ESRI) probably underestimated the strength of recovery that will ensue in the coming months given the level of excess savings built up during lockdown.
However, he told the committee that the forecasts were unique in predicting a strong expansion of economic activity – to pre-Covid levels and beyond – without a correspondingly reduction in unemployment.
Unemployment predictions
The Department of Finance’s recent Stability Programme Update (SPU) assumes a return to pre-Covid growth rates while suggesting unemployment will remain elevated.
It predicted a reduction in unemployment from 16.3 per cent this year to 8.2 per cent in 2022, and 6.7 per cent in 2023.
The elevated jobless rate reflects structural scarring left by the crisis on certain sectors such as retail and hospitality, he said, which continues to fall disproportionately on the shoulders of younger workers.
“While Employment Wage Subsidy Scheme payments accounted for just 4.9 per cent of total earnings across all sectors in the first quarter of 2021, they represented 49.5 per cent of total earnings for the accommodation sector,” he said.
Prof Kinsella said enhanced public spending included in the Government’s economic recovery plan, announced earlier this week, would add to the recovery in domestic demand.
He said fiscal consolidation was inevitable once the economy opens up and some sectoral stabilisation policies are put in place.
Prof Kinsella said closing the budget deficit could be achieved in three ways: through economic growth, which would allow for investing in structurally-transformative elements like digitalisation and decarbonisation; through raising taxes; or reducing public spending.
“This need to position the State’s finances for some kind of balance does not chime at all with the rising demands for ever-larger capital spending, particularly on housing. It is therefore probable that public anger will continue to rise,” he said.
The head of Social Justice Ireland, Fr Sean Healy, told the committee that Covid-19 had exposed and exacerbated weaknesses that already existed in Irish society, including " a totally inadequate supply of social housing; a two-tier healthcare system; climate change; growing inequality; homelessness; environmental goals not being met, to name but a few."
