Madam, – Sarah Carey’s article (Opinion, July 1st) was strong on the obvious, but weak on specifics. Economists may agree that job subsidies are a weak and ineffective way to save jobs. But the question on how to tackle Ireland’s growing job crisis remains.
The ESRI predicts that unemployment could grow to over 17 per cent by the end of next year.
In the absence of an upturn in the international economy this could grow even further.
This crisis in unemployment – affecting thousands of individuals, families and communities – deserves the same policy-focused endeavour as that shown to the public finances.
Ireland’s economic crisis is remarkably similar to the Finnish depression in 1990.
The causes of both crises are practically identical; financial deregulation led to an explosion in the availability of cheap credit.
This cheap credit facilitated by pro-cyclical economic policies by government led to an investment and housing bubble.
Private sector debt doubled in four years.
In order to avoid a devaluation of the currency a deflationary adjustment was chosen. The Government tried to depress demand by cutting wages.
This policy approach backfired. Aggregate consumer demand (by individuals and firms) collapsed. 450,000 jobs were lost which equated to 20 per cent of the population. It took 15 years for employment to get back to 1991 levels, and this was after devaluation, a policy option not available to Ireland.
Job creation needs to be a primary policy objective of government over the next five years.
Whilst job subsidies may not be the best option, making funding available for policies that fight unemployment, prevent people from losing touch with the labour market and concentrate on re-skilling for existing labour demand will be money well spent. – Yours, etc,