We are in a recession, all right, but nothing like we have ever seen before. Leo Varadkar was right when he said during the week that this would be the divisive downturn. We are heading into a two-tier recession, with one part of the economy getting a gentle slap and the other being punched in the face. Younger, less-educated people in lower-paid jobs are exposed, while many older, better-paid folk are protected. Dublin, with its diversity of employment, will have some protection, but many parts of rural Ireland, particularly areas reliant on tourism, will have little.
Perhaps the spark of hope in this is that the tax revenues – and the activity – created by the parts of the economy that continue to do okay can help to support the worst-hit sectors. The latest economic data suggests that as the most exposed parts of the economy – such as hospitality, tourism and entertainment – struggle, many other sectors continue to trundle on. A CSO survey shows that seven out of 10 people report no impact on their earnings. Employment in the 10 biggest multinational taxpayers rose by 11 per cent in both April and May, according to Revenue data.
A significant group of generally lower-paid people are at imminent risk of losing their jobs
The creation of these better-paid new jobs supports income tax, which is important. But we face a coming wave of job losses among lower-paid people who make up much of the workforce in the three most-exposed sectors. Work by the ESRI has shown that this group tends to be younger and less established in work, to have limited financial resources and less education. Many have migrated to Ireland. Most are renting their accommodation.
Here we have the two-tier threat of this most unusual of recessions. Many better-off people continue to do fine – the public sector is even in line for a wage rise – the big multinationals do their thing and the professional classes continue on, as they always seem to do. Meanwhile, a significant group of generally lower-paid people are at imminent risk of losing their jobs.
Beyond the obvious
We can’t generalise too much. Recessions hit across the board and this one will have particular impacts in a range of sectors beyond the obvious. The education and public transport sectors are in trouble and university finances have been upended. And the general trend in consumer and business confidence – which could yet cause much wider economic damage – is now crucially reliant on the path of the virus.
Rural countries are those with by far the biggest number of unemployed people in proportion to listings of jobs currently available
But for now the industries where there is direct contact with consumers are on the front line and these tend to have younger employees. There are some 96,000 under-25s on the Pandemic Unemployment Payment and including these the unemployment rate among 15-24-year-olds is about 45 per cent. While most in this age group are in education, this is still a striking figure. The National Youth Council pointed out this week that the 125-page programme for government contained no mention of specific measures to tackle youth unemployment, beyond a few general commitments to new training and reskilling programmes.
The two-tier nature of the recession relates not only to age but also to geography. Dublin and the other cities have plenty of jobs at risk, of course, but as a proportion of the workforce, rural Ireland is much more exposed. New research by Central Bank economist Reamonn Lydon, published with its quarterly bulletin last week, showed the regional nature of the jobs hit. In mid-June, about 60 per cent of the workforce of counties such as Donegal, Kerry, Louth, Carlow and Wexford were reliant on State job supports – the pandemic payment, the wage subsidy or the live register. In Dublin, Cork and Kilkenny the figure was just above 40 per cent. Rural countries are those with by far the biggest number of unemployed people in proportion to listings of jobs currently available.
Top table
When you see rural counties pop up as the most exposed, it gives some perspective to the row over ministerial appointments. Nerves are on edge, and Brexit adds another threat to rural Ireland. Politics is always local, but now more than ever there will be big decisions to be made about how support is paid out. Many measures will be national – possible VAT relief, for example – but the July stimulus and what follows will also try to boost local investment. And let’s not pretend that this won’t be influenced by who is sitting around the top table.
Younger people need their supporters in the debates to come, too. It is all about perspective and priorities. Jobs must be supported where at all possible. But many will be lost and significant supports and investment in training, placement and internships will be essential, as well as imaginative ideas to direct and reskill people for areas where new jobs are available.
In the shake-out to come, the two hardest-hit groups – younger workers and those in rural Ireland – must be at the front of the queue
Few would argue with this, I expect. But entering a period when we can’t afford everything, priorities are key. And this is where the rows will come. It would be nice, for example, to allow everyone to retire at 66, but it would cost a few hundred million a year compared with the plan to allow the State retirement age to gradually rise. And the figures show that the older age groups are least affected by the economic hit of the pandemic. Meanwhile, demands for extra spending are flooding in and will come to a multiple of the amount likely to be available.
In the shake-out to come, the two hardest-hit groups – younger workers and those in rural Ireland – must be at the front of the queue. Even before this hit, both felt left behind by the boom, while others made hay. If this gap widens further, the forecasts of a divisive political future will turn into reality.