Every now and then I ‘break the rules of blogging’ by taking a complex topic and having a long-winded rant. Some issues are complex and need more than a soundbite response. So, indulge me (a little bit).
Current Challenges: Ireland is currently facing a number of extremely difficult economic and social challenges. On the economic front, the gap between revenue and expenditure is running at more than €20 Billion annually – with an estimated cost of €3 Billion in annual interest payments alone. Wrestling back control of day-to-day operational spending is a priority task for the new government.
On the social front, the high rate of unemployment (13.4%) is a terrible waste of our best natural resource. We are already seeing early evidence of this in the numbers of people emigrating, another lost generation. Collectively, we need to find a way to address both the economic and social challenges faced.
As part of the ‘Your Country, Your Call’ competition, Brian O’ Kelly, Deirdre Giblin and I came up with an idea around Developing a Smart Workforce. The goal was to fundamentally change the way unemployment benefits are paid. This idea has the potential to accelerate Ireland’s efforts to become a smart economy and is also self-financing.
Smart Workforce: At the heart of the ‘Smart Economy’ debate is the fundamental idea of a smart workforce. Ireland cannot develop and deliver high-end goods and services without a highly skilled workforce. Developing a highly skilled workforce requires a number of steps to be taken in a co-coordinated fashion. We need to divert some of the current unemployment benefits into a training allowance to accelerate this.
Poverty Trap: The concept of unemployment benefit is socially just. When someone becomes unemployed, the state provides short-term financial support (Job Seekers Benefit) until the person can secure a new job. If the person continues to be unemployed over a longer period, after 15 months they claim Job Seekers Allowance (which is means tested). While the aspiration to support people who are out of work is noble, in practice providing income support during long periods of unemployment has had a number of ‘unintended consequences’.
Unintended Consequences: Firstly, the sheer scale of unemployment payments (the social welfare budget for supporting unemployment payments is currently €4.5 billion annually) is an enormous financial burden on the state. Secondly, unemployment payments were never envisaged as providing a ‘lifestyle choice’ for recipients. Because of the way the system works, some people, (depending on their exact family circumstances) are better off financially remaining unemployed than working for the average industrial wage. These people essentially get caught in a ‘poverty trap’ from which it’s very difficult to escape. Unemployment benefit, originally envisaged as a short-term support mechanism, has become a barrier to people taking up employment, consigning them to a lifetime of marginalization. Thirdly, there is a less visible, harder to measure, downside. Unemployment is a significant source of health problems. Denying people the dignity of working and the ability to provide for their own needs is a recurring source of physical and mental health problems, a factor that has been well documented. We need to rejig the entire system – in line with the Big Issues philosophy ‘a hand up, not a hand-out’.
Despite the above, it is extremely difficult for the government to make radical changes to unemployment payments. Any move to do this is seen as an attack on the poorer sections of society. The net result is an enormous political conundrum. Unemployment benefit, a system originally designed to offer short-term financial support, has itself become a barrier to employment. It fosters a dependency culture, which in the worst-cases can become inter-generational. Despite the cost of maintaining this counter-productive system, no government (regardless of political make-up) wants to really tackle the system because of fear of being labeled as ‘uncaring’.
New Deal: Our proposal is to build a powerful retraining system in which everyone had the best possible opportunity to secure employment. How? Directly link unemployment payments with training opportunities. By making this link explicit, there is an opportunity to promote workforce retraining and re-skilling. A key benefit to those who are unemployed is that the state would maximize the training/education available to them. For a 25% investment e.g. circa €50 per week per person, the state would negotiate training which was worth €200 per week on their behalf (a full outline of how this system would work, including a fully costed submission was submitted).
Future Proof: Developing a Smart Workforce represents a positive statement about our belief in Ireland’s future. While the idea is conceptually simple, it does not represent a quick fix. The way to resolve the problems currently faced is by thinking long-term. Fundamentally, we must take responsibility for creating our own future. No one outside of Ireland ‘owes’ us a vibrant economy e.g. as some sort of payback for voting for the Lisbon Treaty or for delivering the annual bowl of shamrock to the White House. We can only achieve this by out-thinking the international competition.
No Saints, Just Scholars: While we may not always be able to deliver on the saint’s side of the equation, this idea offers an opportunity for Ireland to again become a land of scholars, taking our rightful place at the centre of productive economies on the world stage. If we envisage our current problems as an opportunity to reform a system that has never worked as intended, we demonstrate the courage to grasp the nettle of a difficult social issue. In doing this, our goal is nothing less than to leave a positive social and economic legacy for the generations that follow.
What actually happened? The last government, in an act of political cowardice, reduced unemployment benefit by €8 per week – a 4% cut that will not achieve any of the objectives set out above. In fixing the economy, we need to consider more radical solutions and not just settle for the simple, quick fix (which is certainly simple, but fixes nothing).
Radical Options: Executive teams often face similar dilemmas. When you opt for short-term solutions and take the ‘road less troubled’, most of the time it doesn’t work. You need the courage to make radical choices. Not just because that’s what you are being paid to do. It’s because, fundamentally, you want to make a difference.