What planet is Noonan living on?

later12 wrote: »

83% of the unemployed have no children, so are not concerned with childcare either way.

If one parent were working, then the other would obviously be in a position to look after the children full time (otherwise the OPFP applies).

If both parents were working, then I find it hard to believe that childcare costs outside of the ECCE scheme and the school day would really leave them financially worse off than on welfare. If it did, then presumably one parent would stay at home and any anomaly would be corrected by access to the FIS payment.

Either way, I don't know of any data which takes this into account, so it is difficult to describe the incentives to work amongst this minority. It certainly is too small a minority to back up your suggestion that "employed in Ireland is not significantly better off than unemployed in Ireland", given that it does not apply to at least 83% of the unemployed.


No they are not.

Have you still not read this report?



Out of curiousity, where are you getting that 75% figure from?

http://www.esri.ie/UserFiles/publications/WP395/jacb201155.pdf

I take it that the link is the paper you are using - you didn't post a link earlier and I had to search for it.

Looking again, it seems we are talking at cross-purposes as I was looking at Table 2 and my points in the previous post would apply to that.

Turning to Table 3, it is stated that:

"Table 3 summarises the distribution of replacement rates, as estimated using the microsimulation method (outlined in Section 2, and described in more detail in Callan et al., 2007). Key features of this method are that variations in benefit entitlement due to age, family type or household circumstances are taken into account, and variations in the wage that can be expected in the labour market are also captured by predicting the wage on the basis of age, highest educational qualification, gender and marital status. Potential entitlements to Rent and Mortgage Supplement are included in the calculations. "

The bit that I have a problem with is in bold. It has no resemblance to the real world availability of jobs. Say, for example, you had 10,000 people unemployed, all qualified as medical doctors, but there are only 1,000 doctors needed in the country. That methodology would assume that the wage one of the 10,000 unemployed doctors would get would be the same as the 1,000 doctors actually employed and calculates the replacement rate on that basis. That is nonsense as it ignores supply and demand. The market has cleared at that rate and if the unemployed doctor wants a job, he is going to have to pitch for it at a lower rate.

Now that is also an unrealistic example, but where the two things would collide is in a labour market undergoing severe structural adjustment where previously widely available jobs (estate agent, architect, electrician, plumber, labourer) at various levels no longer exist and where there are many unemployed holding those qualifications. Using a concrete example, Callan et al are suggesting that the replacement rate for an unemployed 50-year old architect in Ireland should be based on the wage that a professional of that age and experience would generally command. Not a chance is my answer to that - the architect will be lucky to get a job in a shop.

The methodology that Callan uses is thereby flawed, any conclusions are also flawed. As I said earlier, the only way to calculate a real replacement rate is to focus on the pay of the lowest decile of the workforce - that is where unemployed people will get jobs - and calculate the marginal gain (if any) to those who are unemployed in taking one of those jobs. Basing the comparison on some idealistic notion of average pay in the workforce based on age, gender, education and experience is nonsense.

Godge wrote: »

Why would it be an absurd dis-service to the research to ask them to base their analysis on reality?

Because this sort of research does not exist to artificially inflate replacement rates.

If someone has a PhD in basket-weaving, and there is currently a most extraordinary demand for basket weavers leading to high salary opportunities in that sector of the economy, then the available research ought not simply underestimate one's incentive to work with a misleadingly high replacement rate.

What happens if all reed resources are allocated to basket weaving and there is no work out there for other labour market participants who aspire to work with reeds in less profitable sectors, like roofers with only a junior certificate?
Well that too can be accounted for in the microsimulation based on known labour market statistics, i.e. low incomes for uneducated roofers.

The important thing is that the labour market and earnings data are correct and up to date. But the above method that you suggest would be misleading because it would falsely underestimate earning potential and exaggerate replacement rates.

The reality is that there are jobs available at the minimum wage or a little above that are freely advertised and that nobody seems to take up.

This is a perception, or a speculation. The idea that you would knock such carefully constructed evidence as in the microsimulation approach used by Callan & al. and yet fall back on anecdotes as per the above strikes me as unusual to say the least.

djpbarry wrote: »

Ok, so how could you know the content of the article you quoted to be "very true"?

All the evidence suggests that the vast majority of those emigrating do not work in construction.

Well if the construction industry has collapsed and the majority of those people were self employed its safe to say a significant number of them have emigrated as there is little or no construction going on at present.

later12 wrote: »

Because this sort of research does not exist to artificially inflate replacement rates..

Does it not? well then maybe it exists to artificially deflate replacement rates?

later12 wrote: »

If someone has a PhD in basket-weaving, and there is currently a most extraordinary demand for basket weavers leading to high salary opportunities in that sector of the economy, then the available research ought not simply underestimate one's incentive to work with a misleadingly high replacement rate.

What happens if all reed resources are allocated to basket weaving and there is no work out there for other labour market participants who aspire to work with reeds in less profitable sectors, like roofers with only a junior certificate?
Well that too can be accounted for in the microsimulation based on known labour market statistics, i.e. low incomes for uneducated roofers.

The important thing is that the labour market and earnings data are correct and up to date. But the above method that you suggest would be misleading because it would falsely underestimate earning potential and exaggerate replacement rates..

We are not talking about a once-off temporarily artificially high demand in reed-making, we are talking about a fundamental shift in the labour market away from construction-related disciplines. But that is the difference between the world of theoretical economists like Callan et al (and increasingly it seems, yourself) and the real world that the rest of us live in.

My method would not falsely underestimate earning potential. In fact, I am suggesting that when the market clears with all available architect jobs taken at the market rate, what is available to remaining architects is lower-level work paid at a reduced rate. Callan et al. assume the market rate, a fatal mistake when there is oversupply of labour matched with under-demand for certain professions. The market doesn't clear because of inflated expectations of the unemployed together with the high rate of social welfare benefit acting together as an incentive not to work.

later12 wrote: »

This is a perception, or a speculation. The idea that you would knock such carefully constructed evidence as in the microsimulation approach used by Callan & al. and yet fall back on anecdotes as per the above strikes me as unusual to say the least.

"Carefully constructed evidence" is like the old saying about statistical conclusions - rubbish in, rubbish out. If Callan et al. think that the replacement rate for all unemployed architects should be judged on the going rate for employed architects, then they are the ones living in cloud cuckoo land. I have adduced more than one reason to doubt the conclusions of Callan et al., the fact that you continue to defend research that bears no relation to the reality of the labour market in Ireland leads me to wonder about your bona fides on this.