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THE ESRI WITHDREW a working paper last night. The Irish Times reported that this was ‘unprecedented’. However, they obviously missed the fact that another ESRI report (on waste incineration) was being ‘re-examined’ by the ESRI last year.
Working in a think-tank that also publishes discussion papers that are the author’s sole responsibility, I have a certain sympathy for the ESRI’s position. The whole point about working papers – and the Cost of Working piece was just that, not a ‘report’ as The Irish Times claims – is that they are open for discussion and debate, and there is an opportunity for new information and new analysis to influence the author’s thinking before a final version is produced.
Taken to a logical extreme, it is always possible that working papers in the social sciences are simply wrong. The margin of error in statistical analysis always allows for a few lemons. But this is not always obvious and we need the publication of more, and more diverse, analysis in Ireland, not less.
The pity about this brief storm is that the withdrawal of the paper will focus more attention on its uncertain conclusions than if it was quietly ignored. It’s worth noting a couple of things about the paper (a pdf version of which can be read here).
‘Looking only at short-term cash incentives won’t tell the whole story’
First of all, the data is from the 2004/05 Household Budget Survey, at a time when we had practically full employment in Ireland. While the ‘incentives’ might seem to have made moving from welfare to work unattractive, the fact was that practically everyone was actually working and many people left welfare to take up employment. This somewhat deflates the central argument of the paper.
The paper rightly points out the fact that childcare costs are extremely high and that they – and other costs – are a barrier to people entering work. There is no doubt that there is a weight of evidence that people, especially women, are put off from entering the labour market because of the costs of childcare. People parenting alone are particularly affected by this.
But the paper does not examine other costs, and factors that offset these costs. For example, housing costs are a major factor. People who gain employment will lose rent supplement, whereas people living in local authority social housing can maintain their lower-than-average ‘differential rent’ when they gain employment. (Differential rent is not a bad thing, as cheaper rent makes it possible for some people to take lower paid employment). In other words, there are lots of major variables not examined in the paper that change the incentives about working.
Moreover, are economists better placed than psychologists to explain why people go to work? During the boom period, some people went to work for marginal benefit, when costs like childcare are factored in. However, people work in order to maintain social networks, for a sense of personal independence and for lots of other reasons. Looking only at a set of short-term cash ‘incentives’ won’t tell the whole story.
Finally, there are other important factors to be examined. NERI point out that the ratio of people unemployed to job vacancies in Ireland is the second worst in the EU. In other words, there are far more people looking for work than there are jobs, and no amount of changing incentives is going to improve that. The real focus should be on boosting demand in the economy to generate more employment opportunities.
Nat O’Connor is the Director of TASC, an independent think-tank dedicated to addressing Ireland’s high level of economic inequality. This article was originally published at Progressive Economy.
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The biggest trouble with this working paper is that it’s a classic case of nuanced academia meets tabloid headlines.
In this case, tabloid Irish Times coverage
Again… What short term…
My partner works… And makes just to much many to avail of family income supplement school allowances etc…. I need 33k to break even on childcare commute clothing cost when going to work.
We are taxed up to the hilt….
One of us at home… The other making a bit less would give us a higher expendable income and more time with our kids.
Thing is psychological we need work. So now for 100 a month extra we hardly see our kids
This report played right into the Krugman’s fallacy. People who work pay taxes, buy stuff (like child care) and generally support the employment of others. If more people go on the dole that has a strong negative feedback effect on the economy and their neighbors. Which is why, of course, austerity fails in a depression and stimulus works.
Clearly there is nothing wrong with the paper which can be read on the Irish Times, instead what we have is political interference, the powers that be in the ESRI blocking Tol’s research and that suggests the ESRI are not an independent institution. Actually what conclusions can be drawn from this research is how hard it is for low earners to survive in this country, with 7000 to 9000 costs just clocked up yearly form actually going to work. It also makes a laugh of the governments jobsbridge scheme, which is actually costing those with least income in our society to take up these shtty dead-end “internships” because the government has done nothing about job creation.
There is an important point here about the ubiquity of ecomonic commentators in Ireland at the current time. People seem to forget (and some economists don’t seem to realise) that life and society is much more complex than that which can be measured in pure economic terms. This is the same logic that looks at the value of culture only in terms of what it can pull in in hard tourist dollars.
I felt some sympathy (but not too much!) for Moore McDowell on a recent Frontline debate when he was asked to comment on the economics of Arts funding in Ireland. His opinion was undermined before he opened his mouth by PK’s reference to Oscar Wilde’s aphorism about knowing the price of everything but the value of nothing and Michael Colgan was able to seize on this in his criticism of the narrow focus of economics.
The ESRI, as its name suggests, has a remit beyond pure economics but it appears that this working paper leaned too heavily on that particular field of analysis.
Does anyone know the purpose of the ERSI?
And assuming it delivers on that purpose is it more important to our society than many of the services that have been slashed?
Just askin’
Thanks Brendan – I asked for that, so let me put the question a different way….
How would Irish society be worse off if the ERSI didn’t exist?
No problem Paul :)
Well for a start we wouldn’t have any of the following publications: http://www.esri.ie/publications/latest_publications/
ERSI reports are used to develop policy in relation to a wide range of areas. If there was no ERSI, there wouldn’t be the research, so there wouldn’t be any information to work off. So instead of the government of the day making crazed decisions based on the best possible evidence, they’d be making crazed decisions on no evidence at all.
At 12.8 million in 2010 that information comes relatively cheaply, particularly if you consider that in the same year we spent €1.354 Billion on Defence.
Nat,
Just to clear something up – the word ‘unprecedented’ was used by the ESRI themselves in their statement last night, which is why we in The Irish Times used it. http://www.irishtimes.com/newspaper/breaking/2012/0612/breaking49.html
In the light of this, perhaps you might want to rephrase your introductory comments?
Regards,
Kilian
I’d pay a few pennies to see the opening comment changed to “we checked to see if it was in fact ‘unprecedented’, which the Irish Times didn’t do.”
Kilian,
Fair enough. I’ve changed the original post to reflect this.
http://www.progressive-economy.ie/2012/06/costs-of-working-in-ireland.html
Regards,
Nat
where is my comment
you are now censoring comments
None of your comments have been deleted from this piece Seamus. Was it on one of the other articles about Richard Tol, perhaps?
Well, back for a second small bite, after reading the paper, these and other posts and comments, it is clear that the paper is assigning costs for short term unemployment in a booming economy, while the inference, which the authors have not denied is for long term unemployment, e.g. people who stop working in order to take advantage of the short term differential.
According to Tol himself the “takeaway” food figure is overall spend on convenience food, NOT just lunch money. I suspect the clothing figure of 25 a week is also overall spend and not just for work. Correcting that would make a big difference to the results.
Well Christine another comment has not gone up.???.
There’s no record in the system of you leaving any other comments on this piece (besides the three that have already appeared here) so I’m going to pass this on to our tech team and see what the issue is. None of your comments have been removed by anyone here, just for the record. In the meantime, it could be worth clearing your cache and trying to post again.
Honestly, Christine this has never happened before, two comments in relation to the above article were not posted.
Have you tried turning it off an on again, Seamus?:)
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