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Labour Market Advisory Council Labour Market Advisory Council Policy Paper: ‘Preparing for Economic Recovery’ June 2020 The views presented in the paper do not represent the official views of the LMAC Department or Minister for Employment Labour Market Advisory Council Affairs and Social Protection. Foreword The Labour Market Advisory Council was established in early-2020 by the Minister for Employment Affairs and Social Protection; it succeeded a previous body, the Labour Market Council which last met in 2017. The role of the Council is to provide advice to the Minister for Employment Affairs and Social Protection and the Government with regard to the efficient operation of the labour market, with a particular view to increasing participation rates, minimising unemployment levels and reducing average unemployment durations in line with Ireland’s commitments under UN Sustainable Development Goal 8.1 The Terms of Reference for the Council are set out in the Appendix. The first task assigned to the Council by the Minister is to develop, as a matter of urgency, proposals for actions to tackle the labour market challenges arising as a result of the COVID-19 pandemic. This Paper represents the Council’s opening response to this mandate. The Paper should not be read as representing the views of the Minister or the Department but as advice offered to the Minister for consideration. For the purposes of this Paper, the Council is solely concerned with the formulation of recommendations with regard to Ireland’s labour market. Specifically, the Council does not propose to comment with regard to fiscal policy or the application of tax revenues. Council membership is drawn from academia and a range of sectors and organisations. However, the Paper does not necessarily reflect the opinion of individual members nor should the Paper be read as having the endorsement of the organisations that the membership is drawn from. In particular, ICTU has advised that, while it concurs with much of the analysis in the paper and welcomes the recommendations flowing from that analysis, it believes that the paper should have paid more attention to a number of broader labour market issues including, for example, the application of Sustainable Development Goal 8, the general performance of the Irish labour market pre-COVID-19, the role of collective bargaining in improving labour market outcomes and the adequacy of certain welfare payments. For these reasons, the ICTU was unable to give its approval to the Paper (see Appendix for the detailed position of the ICTU). 1 https://www.gov.ie/en/publication/656a27-labour-market-advisory-council/ Page 2 Labour Market Advisory Council Members Mr. John Martin (Chair) Mr. Terry Corcoran (retired Chief Economist, Department of Employment Affairs and Social Protection) Mr. Ger Gibbons (ICTU) Mr. Frank Gleeson (Aramark Northern Europe) Ms. Susan Hynes (Takeda Dunboyne Biologics) Dr. Kara McGann (IBEC) Ms. Sinéad McSweeney (EMEA Twitter) Ms. Brid O’Brien (INOU) Dr. Phillip O’Connell (Director of the Geary Institute, UCD) Ms. Angela Smith (Dress for Success) Ms. Ade Stack (Stacks Pharmacy Group) Page 3 Report Structure Foreword ........................................................................................................................... 2 Labour Market Advisory Council Members ......................................................................... 3 .......................................................................................................................................... 5 Guiding Principles ................................................................................................................. 5 1 Introduction .................................................................................................................... 6 2 TitleEconomic Recovery: The Need for a Differentiated Sectoral Approach .......................... 8 3 Remodelling Income Support Payments ....................................................................... 12 3.1 Wage Subsidies ................................................................................................. 14 4 Active Labour Market Programmes, Further Education and Training ............................ 16 Section4.1 Effective programmes/schemes 01 ................................ ......................................... 17 4.2 Delivering FET Supports .................................................................................... 18 Title4.3 Targeting Supports ............................................................................................ 20 5 Capacity of the Public Employment Service (PES) – Intreo – and Skills and Training Provision ............................................................................................................................. 22 5.1 Addressing the inflow to Long-term unemployment ................................................ 23 6 Conclusions and Recommendations ............................................................................ 25 Bibliography ........................................................................................................................ 29 Appendix ............................................................................................................................. 30 1. Position of the Irish Congress of Trade Unions (ICTU) ....................................... 30 2. Terms of Reference for the Labour Market Advisory Council ............................. 35 Page 4 Guiding Principles The Council has regard to the following guiding principles to inform the content of this policy paper: i. Equity: Ensuring that measures designed to support the recovery pay sufficient attention to the needs of the most-at-risk jobseekers and others on the fringes of the labour market. ii. Responsiveness: Designing policy recommendations to support labour market recovery in the context of the most up-to-date public health Sectionguidance and the return 01-to-work safely protocols. iii. Evidence-based: Adopting an evidence-based approach so that, where Titleavailable, facts and appropriate benchmarks are used to support our analysis and conclusions. iv. Transparency: Setting out the proposed measures clearly and communicating them effectively to all the key actors. v. Cost-effectiveness: Ensuring that the measures proposed and their implementation are cost-effective so that public funding is used wisely. vi. Solidarity: Implementing a cohesive approach to ensure high levels of public support and improved levels of social inclusion. Page 5 1 Introduction Prior to the outbreak of the COVID-19 pandemic, conditions in the Irish labour market were relatively close to full employment, as conventionally defined. Over 2.36 million people were in employment, and the unemployment rate fell to 4.7 per cent in the fourth quarter of 2019. The labour market situation has changed dramatically since mid-March 2020. The Department of Employment Affairs and Social Protection (DEASP) has recently published a Working Paper which presents an analysis of the initial impacts of the COVID-19 pandemic on Ireland’s labour market.2 This indicates that since the implementation of public health measures requiring the closure of all non-essential businesses, the labour market recorded unprecedented joblessness over a four-week period, a much more rapid increase than witnessed during the Financial Crisis. Approximately 1.3m persons were in receipt of State income support (or wage subsidies) by May 2020 with the COVID-19 Adjusted Monthly Unemployment Estimates standing at more than 28 per cent in April. 3 Ireland quickly mobilised a comprehensive package of temporary income and enterprise supports for households and firms to help cushion the blow. These supports include the COVID-19 Pandemic Unemployment Payment (PUP) and the Temporary Wage Subsidy Scheme (TWSS). Beyond these, a range of additional supports have been introduced for businesses including the waiving of commercial rates and the warehousing of tax liabilities alongside the Pandemic Stabilisation and Recovery Fund, the Trading Online Voucher Scheme and the COVID Response Marketing Support Package. The Council notes the rationale set out by Government underlying the design of the various COVID-19 income supports, that they: be significant enough, in value terms, to sustain incomes at a level necessary to absorb the shock of simultaneous income loss by a large number of workers, thereby helping to support demand; sustain public confidence and buttress support for the restrictive public health measures; support potentially viable firms to minimise bankruptcies and to maintain employees on their payroll until demand recovers; and be capable of being implemented quickly, be as simple as possible to administer and as easy as possible to communicate. Given the high Exchequer costs of supporting firms and workers in employment or in receipt of social welfare payments, incentives and supports will need to be carefully 2 Coates et al. (2020) 3 By 21st May 2020, over 473,500 employees had already received at least one payment under TWSS Page 6 calibrated to maximise effectiveness as well as to minimise the incidence of support payments where none are needed. In addition, the supports will need to be flexible enough, during this initial phase, to support any intermittent pattern of shutdowns/re- openings based on public health developments. We are entering a period where there is an imperative to revive the economy again whilst also complying with public
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