It may not be perceptible to the naked eye, and for most of us it sure doesn’t feel like it, but the Irish economy may be ready to leave intensive care. Make no mistake, a long and difficult period of treatment is in store, but there is mounting evidence that the worst is over.
Certainly, the last set of headline economic growth figures suggested a case of severe winter flu. This was due in large measure to an export engine stalling in the face of weak global demand and an end to patents on some of the blockbuster drugs produced for foreign consumption in our vast pharmaceutical sector.
Over the course of an uncharacteristically sunny Irish summer, however, the economy’s vital signs took a turn for the better. Unemployment fell slowly but steadily to reach 13.4%, improving by roughly 0.1% per month. Nor is this solely down to emigration and people giving up on the job search; 9,000 full-time jobs were being created monthly up to the end of June. Retail sales surged 6.1% in July, in part because the new 132 number plates encouraged people to buy cars in mid-summer rather than wait until January.
Perhaps too soon for the back-slapping, corner-turning, green-shooting rhetoric of recovery, but these are encouraging signs nonetheless. Combined with a slight pick-up recently in growth in our main trading partners, this points to a stronger economic performance in the second half of the year.
So then, why doesn’t it feel like a recovery yet?
A large part of the problem is that the economy has fallen so far that even as it gets back on its feet, there is still a mountain to climb. Unemployment is still unacceptably high. Investment is running at dangerously low levels. Budget cuts and tax hikes continue to take their toll. On average, earnings have flat-lined since 2009, having fallen in many sectors. When inflation is taken into account, workers and welfare recipients have seen steep declines in disposable income. For many, falling incomes render mortgage repayments unpayable. Even as the economy’s prognosis improves, it is still hurting, and chronic pain looks likely to persist.
Another factor is that averages can hide as much as they reveal. While most people have taken some hit to their living standards since 2008, the pain is neither universal nor evenly spread. People working in the construction or hospitality sectors will have had a very different experience than those in the multinational IT sector, for instance, while many of those who had retired and repaid their mortgages prior to the crash have not suffered to anything like the same extent as the generation that came of age as the Celtic Tiger roared.
If the boom increased inequality, and the burden of the bust was unfairly distributed, there is a very real danger that the recovery will also pass many people by as it gains strength. As we know, the rising tide doesn’t lift all boats, and life rafts are in short supply.
1 in 5 children are being raised in jobless households. Well over half of the 300,000 unemployed have been out of work for over a year while 1 in 3 people under 25 who want a job can’t find one. The longer people are out of work, the less likely they are to find one and the more likely they are to experience lower incomes in the longer-term. With prospects so bleak at home, 1 in 50 people living in Ireland are deciding to emigrate annually, testament to the social scars imposed by economic depression.
Ultimately, the best way to overcome poverty and social exclusion is to ensure the maximum number of people can get a decent job that pays a living wage while ensuring everyone else, the unhappy few, can enjoy a standard of living sufficient to engage meaningfully in a modern society. Young people graduating from school or college, for instance, should never be faced with a choice between emigration and welfare dependency.
Progress is being made as the welfare system slowly transitions to a more ‘activist’ stance, engaging more intensively with people to help them find jobs and get work experience. But these initiatives are nothing near the scale needed to ensure that tens of thousands of people can gain the skills they need for the jobs that will be created as the economy recovers.
Even the construction sector will eventually recuperate, but it will not – and should not – ever come to dominate the economy as before 2008. This means people will need to be willing to re-train and change sector, if necessary, but the government has a duty of care to provide sufficient and meaningful opportunities for people to make the most of their potential.