The Economic and Social Review, Vol. 26, No. 1, October, 1994, pp..45-58
A F l o w Analysis of the I r i s h L i v e Register*
M I C H A E L J . H A R R I S O N
P A T R I C K P. W A L S H
Trinity College, Dublin
Abstract: This paper makes use for the first time of data on the flows into and out of the Irish Live Register. I t describes the construction of consistent quarterly flow series for the period 1967 to 1993. The analysis suggests that the build-up of the unemployment stock is mainly due to the inflows to the Live Register. The results also suggest that i n the 1970s the inflows seem to have been largely determined by market and demographic adjustments i n Ireland induced by developments i n Britain. I n the 1980s, by contrast, the inflows seem to have been driven substantially by demographic developments i n Ireland.
I I N T R O D U C T I O N
E
m p i r i c a l r e s e a r c h i n t o u n e m p l o y m e n t i n I r e l a n d has t o d a t e con c e n t r a t e d on t h e use of i n f o r m a t i o n on the stocks o f u n e m p l o y e d due tothe u n a v a i l a b i l i t y of other types of data. The present paper is a c o n t r i b u t i o n
to t h i s research area w h i c h for the f i r s t t i m e makes use of d a t a on t h e flows
i n t o a n d o u t o f t h e I r i s h L i v e Register. F o c u s i n g o n t h e c o n s t r u c t i o n of
consistent series of flow data, and on simple e x p l o r a t o r y d a t a d e s c r i p t i o n a n d
a n a l y s i s , we p u t f o r w a r d a n u m b e r o f new facts a n d i n s i g h t s i n t o t h e
Paper presented at the Eighth Annual Conference of the Irish Economic Association.
b e h a v i o u r o f these flows. I n p a r t i c u l a r , t h e analysis suggests t h a t the b u i l d u p o f t h e u n e m p l o y m e n t stock, a n d t h e n u m b e r s i n t h e different d u r a t i o n categories, is m a i n l y due to t h e inflows to t h e L i v e Register a n d t h a t t h i s b u i l d - u p has been ameliorated by generally increasing outflows t h a t seem t o be s t r o n g l y l i n k e d t o m i g r a t i o n to Great B r i t a i n .
I f these f i n d i n g s are accepted, t h e clear i m p l i c a t i o n is t h a t i n order t o e x p l a i n I r i s h u n e m p l o y m e n t , one has to u n d e r s t a n d a n d be able to e x p l a i n t h e factors t h a t determine the inflows t o the Register. The results we present a n d discuss below suggest t h a t the key d e t e r m i n a n t o f the inflow i n t h e 1970s is q u i t e d i f f e r e n t f r o m t h a t w h i c h appears t o operate i n the 1980s. I n t h e e a r l i e r p e r i o d o f t h e 1970s, t h e s m a l l I r i s h product a n d factor m a r k e t s were closely i n t e g r a t e d w i t h those i n Great B r i t a i n , whereas i n the 1980s the l i n k s w e r e m u c h w e a k e r . I n t h e 1970s t h e i n f l o w s seem to have been l a r g e l y d e t e r m i n e d b y m a r k e t a n d demographic adjustments i n I r e l a n d i n d u c e d by developments i n B r i t a i n . B y c o n t r a s t , i n t h e 1980s, due t o constancy o f e m p l o y m e n t capacity a n d p a r t i c i p a t i o n rates, t h e inflows seem to have been d r i v e n s u b s t a n t i a l l y by demographic factors. I t is our strong contention t h a t a n y t h e o r e t i c a l e x p l a n a t i o n o f I r i s h u n e m p l o y m e n t m u s t account for t h e u n u s u a l features o f t h e economy b r o u g h t to l i g h t by t h i s study. I n p a r t i c u l a r , i t m u s t provide good reasons for t h e apparent l a c k of i m p a c t on t h e flows of changes i n e m p l o y m e n t , changes w h i c h seem to be t h e m a i n d e t e r m i n a n t of flows i n other countries.
T h e paper is organised as follows. Section I I describes t h e w a y t h e new d a t a set was c o n s t r u c t e d . Section I I I focuses o n t h e i m p l i c a t i o n s of t h e d e r i v e d i n f l o w s for h a z a r d rates, a n d on t h e factors affecting t h e outflows, w h i l e Section I V examines t h e key d e t e r m i n a n t s of t h e i n f l o w s . F i n a l l y , Section V contains a few concluding remarks.
I I C O N S T R U C T I O N OF T H E D A T A
T Ut +i s T U t + I u t +r Ou t + 1 (1)
where t—>t+l denotes the t h r e e - m o n t h period between t i m e points t and t+1. The t o t a l n u m b e r o f u n e m p l o y e d males, T Ut, is available i n a consistent q u a r t e r l y series based on t h e d e f i n i t i o n o f t h e L i v e Register i n t r o d u c e d i n J a n u a r y 1980. T h e precise t i m e p o i n t s used for t h i s series are t h e end of M a r c h , J u n e , September a n d December of each year. C l e a r l y , g i v e n t h e over a l l i n f l o w s of males i n t o t h e L i v e Register d u r i n g each of these q u a r t e r s , It-»t+i, ^ follows f r o m (1) t h a t t h e corresponding o v e r a l l q u a r t e r l y outflows m a y be determined u s i n g the i d e n t i t y
Ot_t+lSIt_t+1- A T U (2)
where A T U = T Ut + 1 - T Ut is the change i n the stock of male u n e m p l o y m e n t over the q u a r t e r between t i m e points t a n d t + 1 . T h u s our a t t e n t i o n focuses on t h e c o n s t r u c t i o n of a consistent series for It->t+i> commencing w i t h t h e f i r s t q u a r t e r of 1967 a n d e n d i n g w i t h t h e f o u r t h q u a r t e r of 1993.
F o r t h e period from t h e f i r s t q u a r t e r of 1983 to t h e l a s t q u a r t e r o f 1993, i.e., 1983-1 to 1993-4, t h e i n f l o w s o f u n e m p l o y e d males have i n fact been p u b l i s h e d by t h e C e n t r a l Statistics Office on a m o n t h l y basis. T h e counts for t h i s series were u n d e r t a k e n on the second F r i d a y of each m o n t h . W i t h i n t h e p e r i o d t h e count is i n t e n d e d to cover, some n e w l y u n e m p l o y e d i n d i v i d u a l s have u p t o t h e f u l l m o n t h t o leave t h e Register a n d others j u s t one day. Nevertheless, we feel t h a t t h e t r e n d i n t h e o v e r a l l m o n t h l y inflows is w e l l -c a p t u r e d by t h e CSO figures for the 1983-1 to 1993-4 period. To -constru-ct a q u a r t e r l y series for the i n f l o w s of males to t h e L i v e Register w h i c h corre sponds w i t h t h e end-of-month t i m e - p o i n t s used for t h e stock of u n e m p l o y m e n t data, we assume t h a t t h e m o n t h l y i n f l o w s accumulate at a u n i f o r m w e e k l y r a t e , t h e n aggregate t h e CSO m o n t h l y f i g u r e s a n d m a k e t h e a p p r o p r i a t e a d j u s t m e n t s for t h e weeks at t h e b e g i n n i n g a n d end o f each quarter.
C o n s t r u c t i o n of the r e q u i r e d inflows for t h e e a r l i e r p a r t of o u r sample is more p r o b l e m a t i c a l as no CSO m o n t h l y i n f l o w d a t a were available. Indeed, due to insuperable constraints r e l a t i n g to r a w d a t a a v a i l a b i l i t y , o u r m e t h o d of c o n s t r u c t i o n h a d to be modified for t w o e a r l i e r sub-periods, n a m e l y , t h e periods 1967-1 to 1979-4 and 1980-1 to 1982-4.
i n v e s t i g a t e d some o f t h e i r characteristics b y d e r i v i n g f r o m t h e m a n n u a l i n f l o w series i n t h r e e different ways. F i r s t , t r e a t i n g a l l males i n t h e u n d e r t h r e e m o n t h s d u r a t i o n category a t the end o f each q u a r t e r as a proxy for the i n f l o w i n t h a t q u a r t e r , we aggregated over quarters to o b t a i n a n n u a l i n f l o w estimates. Second, u s i n g a l l males i n the u n d e r six months d u r a t i o n category a t t h e e n d of each h a l f - y e a r as a p r o x y for t h e i n f l o w i n t h a t p e r i o d , we s u m m e d semi-annual figures to derive a second a n n u a l inflow series. F i n a l l y , we constructed a n a n n u a l inflow series u s i n g the t o t a l n u m b e r of males i n the u n d e r t w e l v e m o n t h s d u r a t i o n category d i r e c t l y . The f i r s t p r o x y a l l o w s i n d i v i d u a l s u p t o t h r e e m o n t h s to leave t h e L i v e Register, w h i l e t h e second allows u p t o six m o n t h s a n d t h e t h i r d u p to a year. However, a l t h o u g h these a l t e r n a t i v e a n n u a l measures h a d different levels, t h e y h a d exactly the same trends, reflecting, we feel, a n i m p o r t a n t feature of l a b o u r m a r k e t flows w h i c h we w i l l r e t u r n t o i n Section I I I below, namely, t h a t t h e h a z a r d rates for t h e different d u r a t i o n categories were v i r t u a l l y constant d u r i n g the 1 9 7 0 s .1 The common t r e n d i n t u r n almost c e r t a i n l y reflects the t r e n d of the actual inflows i n t h i s i n i t i a l p e r i o d , w h i c h w o u l d count every new u n e m p l o y m e n t r e g i s t r a t i o n . A s s u m i n g t h a t F e b r u a r y , M a y , A u g u s t and November are representa t i v e m o n t h s for t h e r e q u i r e d quarters, the q u a r t e r l y inflows were constructed as 3.25 t i m e s t h e n u m b e r o f males i n t h e u n d e r five weeks u n e m p l o y m e n t d u r a t i o n category i n each of t h e representative m o n t h s . T h i s procedure pro vides us w i t h r e s u l t s w h i c h are consistent w i t h t h e estimates for the 1983-1 to t h e 1993-4 period.
F o r t h e r e m a i n i n g sub-period i n t h e sample, n a m e l y , the b r i d g i n g period 1980-1 t o 1982-4, only semi-annual d u r a t i o n analysis is available from CSO sources. F o r t h i s case, c o n s t r u c t i o n o f proxies for t h e r e q u i r e d q u a r t e r l y i n f l o w s w a s based o n t h e fact t h a t , i n f l o w cohorts g e n e r a l l y seem to be s t a y i n g o n for l o n g d u r a t i o n s t h r o u g h o u t t h i s period. T h u s t h e q u a r t e r l y i n f l o w d u r i n g t h e p e r i o d to the end o f M a r c h i n each year was e s t i m a t e d by t h e n u m b e r o f u n e m p l o y e d i n t h e u n d e r 12 weeks d u r a t i o n category at t h e s t a r t o f A p r i l o f the same year. The i n f l o w for t h e q u a r t e r to the end of J u n e was e s t i m a t e d b y a l l those i n t h e 13 to 26 weeks category i n October o f the same y e a r . S i m i l a r l y , t h e q u a r t e r l y i n f l o w t o t h e end o f September was p r o x i e d b y t h e n u n i b e r i n t h e u n d e r 12 weeks category i n October of the same year, w h i l e t h e inflow i n the q u a r t e r t o t h e end of December was measured by t o t a l u n e m p l o y m e n t i n t h e 13 to 26 weeks d u r a t i o n category i n A p r i l of t h e i m m e d i a t e l y f o l l o w i n g year. I n t h e case o f t h e second a n d f o u r t h quarters i n each year a s m a l l u p w a r d adjustment was made g i v i n g the quarters the same r e l a t i v e levels as i r i the corresponding quarters i n 1983. T h i s was carried o u t
i n order to allow for the fact t h a t i n these q u a r t e r s there is u p t o six m o n t h s for i n d i v i d u a l s t o leave t h e L i v e Register, r a t h e r t h a n t h r e e m o n t h s as i n t h e f i r s t a n d l a s t q u a r t e r s i n any year. W e feel confident t h a t t h e m e t h o d o f c o n s t r u c t i o n for t h e b r i d g i n g p e r i o d b o t h picks u p t h e t r e n d i n t h e o v e r a l l inflows to t h e L i v e Register, a n d also produces r e s u l t s w h i c h are reasonably consistent w i t h t h e estimates o f t h e o v e r a l l i n f l o w s for t h e e a r l i e r 1970s period a n d t h e data derived for t h e 1980s and early 1990s.
The constructed o v e r a l l q u a r t e r l y i n f l o w s a n d d e r i v e d outflows o f males are t a b u l a t e d i n t h e annex to t h e paper. T h e flows, smoothed u s i n g a five-p o i n t m o v i n g average, are five-p l o t t e d i n F i g u r e 1. The b u i l d - u five-p of u n e m five-p l o y m e n t is d e p i c t e d by t h e a c c u m u l a t i n g area b e t w e e n t h e p l o t t e d i n f l o w s a n d o u t f l o w s over t i m e . A n i n t e r e s t i n g f e a t u r e o f t h e flows is t h a t over t h e business cycle t h e y are positively correlated w i t h each other; one m i g h t have expected t h e m to be n e g a t i v e l y r e l a t e d . Job c r e a t i o n a n d d e s t r u c t i o n , a n d changes i n w o r k e r s p a r t i c i p a t i o n levels i n response t o d o m e s t i c a n d i n t e r n a t i o n a l business cycles, w o u l d generally be expected t o be t h e m a j o r influences o n the flows. E m p l o y m e n t movements appear to p l a y a m i n o r role i n d e t e r m i n i n g the behaviour o f the flows i n most years i n the sample period. I t w i l l be suggested i n Sections I I I a n d I V t h a t demographic forces, a n d p a r t i c u l a r l y m i g r a t o r y movements, are l i k e l y to be t h e r e a l key t o e x p l a i n i n g t h e behaviour o f the flows a n d the positive r e l a t i o n s h i p observed i n F i g u r e 1.
68 69 70 71 72 73 74 7 5 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93
I I I H A Z A R D R A T E S A N D T H E O V E R A L L O U T F L O W
I n t h i s section we i n f e r f r o m t h e overall inflow a n d t h e stock of l o n g - t e r m u n e m p l o y m e n t how h a z a r d rates for t h e different d u r a t i o n categories have changed over t i m e. D u e t o t h e lack o f d e t a i l i n our d u r a t i o n analysis, h a z a r d r a t e s cannot be constructed for a l l d u r a t i o n categories.2 Breen a n d H o n o h a n (1991), u s i n g d i f f e r e n t approaches, gave i n d i r e c t evidence t h a t t h e s e m i a n n u a l h a z a r d r a t e s for t h e s h o r t - t e r m , m e d i u m - t e r m a n d l o n g - t e r m u n e m p l o y e d i n I r e l a n d have been constant over the 1970s a n d t h e 1980s. T h i s has t h e i m p o r t a n t i m p l i c a t i o n t h a t t h e b u i l d - u p o f u n e m p l o y e d resources o v e r a l l , a n d i n t h e different d u r a t i o n categories, can be solely a t t r i b u t e d to t h e increased i n f l o w of newcomers to the L i v e Register.
T h e f i r s t p a r t o f t h i s section uses our i n f o r m a t i o n on t h e overall i n f l o w a n d t h e stock o f l o n g - t e r m u n e m p l o y m e n t to re-check the Breen-Honohan f i n d i n g of constant h a z a r d rates. F r o m t h e overall inflow a n d t h e stock of l o n g - t e r m u n e m p l o y m e n t we can e x t r a c t i n f o r m a t i o n concerning t h e m o v e m e n t s o f h a z a r d r a t e s for t h e combined d u r a t i o n categories.3 W e w o r k w i t h a n n u a l d a t a o n l o n g - t e r n i u n e m p l o y e d males at t h e end of the f i r s t q u a r t e r o f each year a n d s u m the, q u a r t e r l y inflows from the second q u a r t e r of one year t o t h e f i r s t q u a r t e r of t h e next, inclusive. W e w o r k w i t h t h e following modification of i d e n t i t y (1) w h i c h states t h a t the stock o f l o n g - t e r m u n e m p l o y m e n t at t i m e t + 1 is i d e n t i c a l t o t h e stock o f l o n g - t e r m u n e m p l o y m e n t at t i m e t plus t h e t o t a l n u m b e r o f newcomers to long-term u n e m p l o y m e n t ( D over t h e year t to t + 1 m i n u s those w h o outflowed f r o m l o n g - t e r m u n e m p l o y m e n t (O*) d u r i n g t h e same period.
L t + i = Lt + I t - > t + i ~ O t - > t + i (3)
To verify B r e e n arid Honohan's (1991) findings we begin by assuming t h a t the h a z a r d r a t e s for t h e different d u r a t i o n categories r e m a i n constant over t i m e . T h i s a s s u m p t i o n i m p l i e s t h a t t h e r e w o u l d be t h e f o l l o w i n g p r o p o r t i o n a l r e l a t i o n s h i p between t h e i n f l o w o f newcomers i n t o l o n g - t e r m u n e m p l o y m e n t
2. The duration analysis only allows one to split the data into under 6 months, between 6 months and a year a'nd over a year. As a result a semi-annual hazard rate can only be constructed for the sho:rt-term unemployed.
d u r i n g a g i v e n year a n d t h e newcomers t o t h e L i v e Register d u r i n g t h e previous year.
C
t + a = ( l - a ) ( l - b ) It_ ^t (4)w h e r e a is t h e constant p r o p o r t i o n of newcomers t o t h e L i v e Register t h a t w o u l d flow o u t d u r i n g t h e f i r s t six m o n t h s o f a year, a n d b is t h e constant p r o p o r t i o n of those newcomers r e m a i n i n g beyond six m o n t h s t h a t flow o u t d u r i n g t h e second h a l f of t h e year. The outflow from l o n g - t e r m u n e m p l o y m e n t d u r i n g a year can be w r i t t e n a l t e r n a t i v e l y as
OUt+i =c \ + c ( l - a ) ( l - b ) It_ ^t (5)
where c* is t h e p r o p o r t i o n of t h e l o n g - t e r m u n e m p l o y m e n t a t t i m e t t h a t flow o u t d u r i n g t h e p e r i o d t t o t + 1 , a n d c is t h e p r o p o r t i o n of newcomers to l o n g -t e r m u n e m p l o y m e n -t -t h a -t flow o u -t d u r i n g -t h e same period. U s i n g (4) a n d (5) we can r e - w r i t e (3) as
Lt=1s ( l -c' ) Lt + ( l - a ) ( l - b ) ( l - c ) It_1_> t (6)
A s c* m a y be expected to be v e r y close to zero, i t follows t h a t (6) m a y be re w r i t t e n as
A L - A I t . ^ (7)
w h e r e A L = Lt+1- Lt a n d X = ( l - a ) ( l - b ) ( l - c ) . T h u s , i f h a z a r d r a t e s are constant, there should be a n a p p r o x i m a t e p r o p o r t i o n a l r e l a t i o n s h i p between t h e change i n t h e stock of l o n g - t e r m u n e m p l o y m e n t a n d t h e overall i n f l o w o f newcomers to t h e L i v e Register d u r i n g t h e previous year. These t w o series are p l o t t e d i n F i g u r e 2. I t is clear f r o m t h e g r a p h t h a t t h e k i n d of pro p o r t i o n a l i t y suggested by (7) h e l d d u r i n g t h e 1970s a n d t h e e a r l y 1990s. We therefore conclude t h a t t h e r e is s t r o n g e m p i r i c a l support for t h e a s s u m p t i o n of constant h a z a r d rates d u r i n g these t w o periods.
h —i — i — i — i — i— i — i — i — i — i — i — i — i— i— i— i— i— i * f - r—i—i — i
69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93
Year
Figure 2: The Annual Change in Long-Term Unemployment and the Inflow of
Newcomers to the Live Register during the Previous Year
t h e increased i n f l o w of newcomers to t h e L i v e Register. Given t h e apparent significance of t h e i n f l o w i n d e t e r m i n i n g t h e stock of unemployment, we raise i n Section I V t h e i m p o r t a n t question o f w h a t i n t u r n m i g h t be t h e essential d e t e r m i n i n g factors o f t h e inflow itself.
I n t h e r e m a i n d e r o f t h i s section we r e s t r i c t our a t t e n t i o n to t h e outflows f r o m t h e L i v e Register. Specifically, g i v e n t h a t e m p l o y m e n t g r o w t h was g e n e r a l l y s l u g g i s h (no vacancies) d u r i n g our sample p e r i o d , a n d t h a t t h e n u m b e r s of newcomers to t h e working-age p o p u l a t i o n burgeoned (more com p e t i t i o n for e x i s t i n g vacancies), we address t h e questions as to w h y , as shown above, h a z a r d r a t e s were g e n e r a l l y non-decreasing a n d w h y , as s h o w n i n Section I I , gross outflows from t h e Register were generally increasing. The answer t o these questions is h i n t e d at, we feel, i n t h e upsurge i n o u t w a r d m i g r a t i o n over t h e 1980s.
m e t h o d o f c o n s t r u c t i o n o f t h e I r i s h flows. I n F i g u r e 3 t h e t r e n d s i n t h e outflows for I r e l a n d a n d G r e a t B r i t a i n are s h o w n against each other. T h e same basic t r e n d is apparent i n the t w o series from 1967 i n t o the late 1980s. I n t h e absence of t h e r e l e v a n t data, H a r r i s o n a n d W a l s h (1994) m a k e a key a s s u m p t i o n concerning t h i s phenomenon. T h e y assume t h a t t h e m a j o r i t y of persons w h o f l o w e d o u t o f t h e I r i s h L i v e R e g i s t e r d i d n o t f l o w i n t o e m p l o y m e n t i n I r e l a n d . Some w e n t i n t o government schemes, others left t h e l a b o u r force, b u t t h e m a j o r i t y a l m o s t c e r t a i n l y e m i g r a t e d . I t was also f e l t most l i k e l y t h a t t h e m a j o r i t y of t h e unemployed t h a t m i g r a t e d w e n t t o G r e a t B r i t a i n . L a b o u r a n d product m a r k e t adjustments i n Great B r i t a i n were l i k e l y to have p u l l e d t h e flows o u t o f t h e I r i s h L i v e Register. T o o b t a i n i n d i r e c t evidence i n support o f t h i s v i e w t h e y modelled m a l e outflows from t h e I r i s h L i v e Register as depending o n t h e outflow f r o m t h e L i v e Register i n G r e a t B r i t a i n a n d a w e i g h t e d G D P index designed to reflect the c h a n g i n g m i g r a t i o n p a t t e r n s a w a y f r o m G r e a t B r i t a i n a n d t o w a r d s N o r t h A m e r i c a a n d c o n t i n e n t a l E u r o p e . G r e a t B r i t a i n has a l w a y s been t h e m o s t s i g n i f i c a n t d e s t i n a t i o n , however, and so got t h e largest w e i g h t i n g . The combined steady-state l o n g - r u n e l a s t i c i t y o f I r i s h o u t f l o w s w i t h respect t o t h e above t w o variables was estimated to be u n i t y . I n t h e l i g h t of t h i s recent research t h e r e seems l i t t l e doubt about the importance of t h e i m p a c t of m i g r a t i o n flows on h a z a r d rates and the overall outflow.
68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94
f
I V T H E O V E R A L L I N F L O W A N D D E M O G R A P H I C S
T h e t w o key results t h a t we carry from Section I I I are, first, t h a t the b u i l d u p o f unemployeid resources i n I r e l a n d , a n d i n t h e different d u r a t i o n cate gories, can be solely a t t r i b u t e d to t h e increased i n f l o w o f newcomers to t h e L i v e Register. Second, there seems l i t t l e doubt t h a t m i g r a t i o n flows were t h e p r i m e d e t e r m i n a n t o f t h e m a i n l y non-decreasing duration-specific h a z a r d r a t e s a n d t h e g e n e r a l l y i n c r e a s i n g gross outflow of males f r o m t h e L i v e Register. T h u s , i f we can e x p l a i n w h a t drives t h e o v e r a l l i n f l o w to t h e L i v e Register, t h e n we can e x p l a i n the b u i l d - u p of I r i s h male unemployment.
H o n o h a n (1984) has shown t h a t d u r i n g t h e 1970s, w h e n product a n d factor m a r k e t s i n t h e B r i t i s h Isles were h i g h l y i n t e g r a t e d , t h e I r i s h u n e m p l o y m e n t r a t e h a d a l o n g - r u n e q u i l i b r i u m tendency to converge to 5 percentage points above t h e corresponding U K rate. I n a s i m i l a r study for t h e 1980s, H o n o h a n (1992) f o u n d t h a t t h e previous r e l a t i o n s h i p d i d n o t h o l d i n t h e same w a y . A l t h o u g h t h e U K r a t e s t i l l appeared to have a s t r o n g short- a n d l o n g - t e r m influence o n t h e I r i s h u n e m p l o y m e n t rate, t h e I r i s h rate i n the 1980s can no longer be explained b y the trends i n the U K rate. H a r r i s o n and W a l s h (1994), a g a i n u s i n g t h e q u a r t e r l y i n f l o w d a t a f r o m Section I I , e x a m i n e t h e l i n k b e t w e e n t h e i n f l o w s o f I r e l a n d a n d G r e a t B r i t a i n . The inflows are p l o t t e d a g a i n s t each o t h e r i n F i g u r e 4, a n d d i s p l a y s i m i l a r t r e n d s except for t h e period f r o m w h e n I r e l a n d j o i n e d t h e E R M i n 1979 to w h e n the U K j o i n e d i n
1 — i — i — i — i — i — i — i — i — i — i — i — i — i — i — i — i — i — i — i — i — i — i — I — i — i — i
68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94
1989. T h e i r r e s u l t s suggest t h a t due to m i g r a t i o n , c a p i t a l a n d t r a d e flows between t h e s m a l l I r i s h economy a n d t h e m a i n l a n d , inflows were p u l l e d b y t h e p r o d u c t a n d factor m a r k e t adjustments i n G r e a t B r i t a i n over t h e 1970s. T h e steady-state l o n g - r u n e l a s t i c i t y o f t h e I r i s h i n f l o w w i t h respect t o t h e B r i t i s h i n f l o w suggests t h a t convergence was i m p o r t a n t i n t h e 1970s, was b r o k e n i n t h e 1980s as product a n d c a p i t a l m a r k e t s became less i n t e g r a t e d , b u t was re-established i n a w e a k e r f o r m i n t h e e a r l y 1990s. T h e r e l a t i v e i m p o r t a n c e o f m i g r a t i o n flows, c a p i t a l a n d t r a d e flows cannot be decomposed f r o m t h e analysis. Convergence l i n k s w i t h G r e a t B r i t a i n e x p l a i n movements i n t h e gross i n f l o w a n d u n e m p l o y m e n t i n t h e 1970s b u t n o t since t h e e a r l y 1980s. W e therefore t u r n to consider the m a i n d e t e r m i n a n t o f the i n f l o w over the 1980s.
T h e i n f l o w to t h e L i v e Register comes e s s e n t i a l l y f r o m t w o sources: n a m e l y , e m p l o y m e n t d e s t r u c t i o n over b o t h t h e domestic a n d i n t e r n a t i o n a l business cycles, a n d newcomers to the l a b o u r force produced b y p o p u l a t i o n g r o w t h a n d c h a n g i n g p a r t i c i p a t i o n rates. M i g r a t i o n flows from these sources w i l l , o f course, offset t h e i n f l o w to the Register. W h a t , t h o u g h , has been t h e r e l a t i v e importance of these factors since the early 1980s?
Since t h e e a r l y 1980s, w o r k i n g - a g e p a r t i c i p a t i o n i n t h e l a b o u r force has been r e m a r k a b l y constant a t a r o u n d 52 per cent. S i m i l a r l y , t h e o v e r a l l e m p l o y m e n t capacity o f I r e l a n d has r e m a i n e d f a i r l y static, never d e v i a t i n g too m u c h from 1.1 m i l l i o n since the same t i m e . However, despite t h e s t a b i l i t y i n o v e r a l l numbers, there have been changes i n the composition a n d s t r u c t u r e of e m p l o y m e n t . G i v e n a constant p a r t i c i p a t i o n r a t e t h e l a b o u r force, w h i c h c u r r e n t l y stands a t 1.34 m i l l i o n , reflected t h e t r e n d s i n t h e w o r k i n g - a g e p o p u l a t i o n , g r o w i n g by 11 per cent over t h e 1970s a n d by 5 per cent d u r i n g t h e 1980s. Table 1 gives more d e t a i l on t h e g r o w t h rates o f the w o r k i n g - a g e p o p u l a t i o n a n d t h e l a b o u r force for five-year i n t e r v a l s d u r i n g t h e w h o l e period.
A constant e m p l o y m e n t capacity i m p l i e s t h a t a n y g r o w t h i n I r e l a n d ' s p a r t i c i p a t i n g w o r k i n g - a g e p o p u l a t i o n m u s t be absorbed b y u n e m p l o y m e n t .
Table 1: Percentage Growth Rates
Period
1971 -1975 1975 -1980 1980 -1985 1985 -1990 1990 -1993
Working-Age Population
4.0 7.9 4.3 1.8 3.6
Labour Force
o -I 1 1—. 1 1 1 1 1 1 1 1 1 1 1
80 81 82 83 84 85 86 87 88 89 90 91 92 93
Year
Figure 5: Trends in the'Growth of Working Age Population and Unemployment
F i g u r e 5 i l l u s t r a t e s t h i s point. T h e g r o w t h i n w o r k i n g age p o p u l a t i o n , w h i c h has s i m i l a r t r e n d s t o t h e l a b o u r force, is p l o t t e d a g a i n s t t h e g r o w t h i n u n e m p l o y m e n t . I t is clear t h a t over t h e 1980s t h e g r o w t h i n u n e m p l o y m e n t is probably v e r y significantly pushed b y t h e g r o w t h i n working-age p o p u l a t i o n .
H a v i n g d e m o n s t r a t e d i n Section I I I t h a t t h e b u i l d - u p of u n e m p l o y m e n t w a s e s s e n t i a l l y due to increased i n f l o w s t o t h e L i v e Register d u r i n g o u r sample p e r i o d , i t w o u l d appear t o follow t h a t i n t h e 1980s, because o f t h e constant e m p l o y m e n t capacity a n d p a r t i c i p a t i o n rates, t h e inflows can i n t u r n be l i n k e d p r i m a r i l y t o t h e g r o w t h i n t h e w o r k i n g - a g e p o p u l a t i o n . T h i s is i n s t a r k c o n t r a s t t o t h e experience i n t h e 1970s, w h e n t h e inflows appeared to be d r i v e n m o r e b y m a r k e t a n d d e m o g r a p h i c a d j u s t m e n t s i n I r e l a n d s t i m u l a t e d by developments i n B r i t i s h m a r k e t s .
V C O N C L U S I O N
t h e 1970s t h e inflows appear to have been d r i v e n m o s t l y by m a r k e t a n d demographic adjustments i n I r e l a n d s t i m u l a t e d by developments i n B r i t i s h m a r k e t s , whereas i n the 1980s, because o f the constant e m p l o y m e n t capacity a n d p a r t i c i p a t i o n rates, i t seems more l i k e l y t h a t t h e i n f l o w s w e r e l i n k e d p r i m a r i l y to the g r o w t h i n the working-age p o p u l a t i o n . These r e s u l t s suggest t h a t t h e flows over the whole sample period are p r e d o m i n a n t l y p u s h e d a n d p u l l e d by g r o w t h i n the working-age p o p u l a t i o n a n d m i g r a t i o n flows, r a t h e r t h a n flows created by employment flows.
REFERENCES
B R E E N , R., and P. HONOHAN, 1991. "Trends in the Share of Long-Term Unemployment in Ireland", The Economic and Social Review, Vol. 22, No. 4, pp. 253-286.
HARRISON, M. J . , and P. P. WALSH, 1994. "A Flow Analysis of the Link Between Irish and British Unemployment", Trinity Economic Papers, Technical Paper No. 5, November 1994, Department of Economics, Trinity College Dublin.
HONOHAN, P., 1984. "The Evolution of the Rate of Unemployment in Ireland 1962-1983", Quarterly Economic Commentary, May.
HONOHAN, P., 1992. "The Link Between Irish and U K Unemployment", Quarterly
Economic Commentary, Spring.
L E H M A N N , H . , 1993. "The Effectiveness of the Restart Programme and the Enterprise Allowance Scheme", Centre for Economic Performance, London School of Economics, Discussion Paper No. 139.
McNALLY, S., 1994. "Approaches to Irish Unemployment", BA Dissertation, Department of Economics, Trinity College, Dublin.
D A T A A N N E X
Consistent Quarterly Irish Male Flows On and Off the Live Register in Thousands: 1967-1993
Period Stock Inflow
Derived
Outflow Period Stock Inflow
Derived Outflow
Derived Derived Period Stock Inflow Outflow Period Stock Inflow Outflow
1973 Q l 54.400 31.190 33.490 1984 Q l 160.300 35.503 30.403 02 46.800 20.774 28.374 Q2 156.000 31.099 35.399 03 46.500 21.375 21.675 03 156.500 33.090 32.590 Q4 52.500 23.576 17.576 Q4 167.600 37.705 26.605 1974 Q l 53.800 26.140 24.840 1985 Q l 172.100 36.567 32.067 02 49.600 22.682 26.882 02 167.200 32.872 37.772 03 53.300 25.903 22.203 Q3 168.200 37.834 36.834 04 63.900 36.225 25.625 04 176.900 39.841 31.141 1975 Q l 73.200 43.989 34.689 1986 Q l 175.400 38.261 39.761 02 75.500 38.084 35.784 02 167.600 34.736 42.536 Q3 79.000 37.109 33.609 Q3 167.500 39.505 39.605 04 88.300 42.874 33.574 Q4 180.700 44.289 31.089 1976 Q l 90.100 43.131 41.331 1987 Q l 179.800 42.945 43.844 02 84.900 35.877 41.077 02 175.200 38.826 43.426 03 83.900 34.808 35.808 Q3 171.300 39.639 43.539 04 89.000 37.037 31.937 04 177.400 44.103 38.003 1977 Q l 89.000 38.987 38.987 1988 Q l 176.000 41.291 42.691 02 82.900 33.777 39.877 02 166.000 36.070 46.070 Q3 80.300 33.530 36.130 Q3 165.200 42.856 43.656 Q4 85.700 37.814 32.414 04 170.300 39.158 34.058 1978 Q l 85.900 36.631 36.431 1989 Q l 168.000 46.722 49.022 02 75.500 28.571 38.971 02 157.600 43.428 53.828 Q3 71.800 33.290 36.990 03 154.000 44.371 47.971 Q4 77.300 33.888 28.388 04 159.800 46.209 40.409 1979 Q l 74.400 32.162 35.062 1990 Q l 152.700 43.976 51.076 Q2 67.100 30.739 38.039 Q2 147.900 43.818 48.618 Q3 62.700 35.948 40.348 03 148.500 48.402 47.802 Q4 67.200 27.430 22.930 Q4 158.100 48.729 39.129 1980 Q l 70.000 26.256 23.456 1991 Q l 167.300 58.175 48.975 02 73.200 18.536 15.336 Q2 168.700 60.448 59.048 Q3 80.300 35.830 28.730 Q3 172.100 59.024 55.624 Q4 93.200 24.266 11.366 Q4 181.000 62.068 53.168 1981 Q l 97.200 35.860 31.860 1992 Q l 187.800 62.782 55.982 02 94.200 20.507 23.507 Q2 183.100 56.240 60.940 Q3 96.900 36.380 33.680 03 187.800 56.845 52.145 04 108.200 27.186 15.886 Q4 194.700 62.845 55.945 1982 Q l 113.600 35.471 30.071 1993 Q l 196.700 52.704 50.704 02 114.600 27.825 26.825 Q2 193.200 51.467 54.967 Q3 125.300 39.755 33.055 Q3 190.600 50.835 53.435 Q4 135.100 35.016 21.216 04 195.700 59.408 54.308 1983 Q l
02 Q3 04 143.400 141.700 144.400 155.200 30.106 27.926 37.667 39.862 21.806 29.626 34.967 29.062
Notes: L The quarterly dates of stock for each year are 31 March ( Q l ) , 30 June (Q2), 31 September (Q3) and 31 December (Q4).
2. The corresponding quarterly periods of inflow are from 1 January up to and including 31 March (Ql), 1 April up to and including 30 June (Q2), 1 July up to and including 31 September (Q3), and 1 October up to and including 31 December (Q4).
