In what ways has Labor Input Growth affected the economy and unemployment?
Acceleration in working age population
What are the characteristics of the population? [TOP]
Before the Great Famine of the 1840s, the population of Ireland stood at 6.6 million people (CSO 1999). The great famine, while wiping out a large percentage of the population, also began a trend for mass emigration from Ireland. During economic downturns in the Irish economy, Irishmen and women have become accustomed to emigrating to more prosperous areas. However, it has been found that when Ireland recovers from these downturns, those who left quickly return to their home country. Given this historical trend in Ireland, the population fell to less than three million after the famine, and remained their for much of the 20th century. The latest OECD estimates from 1999 show the population equal to 3.7 million people (OECD 1999).
Due to Ireland's recent economic growth, immigrants from other European countries are attracted by its job opportunities. Nearly 23,000 people per annum immigrate into Ireland, largely expanding the work force. Similarly, people who have left Ireland to pursue more prosperous career opportunities abroad during poor economic conditions, have returned to Ireland to take advantage of the new positions the economy has created. Of the 47,500 immigrants who arrived in Ireland in the year to April 1999, over fifty percent were returning Irish nationals. Considering these immigration and emigration factors, population is projected to equal 4.6 million in 2031 (CSO 1999).
This increase in immigration by both foreigners and returning Irishmen, has had tremendous effects on the unemployment rate. There is a tremendous demand for labor in Ireland today, therefore, this influx of immigration is needed. These increases in population, along with an Irish baby boom in the 1970s, has increased the working age population in Ireland. During the 1970s, each women averaged nearly four births, therefore, creating a population today in which 40 percent is under the age of twenty-five (CSO 1999).(See Graph L1) This young population provides Ireland with the largest available workforce for the future. (See Graph L2)
IDA
Graph L1- Represents the age distribution of Irish population
Graph L2 - The future availability of the workforce in the year 2010
Increase in Labor Force Participation [TOP]
Pyle and European Commission 1999
In the period 1961-1981, the female participation rate did not grow as expected by economic theorists. As many hypothesized, the combination of a vigorous pursuit of export-led development and the shift in economic activity from agriculture to industry and service sectors would lead to a dramatic increase in the employment of women. This was believed likely to occur because export-led development is based on the attraction of foreign direct investment in labor intensive industries. According to the theory of factor proportions, assuming equal productivity, labor intensive industries seek low-wage workers, which have been found to be female (Pyle 1990). However, female participation in the work force did not grow accordingly.
Potential explanations for these facts are important to consider, as close examination has led economists to the conclusion that social processes were the most vital factors in explaining these findings. Despite the traditional, theoretical thought described above, social relations in the household, firm, and society in general have led to falling sectoral sex ratios which had a negative impact on female employment. In addition, a feminist explanation was offered, stating that Ireland was a patriarchal society in which the labor force participation of married women was constrained by unequal relations in the household (Pyle 1990).
Clearly, by 1997, much has changed in terms of women’s participation rate in the labor force. To understand this change, one can look to the continued shift in the economic activity from agriculture to industry and service sector and then to those positions employed by women.
Percent of Employment Generated By Sector
Pyle and European Commission
Clearly, the Services sector had been the growing sector in Ireland in the last thirty years. In accordance, the service sector is where most woman are currently employed (1997 data):
European Commission 1999
Therefore, we can conclude that while economists predicted that the labor force participation rate for women would increase due to more industry employment, the participation rate did not increase until the service sector became the dominant sector in employment in Ireland. At that point, the participation of woman rose considerably.
Upgrade of Human Capital [TOP]
How have developments in education led to the upgrade in Human Capital?
Human Capital in Ireland has improved drastically over time. The foundations for the well educated and highly technical workforce today, came as early as 1967. These foundations are as follows:
Until 1966, entrance into secondary school could only occur, if the student passed an exam and had money for it. Secondary education was not free, until a 1967 law was passed making it free. Historically speaking, secondary schools were only located in select areas, so many students had to be boarded. (Sociology of Education, 1993)Unfortunately they were not free either, so only children whose parents made a modest income could afford schooling.
Secondary education could last up to 5 years. Students took a state-run exam after the second and fifth year of secondary education. Many students would take the two year exam and drop out, while others would stay the whole five and then possibly go onto university study or to the work force, where they would be able to get certain jobs that required a full secondary education. Most vocational schools lasted two years in length. (Sociology of Education, 1993)
Primary schools in Ireland are denominational and parochial and have, for the most part, been mainly funded by the state, while secondary schools, until 1967, were privately funded. Since 1967, secondary school education has been mainly funded by the state. The vast majority of secondary school are religiously affiliated and run. There has always been a high level of education, at least at the primary level, due to the religious aspect of education in Ireland. Ireland has always had deep religious roots entwined with the need for education. The church has always been a large contributor towards the education system.
Education in Ireland has, traditionally, been religious, moral, and intellectually taught, but education has not served as a devise for career preparation or a social class distinction. (Sociology of Education, 1993) Education has always been attainable for all classes and all people, including women. One reason for Ireland's high participation rate, compared to the rest of the EU, has been due to the large amount of women in the education system. Women have, traditionally, been able to get educated in Ireland.
The education reforms of the late 1960s was spurred by the change in economic policy of the 1950s. Ireland turned away from its domestic protectionism, economic nationalism and self-sufficiency and moved towards industrialization and foreign investment. The government decided that education was one of the best ways to move the Irish economy in a forward direction.
In 1967, tuition fees for secondary schools were abolished and grants became available for university study. The state also began to fund the construction of new schools and the renovation of existing schools. The state began to invest in their future through the education system. Participation rates, for both secondary and university education, rose at, roughly, the same rate as before, however. There was a slight increase in the participation rates around 1967, but the overall rate was primarily the same. This is evident in the graph HERE.
The education level of most employment sectors had been rising for a while in Ireland. The figure below shows different types of occupations and the level of education in each occupation. The figure shows the education level of the occupation by the birth years of the workers. People born between 1953 and 1955 were the first people to be able to go to secondary school for free. There is a noticeable increase in the level of education in all of the occupations for the 1956 category. There were even some ‘farm laborers’ with higher education in 1956.
All social classes benefited from education. Since the school system had begun to be funded by the state, the school system has been growing and able to hold more people. The expectation of increasing returns, from being educated, and the increasing availability of schools, made it possible that all social classes would be able to further their education, to the secondary and possibly to the university level. Although some schools may have had better facilities and ‘preferential’ access to universities, Ireland had a national curriculum, so everyone learned the same thing. Since people from all social classes were able to get educated and got the same education, social class distinctions became smaller. (Sociology of Education, 1993) There were, and still are, more avenues for poorer people to explore. The availability of education has lowered inequality of the Irish population.
Technology based education and the workforce
As Ireland moved into the 1990s, the country began to adapt the economy around its well developed educational system. The economy become more technology based. It is interesting to examine how this push for technology based education began.
Education in today’s Irish classroom is technology based. Ireland is in the process of placing both computers and the internet in every classroom in every school in Ireland. In 1994, only about 3% of classrooms had been connected to the internet. By the summer of 1999, at least 51% of classrooms were online. Ireland has plans of utilizing the internet in every class room by the year 2000. (Europe, 1997)
The initiative to integrate computers and the internet into the classroom stemmed from the 1970s plan toward attracting high technology firms to come to the country. They used the 1960s move toward better education as a way to induce companies to come to Ireland. They focused their attention in the pharmaceutical, health care, and computer industries. "Generous tax breaks, a green-and-clean working environment, and one of the world’s best educated and highly skilled work forces" (CEC, 1997) were very attractive forces for many firms.
The Irish economy is in a boom now. One could easily argue that the boom is directly related to the Irish concentration in bettering their education system. According to 1999 OECD education surveys, Ireland ranks eighth out of 21 countries with 24% of their 25-34 years olds having a university level education. The government is putting money into the education system. Their teachers are the third best paid teachers in all of Europe, and the education budget has increased by 40% over the last five years.
Ireland will have invested about $71 million in technology, by the year 2001. (CEC, 1997) The money will be used to acquire the technology and equipment and for training. The systems will be used in over 4,000 schools in Ireland.
Today, about 39% of secondary education takes the form of vocational schools or technical schools. 61% of secondary education is done in traditional schools, which are, primarily, religiously affiliated. Some secondary schools are run by ‘board of governors’ or by individual people. Both are financed by the state, to allow for free secondary education. Ireland also has about 90,000 students pursuing university level education. (Electronic News,1995)
Technology has also been a force at the university level. (R & D Management, 1999) Today the university is the center for much of the country’s research and development for businesses. Schools and firms are combining to form partnerships for technology advancements. Schools now have an Industrial Liaison Office (ILO), which is responsible for linking the school with businesses. These schools are serving the many foreign based firms in Ireland. These branches don’t have R&D facilities, so they turn to the universities for research. The businesses help fund the projects and make use of the new innovations.
Universities are the new centers for R&D in Ireland.(R & D Management, 1999) Both business and the government look to the university for developing the country’s new technologies. The ILO function is one of marketing the school’s ability and identifying businesses that could benefit from their resources and expertise. Ireland has turned to their education system, to turn the country and economy around. With the economic boom that has been occurring in the 1990s, one could expect a bright future for Ireland. They are training their youth to be technically educated in an increasingly technical world.
