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Tuesday, October 22, 2013

Irish Austerity Exodus Continues

The Eurozone experiment in austerity continues to fail as the peripheral countries endure ongoing cuts. Following up on my post of August 15, it's time to look at the most recent Irish immigration data to update it through April 2013 (Ireland records population data from May 1 to April 30) and see how it affects the reported unemployment rate. The picture remains ugly, with emigration climbing once again, from 87,100 in 2011-2012 to 89,000 in 2012-13. Immigration increased by 3200, so net emigration fell by 1300, with net out-migration over the year declining by about 3% to 33,100. Here are the details:

  Year ending

April 2012April 2013



Net migration-34,400-33,100

of which Irish nationals-25,900-35,200
Source: Central Statistics Office Ireland

Take a good look at the last line: Net emigration by the Irish themselves increased by 35.9% and accounts for all net out-migration; there was net in-migration by non-Irish citizens of 2100 in 2012-13. Indeed, the Irish comprised 57.2% of all emigrants in the most recent report.

What was the effect of emigration on the unemployment rate? Once again in 2013, people in the age group closest to what we would consider prime-age workers (15-64, given how Ireland reports immigration by age groups; see Table 4 of the linked report) left the country at a higher rate than children and seniors, with total out-migration for those 15-64 of 35,300. That brings total out-migration for population years 2010-2013 to 126,000.

Since April 2013 data is a much better match for Ireland's official first-quarter 2013 unemployment data than April 2012 was, I am going to repeat my calculation from August, still using Q1 2013 unemployment of 13.7% as my base. Again, there were 292,000 officially unemployed in the first quarter; dividing by 0.137 gives an estimated workforce of 2,131,387. We now add 126,000 to numerator and denominator to get the maximum potential unemployment rate, which would exist if all 126,000 were in the labor force and unemployed: 418,000/2,257,387, or 18.5%.

Even if we add in only those in the most prime working-age group in the Irish statistics, those from 25 to 44 years old, we still find that the imputed unemployment rate exceeds the country's maximum during this crisis of 15.1%. 2013's 12,500 net out-migration in this age group brings the 2010-2013 total to 48,500; adding this to the numerator and denominator gives us 340,500/2,179,887 or 15.6%.

Paul Krugman points out that we can also see this by looking at Ireland's employment rate. Over 2.1 million were employed in the third quarter of 2007; in the second quarter of 2013, the number is still far depressed at 1,869,900, which represents a 1.8% increase from a year earlier.

Finally, the overall picture for the EU and the eurozone has deteriorated over the previous year: EU unemployment rose from 10.6% in August 2012 to 10.9% in August 2013 (most recent month available), while eurozone unemployment rose from 11.5% in August 2012 to 12.0% in August 2013. Both figures were down a hair from several months earlier. But in Greece, new records continue to be set, with unemployment in June 2013 (most recent month available) hitting 27.9%. By contrast, as Eurostat shows, unemployment has steadily declined in the United States and Japan.

Unfortunately and unsurprisingly, the evidence that austerity has failed in Europe still is not affecting EU policy, nor has it stopped the cacophony of voices in the United States calling for more austerity. While Republicans supposedly "lost" the government shutdown crisis, they succeeded in locking in sequester-level government spending until the next crisis, and sequester II will be here soon. God help us.

Cross-posted at Angry Bear.


  1. What evidence do you have that these emigrants were all unemployed? Indeed, what evidence do you have that their employment rates were lower than average?

    I contend that it is more likely that these people are MORE likely to be employed. In "SCIENTISTS, MANAGERS, AND TOURISTS: The Changing Shape of European Mobility to the United States", produced for the European Union by the Migration Policy Institute and the
    European University Institute, says,

    "Recently arrived workers from EU countries are more educated, on average, than those who have been in the country for some time. Among EU-born immigrants who moved to the United States in 1995 or later, half have at least a college degree, compared to less than one-third of EU immigrants who moved before 1995. Recently arrived EU immigrants are also more strongly concentrated in highly skilled occupations such as the life and physical sciences, mathematics and IT, and executive or managerial jobs."

    That same report shows that European immigrants have higher incomes than do native-born Americans, and constitute a European "brain drain" to the United States.

    But to the question of "austerity" -- what is the alternative? Continue borrowing until you cannot even pay the interest on the debt, and the whole house of cards comes crumbling down? Yes, it is painful to try to live within one's means when one has been living far beyond them for so long. I'd like to live like I'm earning 50% more than I do, and just be able to ignore the long-term consequences of my accumulating debt. But eventually no-one would lend to me any longer. I would lose my house, my cars, and maybe even my family. I would be better to sell the house and the cars, buy something much smaller and much older, and pay off my debts. Painful, yes -- but not as painful as the eventual results of fiscal foolishness.

    Better still would be to not get into such debt in the first place.

    1. I doubt that they're all unemployed, but a huge chunk are. Ask yourself why all these well-educated Europeans are coming to the United States, and the answer is for better job prospects. Take a look at the comments to my August 15 post that are from people in Ireland.

      The alternative to austerity is coordinated expansion. But the Germans think their trade surplus means they're virtuous, when mostly what it means is that *for them* the euro is undervalued. So they continue to force austerity down everyone's throat, which the move to the euro was originally intended to prevent them from doing. But they outmaneuvered the French and wrote deflation into the convergence criteria, the budget rules, and the singular anti-inflation mandate of the European Central Bank.

      You seem to think a national economy is like a household; it's not.

    2. "Coordinated expansion" of WHAT?

      Germany's trade surplus means that it's people, collectively, buy less than they make, so they have to sell the difference in other countries. Our people buy more than we make (which is why we are, collectively, in debt), and so must purchase the difference from other countries.

      No, a national economy is not like a household. The people of a household can take on additional jobs to get more money. The only ways the government can get more money are to take it in taxes, borrow it in bonds, or print it (which amounts to a wealth and income tax because it dilutes the value of what one saves and earns). These methods necessarily take money out of the economy. Taking money out of the economy slows the growth of that economy. Putting some back in, while passing it through the hands of unproductive people, only in rare circumstances can recoup al of the loss of taking it out in the first place.

    3. For all its faults, Wikipedia has some good policies and sayings. In particular, the rules there recognize that "I didn't hear that" is not an argument. That is what you are indulging yourself in here; and you YELLED. The German aren't buying less than they make; they're dumping goods on the world market.

      And yes, as long as you keep talking about living within one's means, you are treating the economy like a household.

      Thanks for visiting.

    4. How can they run a surplus if they are "dumping goods on the market"?

      "Dumping" implies that they are selling for less than the cost of production. That may prop up a few companies, but it is detrimental to the nation as a whole. If they make a widget for 1.00€ and sell it for 0.90€, the German taxpayer is subsidizing the purchase. What's wrong with that? Say, "Vielen Dank," and pocket your change.

      The only way to have a trade surplus is to buy less that you make -- to have a Gross National Consumption smaller than the Gross National Product. Conversely, the only way to have a trade deficit is to buy more than you sell -- to have a Gross National Consumption larger than the Gross National Product.

      There are two ways to buy more than you make -- take it out of capital or take on debt.

      As we, collectively, go into debt to buy cars, houses, vacations, clothes, etc., and run up our credit cards, we contribute to the trade deficit.

    5. Sorry for the confusion, I didn't mean "dump" literally. What I meant is that if Germany were still on the DM, its products would be more expensive in dollar/yen/sterling/etc. terms than they are on the euro, so it is easier for Germany to have a trade surplus than would be the case without the euro.

    6. An interesting theory. Why do you think that is true?

      Assuming it is true, does that not mean the Germans can, in turn, buy less from other countries? (Internally, it's all a wash -- lower wages and rents translates into lower lower prices.)

      If, on the DM, they could sell a gallon of beer for $5, but on the Euro they can sell it for $4. So that's $1 less that they have to buy products from other countries. In short, they are $1 poorer than they would have been on the DM.

      True, some other country might be able to make an equivalent beer for $4.50, and they will lose some business to the Germans. But only in the beer industry. Even if one country can make everything cheaper than another country can, it will gravitate to those industries that generate greater profits, and leave others for the less efficient country. Even though they could more cheaply make the products that they buy from that other country, it does not maximize their profits to do so.

    7. It's quite simple. The value of the euro is based on conditions in all 18 eurozone countries. Just as Greece, Portugal, Spain, and Ireland would see their individual currencies fall if they left the euro, the DM would rise in value.

      Meanwhile, your example is mistaken. At $4, Germany is not $1 poorer, it's gaining a sale it wouldn't have had at $5.

      But you are completely right that a lower exchange rate means you can afford fewer foreign goods. That's the other half of why Germany's trade surplus is bigger on the euro than the DM.

  2. Kenneth; you are so right on about this!!

  3. "Just as Greece, Portugal, Spain, and Ireland would see their individual currencies fall if they left the euro, the DM would rise in value."

    They do not now have currencies that could rise and fall.

    Your assertion is that German product would cost more U.S. dollars than they do now if Germany were still on the DM. I do not understand the reasoning behind that. Why would a German's work be worth more because of a DM-to-dollar exchange instead of a Euro-to-dollar exchange?

    1. I can explain it to you, but I can't understand it for you. If you'd like to continue criticizing my views on this issue, please do so on your own blog. You are of course welcome to continue to comment on other posts, but this is the last comment of yours I am approving in this thread.

    2. If you don't like my explanation, try two from Paul Krugman: