In its last report, OECD asks most of its members to support more intensively employment policies, without leaving out public expenditure. According to OECD economists, indeed, a rapid recovery is possible only if public debt decreases and employment rate rises. In order to obtain these results, governments are asked not to provide any benefits to long-term unemployed people who repeatedly refuse “a reasonable possibility to go back to work”. In fact, the Irish Government has been discussing for a few weeks the possibility of reducing or even deleting unemployment benefits.
Joan Burton, the Irish Minister of Social Protection, agrees with what the report says and thinks that benefits may lead to an increase of natural unemployment. The Minister believes that, on the long term, benefits may act as a disincentive for unemployed people to search for a job, whose salary is quite similar to the amount of the benefit.
Such ploys underline how it is difficult for Ireland to create a new macroeconomic policy because of the rigid rescue plan imposed by Europe. On the one hand, indeed, the plan avoided the default, but, on the other, it affected seriously Irish national economy and employment rate. Prime Minister Anda Kenny and his government tried to calibrate the restrictions provided by the plan, but they met the strong opposition of their European partners. European countries, indeed, and especially Germany asked Ireland to increase tax for companies but it refused to do it.
The rescue plan is very rigid and touches many fields. The equation is simple: in order to re-establish finances, costs must be cut. But how is it possible to create new jobs without financial resources? Although the OECD report does not apply directly to the Irish Government, it will be quite difficult for Ireland to follow its directives, because it is not financially independent. So the question arises: in a context of significant financial changes, where public expenditure and unemployment benefits must be cut, what kind of jobs would people search for? Wouldn’t it be better to lose competitiveness on a tax point of view and keep the level of expenditure stable?
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