Honohan, Patrick and Baker, T.J. and Callan, T. and Scott, S. and Madden, D. (1984) The Evolution of the Rate of Unemployment in Ireland 1962-1983. Quarterly Economic Commentary Special Article, May 1984. [Working Paper]
Abstract
For decades an objective of policy in Ireland has been to lower the rate of unemployment - indeed to achieve full employment. Yet instead of falling, the rate of unemployment has increased rather dramatically to record levels. Many possible explanations for this state of affairs have been advanced. One view looks at the demand for labour and points to the slow growth in the world economy and to a failure of real wages to respond sufficiently to the energy price shocks of the 1970s. Job losses in the 1970s and 1980s have been the key source of unemployment according to this view. An alternative interpretation notes the sharp reversal of net emigration during the last decade and a half and attributes the growth in unemployment to a corresponding surge in labour supply at home. According to a third, less plausible perspective, the increase in unemployment is largely a function of an increase in the propensity of those not genuinely seeking work to apply for (increasingly generous) unemployment assistance or benefits or in an increase in the time spent searching for suitable jobs. Probably each of the three factors has played a part in governing the evolution of the rate of unemployment in Ireland over the past two decades, though their relative importance is the subject of much dispute--. In other larger countries, unemployment has also increased sharply. The role of migration there is obviously small, and the explanation is usually shared between the other two factors. For Ireland, however, migration may be a dominant element in the long run providing the link with unemployment conditions in other countries.
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