Staff Paper 2019 : The Inactive Working Age Population : A Comparison of Cohort Links to the Labour Market

Abstract

The operation and functioning of the labour market is a key element of the overall economy and has a number of implications for Government revenue and expenditure. Since 2013, there has been a significant labour market recovery in Ireland following the recession period. Unemployment peaked at 15.8% in 2011 and has since fallen to 5.3%. There are now 2.3 million people in employment which is a record high. An important consideration is the extent to which people are participating in the labour market. Those classified as economically inactive are defined as not being in employment or unemployed (actively seeking employment). Participation and inactivity is a topic which is of great importance to labour market policy, given its implications for economic and social wellbeing. There was a large increase in inactivity in Ireland after the recession and participation rates remain lower than pre-crisis levels. In the context of a transition to full employment, further employment growth will rely on either increased participation or migration. In its Country Specific Recommendations since 2015, the European Commission has noted that persistent labour market inactivity remains a challenge and have recommended the use of Active Labour Market Policies (ALMPs). Ireland’s Future Jobs strategy, which was launched in March 2019, sets out a framework with a range of actions across five pillars. The fourth pillar within this is the objective of increasing participation in the labour market with a target of a 3 percentage point increase in participation of 25-69 year olds, with a particular focus on females and older people. There has been a large variety of research completed on participation and inactivity in Ireland. This has focused on understanding the characteristics of the inactive population with a view to informing policy responses. The purpose of this paper is to take stock of this existing analysis and to provide additional insights into the relationship between the inactive population and the labour market to better inform policymaking in this area. In particular, the analysis will seek to understand the education levels of the inactive and their work experience including former sector and occupation of employment. The analysis will also consider the current household income of the inactive population and some cohort specific analysis which is of relevance to their relationship to the labour market.