In the run-up to the budget all the talk is of how many jobs will be destroyed as a result of Government measures. Well, not really. But it should be. Ministers and Government backbenchers are fond of quoting one measurement of employment that suggests 30,000 jobs were created in the last year. Never mind that this comes with so many caveats and represents ‘data-dredging’ (searching for one or two stats that puts you in a good light regardless of the context). What they never, ever mention is that their austerity measures are actually destroying thousands of jobs.
No one doubts that spending cuts and tax increases lowers economic growth; this in turn lowers employment. The only question is how many jobs are being lost. I will summarise the estimates from the ESRI and NERI, based on an adjustment of €1 billion (e.g. a €1 billion cut in social protection payments, a €1 billion increase in property tax, etc.).
Not surprising, all measures destroy jobs. The biggest culprit is reducing public sector numbers (this helps explain why cutting public sector numbers actually increases the debt). The second biggest negative impact is investment. The two adjustments that have the least impact on employment are carbon and property tax. There are a few points to bear in mind:
First, the projection for investment is an under-estimate. The ESRI does not include the ‘supply-side’ impact (that is, the loss in employment from not using the asset created by the investment – a road, building, telecommunication network, etc.). According to the ESRI, this under-estimate is ‘significant’.
Second, income tax has the third most negative impact. These estimates are an average of the impact over six years. The impact varies over time. For instance, increasing income tax has only a negligible impact in the first year it is introduced (reduces employment by 1,860). However, the deflationary impact accelerates over the years so that by the fifth year the impact is nearly five times that amount. I have used the average.