Legacy of Crisis Stimulating Economic Growth †MyAssignmenthelp

Question: Discuss about the Legacy of Crisis Stimulating Economic Growth. Answer: Introduction Continuous policy efforts in Ireland have contributed to a successful recovery from legacy of crisis stimulating economic growth. The welfare system of the nation proves extensive support in form of increased demand involving a sense of equality and this has made possible the necessary reform during this time. However, the nation currently suffered from an increased incidence of discourage workers that restricts long-term growth prospect. Different form of targeted benefit especially housing benefit lead to high rate of replacement (oecd.org 2018). Additionally, household living at the bottom line of income distribution faces a high marginal tax rate. This encourages them to substitute more work effort with leisure. The paper briefly discusses policies undertaken by the government to increase work effort and the effectiveness of such policies. Policies undertaken by the government to encourage workforce Recovery from shock is generally associated with an increase in employment and a corresponding fall in unemployment rate. However, in Ireland the unemployment rate has remained considerable high. The recovery gain would be realized well once it is spread across all groups of the society in form of an inclusive growth strategy (Haugh, Jin and Pandiella 2016). Some of the policies undertaken to achieve this goal include establishing a well-designed tax and welfare system, an efficient activation policy and encouraging a better education and skill enhancement policies. Design of tax and welfare system often plays an important role in determining labor-leisure choice of the workforce. The high rate of replacement or high marginal tax rate generally discourage work effort by reducing the reward of work effort. Solution to these problems have an inevitable trade-off between work disincentive effects, fiscal cost to government and social protection. The high replacement rate or higher marginal tax are reducing work effort in Ireland in favor of leisure. Evidences suggest that in Ireland, household belonging to low income groups faces a marginal tax rates as high as 60%. The government is required to reduce assistance in form of Family Income Supplement with an increase in income. It has been observed that if benefits of tax are complimented with an increase in FIS limit of income then this would result in a decline in disposable income from 1 to 6 (Haugh, Jin and Pandiella 2016). This provides greater work incentive even to low paid workers. However, reduction in FIS limit is associated with an increased pressure on government budget. A decline in withdrawal rate from 60 to 32% for a family having two children from EUE 602 to a higher level of EUR 865 is estimated to have an additional cost of EUR 200 million (oecd.org 2018). Efficient activation policy Establishing mutual obligation is one of the best way to increases participation in the labor market. This efficiently encourages workers to return to work without affecting the transfer system. In the early 2010s, a tight conditionality has been imposed on unemployment benefit through the project named Pathways to Work. Since then proportion of penalized beneficiaries have increased significantly. The policy included nearly a 25 percent reduction in benefits with a suspension for 9 weeks. There were approximately 9200 cases where unemployed persons refused to search for active jobs constituting 3 percent of the total unemployed (oecd.org 2018). Such policies can be more comprehensive is undertaken with some objectivity criteria such as wages, contract types, working hours, location and other attributes. Another factor responsible for smaller participation in work is the lack of required skills. Adults in Ireland are lagging behind other OECD nations in terms of literacy and numeracy skills (Haugh, Jin and Pandiella 2016). In order to address this issue, Ireland had launched Further Education and Training Strategy 2014-2019. This involves numeracy and literacy program through its Education and Training Board. This is expected to increase participation by enhancing skills. Voluntary Participation of Women Women roughly consists of nearly half of the population of any country and Ireland is no exception. Thus, one of the primary way of address to the situation of stagnated productivity and labour force participation rates of the country, could have been involvement of more numbers of women in the labour force (Blanchard, Jaumotte and Loungani 2013). As can be seen from the above figure, the gap between the percentages of participation of men and women in labour force in the country had been considerably high. Much of which can be attributed to the high child-rearing cost in the country which compelled the women to stay back and take care of their children. The policy taken by the country to revamp the family benefit schemes and the introduction of child care schemes in this context has proved to be considerably positive as the percentage of women in the labour force are slowly increasing. To increase the productivity of the economy of any country it is of utmost importance to boost up the industrial and commercial sectors, by bringing in new industries and boosting up the existing ones, for which sufficient amount of investment is required. For Ireland, not all the investments can be done by the government itself and thus, the country needs huge inflow of foreign investments, for which the economy needs to be attractive and prospective in the eyes of the foreign investors. The proposed policy of the government of maintaining low corporate tax rates and reduction of the barriers and stringent regulations of foreign investment inflow can be considered as one of the welcoming change on part of the government of the country as by reducing these barriers the economy is expected to make it appear to be more prospective as well as profitable for the foreign multinational and investors to venture into the country, thereby contributing to the growth of the productivity and att racting more labour force participation in the country. Providing the right kind of education: Especially to the immigrants One of the primary ways in which Ireland can increase their labour force participation rate as well as the overall productivity of the economy is by including the immigrants in the labour force and using their unique talents and capabilities, which can help the country to minimise the skill and productivity mismatches in the country. The policies taken by the governing authorities of the country, in this context, include the provision of skill intensive education to the residents including the immigrants as well as equal distribution of immigrants in all schools, thereby preventing the concentration of immigrants only in the disadvantageous schools (Blanchard, Jaumotte and Loungani 2013). The number of immigrants as well as low privileged residents dropping out of school early, the policy of the government also includes provision of vocational training which is expected to help these people in finding jobs. This has been found to be effective as more jobs are being created in the economy and the social inclusiveness and welfare of the immigrants are also increasing which are encouraging them to participate in economic activities, thereby contributing to the increased productivity of the country. Conclusion The policies which have been proposed as well as already implemented by the government of Ireland in order to increase the productivity and labour force dynamics also include measures like concentrating on innovations, encouraging new firms, bringing in sustainability apart from the ones mentioned above. These policies are seen to be having considerable effects on the employment and productivity scenario of the country, mostly positive. However, this assessment is based on the short run observation as it takes a prolonged period to see the net effects of the policies on an economy. Thus, the effects of these policies are expected to be subjected to prolonged time testing and influence of various other exogenous factors working within the economy. References Blanchard, O.J., Jaumotte, M.F. and Loungani, M.P., 2013.Labor market policies and IMF advice in advanced economies during the Great Recession. International Monetary Fund. Cso.ie (2018).Employment - CSO - Central Statistics Office. [online] Cso.ie. Available at: https://www.cso.ie/en/releasesandpublications/ep/p-wamii/womenandmeninireland2013/employmentlist/employment/ [Accessed 30 Mar. 2018]. Haugh, D., Jin, Y. and Pandiella, A.G., 2016. Growing together: Towards a more inclusive Ireland.OECD Economic Department Working Papers, (1293), p.0_1. Oecd.org. (2018).OECD Economic Surveys Ireland. [online] Available at: https://www.oecd.org/eco/surveys/Ireland-2015-overview.pdf [Accessed 30 Mar. 2018].